10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 30, 2009

OR

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

Commission file number 1-14229

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

Delaware	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)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

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

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

The number of shares outstanding of Registrant’s Common Stock,
par value $0.01 per share, at
June 5, 2009 was 128,110,583

QUIKSILVER, INC.

FORM 10-Q
INDEX

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Quiksilver, Inc. Condensed Consolidated Statements of Operations Three Months Ended April 30, 2009 and 2008	2
Quiksilver, Inc. Condensed Consolidated Statements of Comprehensive Income (Loss) Three Months Ended April 30, 2009 and 2008	2
Quiksilver, Inc. Condensed Consolidated Statements of Operations Six Months Ended April 30, 2009 and 2008	3
Quiksilver, Inc. Condensed Consolidated Statements of Comprehensive (Loss) Income Six Months Ended April 30, 2009 and 2008	3
Quiksilver, Inc. Condensed Consolidated Balance Sheets April 30, 2009 and October 31, 2008	4
Quiksilver, Inc. Condensed Consolidated Statements of Cash Flows Six Months Ended April 30, 2009 and 2008	5
Quiksilver, Inc. Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations:
Results of Operations	29
Three Months Ended April 30, 2009 Compared to Three Months Ended April 30, 2008	30
Six Months Ended April 30, 2009 Compared to Six Months Ended April 30, 2008	32
Financial Position, Capital Resources and Liquidity	33
Critical Accounting Policies	35
New Accounting Pronouncements	37
Forward-Looking Statements	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	39
Part II — OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders	40
Item 6. Exhibits	41
SIGNATURES	43
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three months ended April 30,
In thousands, except per share amounts	2009			2008
Revenues, net	$	494,173		$	596,280
Cost of goods sold		261,055			295,938
Gross profit		233,118			300,342
Selling, general and administrative expense		202,589			230,800
Asset impairment		—			350
Operating income		30,529			69,192
Interest expense		13,552			12,996
Foreign currency loss		1,926			1,384
Minority interest and other expense (income)		578			(471	)
Income before provision for income taxes		14,473			55,283
Provision for income taxes		9,528			16,558
Income from continuing operations		4,945			38,725
Loss from discontinued operations, net of tax		(2,132	)		(244,949	)
Net income (loss)	$	2,813		$	(206,224	)
Income per share from continuing operations	$	0.04		$	0.31
Loss per share from discontinued operations	$	(0.02	)	$	(1.95	)
Net income (loss) per share	$	0.02		$	(1.64	)
Income per share from continuing operations, assuming dilution	$	0.04		$	0.30
Loss per share from discontinued operations, assuming dilution	$	(0.02	)	$	(1.88	)
Net income (loss) per share, assuming dilution	$	0.02		$	(1.59	)
Weighted average common shares outstanding		127,324			125,741
Weighted average common shares outstanding, assuming dilution		128,091			130,052

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

	Three months ended April 30,
In thousands	2009			2008
Net income (loss)	$	2,813		$	(206,224	)
Other comprehensive income (loss):
Foreign currency translation adjustment		26,845			36,970
Net unrealized loss on derivative instruments, net of tax of $(7,161) (2009) and $(3,048) (2008)		(10,747	)		(7,499	)
Comprehensive income (loss)	$	18,911		$	(176,753	)

See notes to condensed consolidated financial statements.

2

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Six months ended April 30,
In thousands, except per share amounts	2009			2008
Revenues, net	$	937,451		$	1,092,861
Cost of goods sold		497,170			548,995
Gross profit		440,281			543,866
Selling, general and administrative expense		409,407			452,210
Asset impairment		—			350
Operating income		30,874			91,306
Interest expense		27,706			24,044
Foreign currency loss		3,356			768
Minority interest and other expense (income)		620			(397	)
(Loss) income before provision for income taxes		(808	)		66,891
Provision for income taxes		60,109			20,596
(Loss) income from continuing operations		(60,917	)		46,295
Loss from discontinued operations, net of tax		(130,696	)		(274,459	)
Net loss	$	(191,613	)	$	(228,164	)
(Loss) income per share from continuing operations	$	(0.48	)	$	0.37
Loss per share from discontinued operations	$	(1.03	)	$	(2.19	)
Net loss per share	$	(1.51	)	$	(1.82	)
(Loss) income per share from continuing operations, assuming dilution	$	(0.48	)	$	0.36
Loss per share from discontinued operations, assuming dilution	$	(1.03	)	$	(2.12	)
Net loss per share, assuming dilution	$	(1.51	)	$	(1.76	)
Weighted average common shares outstanding		127,157			125,133
Weighted average common shares outstanding, assuming dilution		127,157			129,606

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

	Six months ended April 30,
In thousands	2009			2008
Net loss	$	(191,613	)	$	(228,164	)
Other comprehensive income (loss):
Foreign currency translation adjustment		32,564			37,480
Reclassification adjustment for foreign currency translation included in current period loss from discontinued operations		(47,850	)		—
Net unrealized loss on derivative instruments, net of tax of $(7,329) (2009) and $(973) (2008)		(11,639	)		(3,035	)
Comprehensive loss	$	(218,538	)	$	(193,719	)

See notes to condensed consolidated financial statements.

3

QUIKSILVER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	April 30,			October 31,
In thousands, except share amounts	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	74,052		$	53,042
Restricted cash		47,236			—
Trade accounts receivable, less allowances of $36,719 (2009) and $31,331 (2008)		410,971			470,059
Other receivables		32,260			70,376
Income taxes receivable		—			10,738
Inventories		307,735			312,138
Deferred income taxes short-term		92,482			12,220
Prepaid expenses and other current assets		33,757			25,869
Current assets held for sale		9,122			411,442
Total current assets		1,007,615			1,365,884
Restricted cash		—			46,475
Fixed assets, less accumulated depreciation and amortization of $242,741 (2009) and $223,572 (2008)		228,918			235,528
Intangible assets, net		142,792			144,434
Goodwill		304,991			299,350
Other assets		42,059			39,594
Deferred income taxes long-term		13,803			39,000
Total assets	$	1,740,178		$	2,170,265
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	224,451		$	238,317
Accounts payable		169,075			235,729
Accrued liabilities		69,455			93,548
Current portion of long-term debt		225,936			31,904
Income taxes payable		20,396			—
Liabilities related to assets held for sale		1,415			135,071
Total current liabilities		710,728			734,569
Long-term debt, net of current portion		604,412			790,097
Other long-term liabilities		38,429			39,607
Non-current liabilities related to assets held for sale		—			6,026
Total liabilities		1,353,569			1,570,299
Stockholders’ equity:
Preferred stock, $.01 par value, authorized shares — 5,000,000; issued and outstanding shares — none		—			—
Common stock, $.01 par value, authorized shares — 185,000,000; issued shares — 130,995,783 (2009) and 130,622,566 (2008)		1,310			1,306
Additional paid-in capital		339,686			334,509
Treasury stock, 2,885,200 shares		(6,778	)		(6,778	)
(Accumulated deficit) retained earnings		(1,194	)		190,419
Accumulated other comprehensive income		53,585			80,510
Total stockholders’ equity		386,609			599,966
Total liabilities and stockholders’ equity	$	1,740,178		$	2,170,265

See notes to condensed consolidated financial statements.

4

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six months ended April 30,
In thousands	2009			2008
Cash flows from operating activities:
Net loss	$	(191,613	)	$	(228,164	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operations		130,696			274,459
Depreciation and amortization		26,738			28,093
Stock-based compensation and tax benefit on option exercises		4,372			4,621
Provision for doubtful accounts		8,965			4,858
Loss (gain) on disposal of fixed assets		2,721			(710	)
Foreign currency (gain) loss		(144	)		337
Asset impairments		—			350
Minority interest and equity in earnings		1,477			698
Deferred income taxes		44,848			—
Changes in operating assets and liabilities, net of the effect from business acquisitions:
Trade accounts receivable		55,579			15,133
Other receivables		20,171			5,382
Inventories		9,259			5,278
Prepaid expenses and other current assets		(7,696	)		(5,721	)
Other assets		(2,641	)		317
Accounts payable		(63,580	)		(11,411	)
Accrued liabilities and other long-term liabilities		(24,688	)		(17,738	)
Income taxes payable		21,170			5,171
Cash provided by operating activities of continuing operations		35,634			80,953
Cash provided by operating activities of discontinued operations		8,801			69,313
Net cash provided by operating activities		44,435			150,266
Cash flows from investing activities:
Capital expenditures		(21,510	)		(43,150	)
Business acquisitions, net of cash acquired		—			(29,984	)
Cash used in investing activities of continuing operations		(21,510	)		(73,134	)
Cash provided by investing activities of discontinued operations		21,848			106,528
Net cash provided by investing activities		338			33,394
Cash flows from financing activities:
Borrowings on lines of credit		8,613			124,148
Payments on lines of credit		(21,941	)		(15,226	)
Borrowings on long-term debt		144,546			118,012
Payments on long-term debt		(142,202	)		(176,948	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		495			6,269
Cash (used in) provided by financing activities of continuing operations		(10,489	)		56,255
Cash used in financing activities of discontinued operations		(11,136	)		(220,069	)
Net cash used in financing activities		(21,625	)		(163,814	)
Effect of exchange rate changes on cash		(2,138	)		(2,860	)
Net increase in cash and cash equivalents		21,010			16,986
Cash and cash equivalents, beginning of period		53,042			74,348
Cash and cash equivalents, end of period	$	74,052		$	91,334
Supplementary cash flow information:
Cash paid (received) during the period for:
Interest	$	26,144		$	24,507
Income taxes	$	(177	)	$	18,690

See notes to condensed consolidated financial statements.

5

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation
	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation.
	Quiksilver, Inc. (the “Company”), in its opinion, has included all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of operations for the three and six months ended April 30, 2009 and 2008. The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the year ended October 31, 2008 included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of results for the full year due to seasonal and other factors.
	In November 2008, the Company sold its Rossignol business, including the related brands of Rossignol, Dynastar, Look and Lange, and in December 2007, the Company sold its golf equipment business. As a result, the Company has classified its Rossignol wintersports and golf equipment businesses as discontinued operations for all periods presented.
	The Company is highly leveraged. However, management believes that its cash flow from operations, together with its existing credit facilities and planned refinancings will be adequate to fund the Company’s capital requirements for at least the next twelve months. With respect to the Company’s European credit facility of $73.3 million due on June 30, 2009, the Company’s European banks have extended the maturity of this credit facility on four separate occasions through June 30, 2009. In connection with current negotiations, the European banks have indicated a willingness to extend this maturity again but have not yet done so based on the progress of current negotiations for a new committed multi-year facility. This multi-year facility would include the refinancing of all uncommitted European debt and a majority of its existing term loans. The Company believes that its short-term uncommitted lines of credit will continue to be made available until refinanced on a longer term basis in its European and Asia/Pacific segments. The Company has entered into an agreement with certain U.S. lenders to form a new three year $200 million asset-based credit facility to replace its existing facility which expires in April 2010, conditioned on the closing of the new five year senior secured term loan. In addition, a strategic investment partner has committed to a five year senior secured term loan in the amount of $150 million, conditioned on the successful closing of the new multi-year facility in Europe and the new Americas asset-based credit facility. This transaction will increase the overall liquidity of the Company and is expected to facilitate the other refinancings in Europe, Asia/Pacific and the Americas. The Americas refinancing, the European multi-year facility and the term loan are expected to close during the three months ending July 31, 2009, but no assurances can be given that the Company will be successful in these efforts.
	If the Company is unsuccessful in closing these transactions or if its short-term uncommitted lines of credit in Europe and Asia/Pacific are no longer made available, the Company could be adversely affected by having current maturities with limited means of repayment. The current maturities include the $73.3 million European credit facility due on June 30, 2009, the European uncommitted debt of $113.3 million and the Asia/Pacific uncommitted debt of $37.9 million, for a total of $224.5 million. While possible, management believes that it is unlikely that a repayment requirement would come from these banks based on the current stage of negotiations and because the debt currently has no associated collateral. Management believes that the more likely scenario would be a request for collateral to secure this debt. At the current time, the European banks have not asked for collateral as they are all working toward the planned multi-year facility. Without the financing arrangements previously described, the Company may not be able to meet its current obligations and would have to seek other alternatives. The continuing turmoil in the financial markets and economic conditions worldwide

6

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	could make it more difficult for the Company to close and fund these planned refinancing and strategic investment transactions. Therefore, no assurances can be given that the Company will be successful in these efforts.
2.	New Accounting Pronouncements
	In September 2006, the FASB, (“Financial Accounting Standards Board”) issued SFAS (“Statement of Financial Accounting Standards”) No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this standard at the beginning of its fiscal year ending October 31, 2009. The adoption of this accounting pronouncement did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See Note 8 for certain required disclosures related to this standard.
	In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS No. 159”), which permits companies to choose to measure certain financial instruments and other items at fair value that are not currently required to be measured at fair value. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this standard at the beginning of its fiscal year ending October 31, 2009. The adoption of this accounting pronouncement did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows since the Company did not elect the fair value option for any assets or liabilities.
	In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS No. 141(R)”), which requires the Company to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred and does not permit certain restructuring activities previously allowed under Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of purchase accounting. In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends the guidance in SFAS No. 141(R) to (i) require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value only if fair value can be reasonably estimated. If fair value of an acquired asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies,” (“SFAS No. 5”) and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss;” (ii) eliminate the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date, and for unrecognized contingencies, the Company is required to include disclosures required by SFAS No. 5 in the business combination footnote; and (iii) require that contingent consideration arrangements of an acquiree assumed by the acquiror in a business combination be treated as contingent consideration of the acquiror and should be initially and subsequently measured at fair value in accordance with SFAS No. 141(R). This statement (as amended) is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The Company will adopt this standard at the beginning of its fiscal year ending October 31, 2010 for all prospective business acquisitions. The Company has not determined the effect that the adoption of SFAS No. 141(R) will have on its consolidated financial statements, but the impact will be limited to any future acquisitions beginning in fiscal 2010, except for certain tax treatment of previous acquisitions.
	In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” (“SFAS No. 160”), which requires noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet.

7

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	This statement is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company will adopt this standard at the beginning of its fiscal year ending October 31, 2010. The Company has not determined the effect that the adoption of SFAS No. 160 will have on its consolidated financial statements.
	In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an Amendment of FASB Statement No. 133” (“SFAS No. 161”). The objective of SFAS No. 161 is to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this standard at the beginning of its fiscal quarter ending April 30, 2009. The adoption of this accounting pronouncement did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See Note 8 for required disclosures related to this standard.
	In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009 and the Company expects to adopt this disclosure only standard during the three months ending July 31, 2009.
3.	Stock-Based Compensation
	The Company accounts for stock-based compensation under the fair value recognition provisions of SFAS No. 123(R) “Share-Based Payment”. The Company uses the Black-Scholes option-pricing model to value compensation expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The expected term of options granted is derived from historical data on employee exercises. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based on the historical volatility of the Company’s stock. For the six months ended April 30, 2009 and 2008, options were valued assuming a risk-free interest rate of 2.0% and 3.0%, respectively, volatility of 62.8% and 40.7%, respectively, zero dividend yield, and an expected life of 5.9 and 5.7 years, respectively. The weighted average fair value of options granted was $0.97 and $3.85 for the six months ended April 30, 2009 and 2008, respectively. The Company records stock compensation expense using the graded vested method over the vesting period, which is generally three years. As of April 30, 2009, the Company had approximately $4.2 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 1.6 years. Compensation expense was included as selling, general and administrative expense for the period.
	Changes in shares under option for the six months ended April 30, 2009 are as follows:

				Weighted		Weighted		Aggregate
Dollar amounts in thousands,				Average		Average		Intrinsic
except per share amounts	Shares			Price		Life		Value
Outstanding, October 31, 2008		15,902,575		$	9.97
Granted		1,458,000			1.67
Exercised		—			—			$	—
Canceled		(1,617,243	)		10.37
Outstanding, April 30, 2009		15,743,332		$	9.15		5.4	$	111
Options exercisable, April 30, 2009		12,713,822		$	9.69		4.6	$	11

8

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Changes in non-vested shares under option for the six months ended April 30, 2009 are as follows:

				Weighted-Average
				Grant Date
	Shares			Fair Value
Non-vested, October 31, 2008		3,650,779		$	5.88
Granted		1,458,000			0.97
Vested		(1,807,261	)		6.34
Canceled		(272,008	)		5.31
Non-vested, April 30, 2009		3,029,510		$	3.21

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

Changes in restricted stock for the six months ended April 30, 2009 are as follows:

	Shares
Outstanding, October 31, 2008		721,003
Granted		260,000
Vested		(9,999	)
Forfeited		(204,001	)
Outstanding, April 30, 2009		767,003

	Compensation expense is determined using the intrinsic value method and forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The Company monitors the probability of meeting the restricted stock performance criteria and will adjust the amortization period as appropriate. As of April 30, 2009, there had been no acceleration of the amortization period. As of April 30, 2009, the Company had approximately $4.9 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.2 years.
4.	Inventories
	Inventories consist of the following:

	April 30,		October 31,
In thousands	2009		2008
Raw materials	$	7,927	$	9,156
Work in-process		3,940		7,743
Finished goods		295,868		295,239
	$	307,735	$	312,138

9

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

	April 30, 2009							October 31, 2008
	Gross		Amorti-			Net Book		Gross		Amorti-			Net Book
In thousands	Amount		zation			Value		Amount		zation			Value
Amortizable trademarks	$	18,585	$	(5,635	)	$	12,950	$	18,976	$	(5,559	)	$	13,417
Amortizable licenses		9,623		(6,174	)		3,449		9,103		(5,386	)		3,717
Other amortizable intangibles		8,139		(4,261	)		3,878		8,103		(3,942	)		4,161
Non-amortizable trademarks		122,515		—			122,515		123,139		—			123,139
	$	158,862	$	(16,070	)	$	142,792	$	159,321	$	(14,887	)	$	144,434

Certain trademarks and licenses will continue to be amortized by the Company using estimated useful lives of 10 to 25 years with no residual values. Intangible amortization expense for the six months ended April 30, 2009 and 2008 was $1.6 million and $1.4 million, respectively. Annual amortization expense is estimated to be approximately $3.1 million in the fiscal year ending October 31, 2009, $3.0 million in the fiscal years ending October 31, 2010 through 2012, and $2.0 million in the fiscal year ending October 31, 2013.

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

	April 30,		October 31,
In thousands	2009		2008
Americas	$	76,991	$	76,124
Europe		170,067		167,814
Asia/Pacific		57,933		55,412
	$	304,991	$	299,350

	Goodwill increased $5.6 million during the six months ended April 30, 2009. This increase was primarily related to the effect of changes in foreign currency exchange rates.
6.	Accumulated Other Comprehensive Income
	The components of accumulated other comprehensive income include net income, changes in fair value of derivative instruments qualifying as cash flow hedges and foreign currency translation adjustments. The components of accumulated other comprehensive income, net of income taxes, are as follows:

	April 30,		October 31,
In thousands	2009		2008
Foreign currency translation adjustment	$	44,717	$	60,003
Gain on cash flow hedges		8,868		20,507
	$	53,585	$	80,510

7.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s management in deciding how to allocate resources and in assessing performance. The Company operates in the outdoor market of the sporting goods industry in which the Company designs, markets and distributes clothing, footwear, accessories and related products. The Company currently operates in three segments, the Americas, Europe and Asia/Pacific. The Americas segment includes revenues

10

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Costs that support all three segments, including trademark protection, trademark maintenance and licensing functions, are part of Corporate operations. Corporate operations also includes sourcing income and gross profit earned from the Company’s licensees. The Company’s largest customer accounted for less than 4% of the Company’s net revenues from continuing operations for the six months ended April 30, 2009 and 2008.

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

	Three Months Ended April 30,
In thousands	2009			2008
Revenues, net:
Americas	$	229,990		$	247,615
Europe		210,498			284,500
Asia/Pacific		52,299			62,484
Corporate operations		1,386			1,681
	$	494,173		$	596,280
Gross profit:
Americas	$	84,895		$	105,779
Europe		119,447			161,730
Asia/Pacific		28,838			31,690
Corporate operations		(62	)		1,143
	$	233,118		$	300,342
SG&A expense:
Americas	$	89,021		$	89,697
Europe		79,060			98,058
Asia/Pacific		26,317			32,167
Corporate operations		8,191			10,878
	$	202,589		$	230,800
Asset impairment:
Americas	$	—		$	350
Europe		—			—
Asia/Pacific		—			—
Corporate operations		—			—
	$	—		$	350
Operating (loss) income:
Americas	$	(4,126	)	$	15,732
Europe		40,387			63,672
Asia/Pacific		2,521			(477	)
Corporate operations		(8,253	)		(9,735	)
	$	30,529		$	69,192

11

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Six Months Ended April 30,
In thousands	2009			2008
Revenues, net:
Americas	$	433,403		$	482,550
Europe		392,196			484,783
Asia/Pacific		109,889			122,860
Corporate operations		1,963			2,668
	$	937,451		$	1,092,861
Gross profit:
Americas	$	160,561		$	207,535
Europe		220,213			271,427
Asia/Pacific		59,539			63,425
Corporate operations		(32	)		1,479
	$	440,281		$	543,866
SG&A expense:
Americas	$	181,027		$	184,307
Europe		157,825			186,137
Asia/Pacific		53,233			60,081
Corporate operations		17,322			21,685
	$	409,407		$	452,210
Asset impairment:
Americas	$	—		$	350
Europe		—			—
Asia/Pacific		—			—
Corporate operations		—			—
	$	—		$	350
Operating (loss) income:
Americas	$	(20,466	)	$	22,878
Europe		62,388			85,290
Asia/Pacific		6,306			3,344
Corporate operations		(17,354	)		(20,206	)
	$	30,874		$	91,306
Identifiable assets:
Americas	$	592,486		$	703,873
Europe		847,414			1,074,507
Asia/Pacific		232,278			354,572
Corporate operations		68,000			66,091
	$	1,740,178		$	2,199,043

12

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8.	Derivative Financial Instruments
	The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income and product purchases of its international subsidiaries that are denominated in currencies other than their functional currencies. The Company is also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to its variable rate debt. Furthermore, the Company is exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in the Company’s consolidated financial statements due to the translation of the operating results and financial position of the Company’s international subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses various foreign currency exchange contracts and intercompany loans.
	The Company accounts for all of its cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet. In accordance with SFAS No. 133, the Company designates forward contracts as cash flow hedges of forecasted purchases of commodities.
	Effective February 1, 2009, the Company adopted SFAS No. 161, an amendment to SFAS No. 133, which provides an enhanced disclosure framework for derivative instruments. SFAS No. 161 requires that the fair values of derivative instruments and their gains and losses be disclosed in a manner that provides adequate information about the impact these instruments can have on an entity’s financial position, results of operations and cash flows.
	For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. As of April 30, 2009, the Company was hedging forecasted transactions expected to occur through October 2010. Assuming April 30, 2009 exchange rates remain constant, $8.9 million of gains, net of tax, related to hedges of these transactions are expected to be reclassified to earnings over the next 18 months.
	For the six months ended April 30, 2009, the effective portions of gains (losses) of foreign exchange derivative instruments in the consolidated statement of operations were as follows:

	Six Months Ended April 30, 2009
In thousands	Amount			Location
Gain (loss) recognized in OCI on derivative	$	(5,693	)	Other comprehensive income
Gain (loss) reclassified from accumulated OCI into income	$	(13,160	)	Cost of goods sold
Gain (loss) reclassified from accumulated OCI into income	$	40		Foreign currency gain (loss)
Gain (loss) recognized in income on derivative	$	613		Foreign currency gain (loss)

On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. In this documentation, the

13

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Company identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicates how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company would discontinue hedge accounting prospectively (i) if management determines that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) because a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if management determines that designation of the derivative as a hedge instrument is no longer appropriate.

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

As of April 30, 2009, the Company had the following outstanding forward contracts that were entered into to hedge forecasted purchases:

		Notional
In thousands	Hedged Item	Amount		Maturity	Fair Value
United States dollar	Inventory	$	321,841	May 2009 — Oct 2010	$	16,065
Swiss franc	Accounts receivable		1,959	May 2009 — Oct 2009		20
		$	323,800		$	16,085

Effective November 1, 2008, the Company adopted SFAS No. 157, which provides a framework for measuring fair value under generally accepted accounting principles. SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS No. 157 also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:

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

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

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

14

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table reflects the fair values of the foreign exchange contract assets and liabilities measured and recognized at fair value on a recurring basis on the consolidated balance sheet as of April 30, 2009:

	April 30, 2009
								Assets (Liabilities)
	Fair Value Measurements Using							at Fair Value
In thousands	Level 1		Level 2			Level 3
Derivative assets:
Other receivables	$	—	$	13,776		$	—	$	13,776
Other assets		—		4,153			—		4,153
Derivative liabilities:
Accrued liabilities		—		(1,788	)		—		(1,788	)
Other long-term liabilities		—		(56	)		—		(56	)
Total fair value	$	—	$	16,085		$	—	$	16,085

9.	Litigation, Indemnities and Guarantees
	The Company is involved from time to time in legal claims involving trademarks and intellectual property, licensing, employee relations and other matters incidental to its business. The Company believes the resolution of any such matter currently pending will not have a material adverse effect on its financial condition or results of operations.
	During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies and, in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. As of April 30, 2009, the Company had not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets because any liability for these indemnities would not be material.
10.	Condensed Consolidating Financial Information
	The Company has $400 million in publicly registered senior notes. Obligations under the Company’s senior notes are fully and unconditionally guaranteed by certain of its domestic subsidiaries. The Company is required to present condensed consolidating financial information for Quiksilver, Inc. and its domestic subsidiaries within the notes to the consolidated financial statements in accordance with the criteria established for parent companies in the SEC’s Regulation S-X, Rule 3-10(f). The following condensed consolidating financial information presents the results of operations, financial position and cash flows of Quiksilver Inc., its guarantor subsidiaries, its non-guarantor subsidiaries and the eliminations necessary to arrive at the information for the Company on a consolidated basis as of April 30, 2009 and October 31, 2008 and for the three and six month periods ended April 30, 2009 and 2008. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. The Company has adjusted certain prior year amounts in the current year’s presentation for prior periods to properly reflect the Company’s investment in its subsidiaries under the equity method of accounting as required by Regulation S-X, Rule 3-10. The Company has applied the

15

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

estimated consolidated annual effective income tax rate to both the guarantor and non-guarantor subsidiaries, adjusting for any discrete items, for interim reporting purposes. In the Company’s consolidated financial statements for the fiscal year ending October 31, 2009, management will apply the actual income tax rate to both the guarantor and non-guarantor subsidiaries. These interim tax rates may differ from the actual annual effective income tax rates for both the guarantor and non-guarantor subsidiaries.

16

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended April 30, 2009

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Revenues, net	$	72		$	204,931		$	298,073	$	(8,903	)	$	494,173
Cost of goods sold		—			128,829			134,987		(2,761	)		261,055
Gross profit		72			76,102			163,086		(6,142	)		233,118
Selling, general and administrative expense		4,034			87,310			118,268		(7,023	)		202,589
Operating (loss) income		(3,962	)		(11,208	)		44,818		881			30,529
Interest expense		10,293			421			2,838		—			13,552
Foreign currency loss		136			71			1,719		—			1,926
Minority interest, equity in earnings and other (income) expense		(19,518	)		353			225		19,518			578
Income (loss) before provision for income taxes		5,127			(12,053	)		40,036		(18,637	)		14,473
Provision for income taxes		—			14			9,514		—			9,528
Income (loss) from continuing operations		5,127			(12,067	)		30,522		(18,637	)		4,945
(Loss) income from discontinued operations		(2,314	)		(65	)		248		(1	)		(2,132	)
Net income (loss)	$	2,813		$	(12,132	)	$	30,770	$	(18,638	)	$	2,813

17

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended April 30, 2008

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	23		$	217,996		$	390,212		$	(11,951	)	$	596,280
Cost of goods sold		—			126,138			173,038			(3,238	)		295,938
Gross profit		23			91,858			217,174			(8,713	)		300,342
Selling, general and administrative expense		16,164			84,095			140,604			(10,063	)		230,800
Asset impairment		—			350			—			—			350
Operating (loss) income		(16,141	)		7,413			76,570			1,350			69,192
Interest expense (income)		12,929			166			(99	)		—			12,996
Foreign currency loss (gain)		392			(10	)		1,002			—			1,384
Minority interest, equity in earnings and other expense (income)		184,133			(189	)		(282	)		(184,133	)		(471	)
(Loss) income before (benefit) provision for income taxes		(213,595	)		7,446			75,949			185,483			55,283
(Benefit) provision for income taxes		(7,973	)		2,173			22,358			—			16,558
(Loss) income from continuing operations		(205,622	)		5,273			53,591			185,483			38,725
Loss from discontinued operations		(602	)		(17,301	)		(225,795	)		(1,251	)		(244,949	)
Net (loss) income	$	(206,224	)	$	(12,028	)	$	(172,204	)	$	184,232		$	(206,224	)

18

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended April 30, 2009

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	149		$	386,141		$	569,618		$	(18,457	)	$	937,451
Cost of goods sold		—			243,325			260,611			(6,766	)		497,170
Gross profit		149			142,816			309,007			(11,691	)		440,281
Selling, general and administrative expense		15,987			171,175			234,663			(12,418	)		409,407
Operating (loss) income		(15,838	)		(28,359	)		74,344			727			30,874
Interest expense		20,918			955			5,833			—			27,706
Foreign currency loss		1			50			3,305			—			3,356
Minority interest, equity in earnings and other expense (income)		175,250			620			—			(175,250	)		620
(Loss) income before (benefit) provision for income taxes		(212,007	)		(29,984	)		65,206			175,977			(808	)
(Benefit) provision for income taxes		(2,823	)		46,039			16,893			—			60,109
(Loss) income from continuing operations		(209,184	)		(76,023	)		48,313			175,977			(60,917	)
Income (loss) from discontinued operations		17,571			(2,787	)		(145,989	)		509			(130,696	)
Net (loss) income	$	(191,613	)	$	(78,810	)	$	(97,676	)	$	176,486		$	(191,613	)

19

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended April 30, 2008

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	18		$	428,601		$	685,857		$	(21,615	)	$	1,092,861
Cost of goods sold		—			246,393			308,954			(6,352	)		548,995
Gross profit		18			182,208			376,903			(15,263	)		543,866
Selling, general and administrative expense		24,949			173,951			269,931			(16,621	)		452,210
Asset impairment		—			350			—			—			350
Operating (loss) income		(24,931	)		7,907			106,972			1,358			91,306
Interest expense		23,609			125			310			—			24,044
Foreign currency loss (gain)		588			(8	)		188			—			768
Minority interest, equity in earnings and other expense (income)		192,618			(224	)		(173	)		(192,618	)		(397	)
(Loss) income before (benefit) provision for income taxes		(241,746	)		8,014			106,647			193,976			66,891
(Benefit) provision for income taxes		(14,394	)		2,343			32,647			—			20,596
(Loss) income from continuing operations		(227,352	)		5,671			74,000			193,976			46,295
Loss from discontinued operations		(812	)		(27,396	)		(244,730	)		(1,521	)		(274,459	)
Net (loss) income	$	(228,164	)	$	(21,725	)	$	(170,730	)	$	192,455		$	(228,164	)

20

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
April 30, 2009

						Non-
			Guarantor			Guarantor
In thousands	Quiksilver, Inc.		Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	16	$	10,254		$	63,782		$	—		$	74,052
Restricted cash		—		—			47,236			—			47,236
Trade accounts receivable, net		—		161,082			249,889			—			410,971
Other receivables		643		5,260			26,357			—			32,260
Inventories		—		134,765			173,619			(649	)		307,735
Deferred income taxes short-term		—		289			92,193			—			92,482
Prepaid expenses and other current assets		13,747		7,895			12,115			—			33,757
Current assets held for sale		—		10			9,112			—			9,122
Total current assets		14,406		319,555			674,303			(649	)		1,007,615
Fixed assets, net		5,137		87,776			136,005			—			228,918
Intangible assets, net		2,837		50,819			89,136			—			142,792
Goodwill		—		118,111			186,880			—			304,991
Investment in subsidiaries		955,858		—			—			(955,858	)		—
Other assets		8,561		1,736			31,762			—			42,059
Deferred income taxes long-term		—		(20,091	)		33,894			—			13,803
Total assets	$	986,799	$	557,906		$	1,151,980		$	(956,507	)	$	1,740,178
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	224,451		$	—		$	224,451
Accounts payable		3,119		87,313			78,643			—			169,075
Accrued liabilities		11,220		17,793			40,442			—			69,455
Current portion of long-term debt		—		149,868			76,068			—			225,936
Income taxes payable		—		(1,152	)		21,548			—			20,396
Intercompany balances		185,851		(123,279	)		(62,572	)		—			—
Current liabilities of assets held for sale		—		70			1,345			—			1,415
Total current liabilities		200,190		130,613			379,925			—			710,728
Long-term debt, net of current portion		400,000		514			203,898			—			604,412
Other long-term liabilities		—		33,991			4,438			—			38,429
Total liabilities		600,190		165,118			588,261			—			1,353,569
Stockholders’/invested equity		386,609		392,788			563,719			(956,507	)		386,609
Total liabilities and stockholders’ equity	$	986,799	$	557,906		$	1,151,980		$	(956,507	)	$	1,740,178

21

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

October 31, 2008

						Non-
			Guarantor			Guarantor
In thousands	Quiksilver, Inc.		Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	18	$	2,666		$	50,358		$	—		$	53,042
Trade accounts receivable, net		—		214,033			256,026			—			470,059
Other receivables		866		9,824			59,686			—			70,376
Income taxes receivable		—		2,859			7,879			—			10,738
Inventories		—		134,812			178,738			(1,412	)		312,138
Deferred income taxes short-term		—		21,560			(9,340	)		—			12,220
Prepaid expenses and other current assets		6,019		8,773			11,077			—			25,869
Current assets held for sale		—		70,367			341,075			—			411,442
Total current assets		6,903		464,894			895,499			(1,412	)		1,365,884
Restricted cash		—		—			46,475			—			46,475
Fixed assets, net		5,775		96,686			133,067			—			235,528
Intangible assets, net		2,754		51,113			90,567			—			144,434
Goodwill		—		117,235			182,115			—			299,350
Investment in subsidiaries		1,185,761		—			—			(1,185,761	)		—
Other assets		9,300		3,387			26,907			—			39,594
Deferred income taxes long-term		—		3,992			35,008			—			39,000
Total assets	$	1,210,493	$	737,307		$	1,409,638		$	(1,187,173	)	$	2,170,265
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	238,317		$	—		$	238,317
Accounts payable		5,121		102,987			127,621			—			235,729
Accrued liabilities		18,436		17,455			57,657			—			93,548
Current portion of long-term debt		—		2,061			29,843			—			31,904
Intercompany balances		186,970		(122,584	)		(64,386	)		—			—
Current liabilities related to assets held for sale		—		35,398			99,673			—			135,071
Total current liabilities		210,527		35,317			488,725			—			734,569
Long-term debt, net of current portion		400,000		143,501			246,596			—			790,097
Other long-term liabilities		—		29,882			9,725			—			39,607
Non-current liabilities related to assets held for sale		—		—			6,026			—			6,026
Total liabilities		610,527		208,700			751,072			—			1,570,299
Stockholders’/invested equity		599,966		528,607			658,566			(1,187,173	)		599,966
Total liabilities and stockholders’ equity	$	1,210,493	$	737,307		$	1,409,638		$	(1,187,173	)	$	2,170,265

22

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended April 30, 2009

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(191,613	)	$	(78,810	)	$	(97,676	)	$	176,486		$	(191,613	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
(Income) loss from discontinued operations		(17,571	)		2,787			145,989			(509	)		130,696
Depreciation and amortization		751			12,571			13,416			—			26,738
Stock-based compensation		4,372			—			—			—			4,372
Provision for doubtful accounts		—			6,154			2,811			—			8,965
Minority interest and equity in earnings		175,250			1,019			458			(175,250	)		1,477
Deferred income taxes		—			47,752			(2,904	)		—			44,848
Other adjustments to reconcile net loss		—			741			1,836			—			2,577
Changes in operating assets and liabilities:
Trade accounts receivables		—			48,306			7,273			—			55,579
Inventories		—			76			10,419			(1,236	)		9,259
Other operating assets and liabilities		(11,476	)		(5,599	)		(40,189	)		—			(57,264	)
Cash (used in) provided by operating activities of continuing operations		(40,287	)		34,997			41,433			(509	)		35,634
Cash (used in) provided by operating activities of discontinued operations		(19,736	)		42,770			(14,742	)		509			8,801
Net cash (used in) provided by operating activities		(60,023	)		77,767			26,691			—			44,435
Cash flows from investing activities:
Capital expenditures		(3,622	)		(4,304	)		(13,584	)		—			(21,510	)
Cash used in investing activities of continuing operations		(3,622	)		(4,304	)		(13,584	)		—			(21,510	)
Cash provided by investing activities of discontinued operations		—			—			21,848			—			21,848
Net cash (used in) provided by investing activities		(3,622	)		(4,304	)		8,264			—			338
Cash flows from financing activities:
Borrowings on lines of credit		—			—			8,613			—			8,613
Payments on lines of credit		—			—			(21,941	)		—			(21,941	)
Borrowings on long-term debt		—			115,412			29,134			—			144,546
Payments on long-term debt		—			(109,591	)		(32,611	)		—			(142,202	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		495			—			—			—			495
Intercompany		63,148			(71,696	)		8,548			—			—
Cash provided by (used in) financing activities of continuing operations		63,643			(65,875	)		(8,257	)		—			(10,489	)
Cash used in financing activities of discontinued operations		—			—			(11,136	)		—			(11,136	)
Net cash provided by (used in) financing activities		63,643			(65,875	)		(19,393	)		—			(21,625	)
Effect of exchange rate changes on cash		—			—			(2,138	)		—			(2,138	)
Net (decrease) increase in cash and cash equivalents		(2	)		7,588			13,424			—			21,010
Cash and cash equivalents, beginning of period		18			2,666			50,358			—			53,042
Cash and cash equivalents, end of period	$	16		$	10,254		$	63,782		$	—		$	74,052

23

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended April 30, 2008

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(228,164	)	$	(21,850	)	$	(171,338	)	$	193,188		$	(228,164	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss from discontinued operations		812			27,396			244,730			1,521			274,459
Depreciation and amortization		1,280			11,983			14,830			—			28,093
Stock-based compensation		4,621			—			—			—			4,621
Provision for doubtful accounts		—			2,575			2,283			—			4,858
Minority interest and equity in earnings		193,351			—			—			(193,351	)		—
Asset impairments		—			350			—			—			350
Other adjustments to reconcile net loss		(169	)		(88	)		582			—			325
Changes in operating assets and liabilities:
Trade accounts receivables		—			21,925			(6,792	)		—			15,133
Inventories		—			(5,078	)		10,193			163			5,278
Other operating assets and liabilities		(2,486	)		(31,741	)		10,227			—			(24,000	)
Cash (used in) provided by operating activities of continuing operations		(30,755	)		5,472			104,715			1,521			80,953
Cash provided by (used in) operating activities of discontinued operations		1,808			6,871			62,155			(1,521	)		69,313
Net cash (used in) provided by operating activities		(28,947	)		12,343			166,870			—			150,266
Cash flows from investing activities:
Capital expenditures		470			(17,330	)		(26,290	)		—			(43,150	)
Business acquisitions, net of cash acquired		—			(20,296	)		(9,688	)		—			(29,984	)
Cash provided by (used in) investing activities of continuing operations		470			(37,626	)		(35,978	)		—			(73,134	)
Cash provided by investing activities of discontinued operations		—			95,142			11,386			—			106,528
Net cash provided by (used in) investing activities		470			57,516			(24,592	)		—			33,394
Cash flows from financing activities:
Borrowings on lines of credit		—			—			124,148			—			124,148
Payments on lines of credit		—			—			(15,226	)		—			(15,226	)
Borrowings on long-term debt		—			114,500			3,512			—			118,012
Payments on long-term debt		—			(148,700	)		(28,248	)		—			(176,948	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		6,269			—			—			—			6,269
Intercompany		21,427			(9,135	)		(12,292	)		—			—
Cash provided by (used in) financing activities of continuing operations		27,696			(43,335	)		71,894			—			56,255
Cash used in financing activities of discontinued operations		—			(35,000	)		(185,069	)		—			(220,069	)
Net cash provided by (used in) financing activities		27,696			(78,335	)		(113,175	)		—			(163,814	)
Effect of exchange rate changes on cash		—			—			(2,860	)		—			(2,860	)
Net (decrease) increase in cash and cash equivalents		(781	)		(8,476	)		26,243			—			16,986
Cash and cash equivalents, beginning of period		12			13,254			61,082			—			74,348
Cash and cash equivalents, end of period	$	(769	)	$	4,778		$	87,325			—		$	91,334

24

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

	Six Months Ended April 30,
In thousands	2009			2008
Revenues, net	$	16,320		$	157,161
Loss before income taxes		(219,080	)		(334,885	)
Benefit for income taxes		(88,384	)		(60,426	)
Loss from discontinued operations	$	(130,696	)	$	(274,459	)

The loss from discontinued operations for the six months ended April, 30, 2009 includes the loss on sale of Rossignol of approximately $124.4 million, net of expected tax benefits

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

	April 30,
In thousands	2009
Current assets:
Receivables, net	$	4,481
Inventories		3,107
Other current assets		1,534
	$	9,122
Current liabilities:
Accounts payable	$	1,101
Other current liabilities		314
	$	1,415

12.

Income Taxes

During the six months ended April 30, 2009, the Company evaluated the realizability of its U.S. federal and state deferred tax assets. The Company has evaluated the need for a valuation allowance under SFAS 109, Accounting for Income Taxes, with respect to the U.S. consolidated tax group, which includes the U.S. portion of the Americas operating segment and the U.S. portion of corporate operations. Accordingly, the Company has concluded that based on all available information and proper weighting of objective and subjective evidence as of April 30, 2009, including a cumulative loss that had been sustained over a three-year period by the U.S. consolidated tax group, it is more likely than not that its U.S. federal and state deferred tax assets will not be realized and a full valuation allowance was established against $45.9 million of deferred tax assets that existed as of October 31, 2008. No benefit has been recognized on U.S. losses during the three months ended April 30, 2009; however, income tax expense has been

25

	recognized against non U.S. earnings in the current period. No valuation allowance has been established against the Company’s deferred tax assets outside of the U.S. based on all available information and proper weighting of objective and subjective evidence as of April 30, 2009.
	On April 30, 2009, the Company’s liability for uncertain tax positions was approximately $34.5 million resulting from unrecognized tax benefits, excluding interest and penalties. During the six months ended April 30, 2009, the Company increased its liability for uncertain tax positions, exclusive of interest and penalties, by $9.1 million. Of this increase, approximately $4.8 million is related to positions taken in prior periods, and approximately $4.3 million is related to tax positions taken in the current quarter and certain other items. The nature of the increase relates to intercompany transactions between foreign affiliates and certain foreign withholding tax exposures.
	If the Company’s positions are favorably sustained by the relevant taxing authority, approximately $26.3 million (excluding interest and penalties) of uncertain tax position liabilities would favorably impact the Company’s effective tax rate in future periods.
	The Company includes interest and penalties related to unrecognized tax benefits in its provision for income taxes in the accompanying consolidated statements of operations. During the six months ended April 30, 2009, the Company recorded an expense of approximately $2.2 million relating to interest and penalties, and as of April 30, 2009, the Company had a liability for interest and penalties of $8.7 million.
	During the next 12 months, it is reasonably possible that the Company’s liability for uncertain tax positions may change by a significant amount as a result of the resolution or payment of uncertain tax positions related to intercompany transactions between foreign affiliates and certain foreign withholding tax exposures. Conclusion of these matters could result in settlement for different amounts than the Company has accrued as uncertain tax benefits. If a position for which the Company concluded was more likely than not is subsequently not upheld, then the Company would need to accrue and ultimately pay an additional amount. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued or extinguish a position through payment. The Company believes the outcomes which are reasonably possible within the next 12 months range from no significant change to a reduction of the liability for unrecognized tax benefits of up to $14.7 million, excluding penalties and interest.
	The Company has completed a federal tax audit in the United States for fiscal years ending in 2004 and 2005 and remains subject to examination for years thereafter. The Company’s significant foreign tax jurisdictions, including France, Australia, and Canada, are subject to normal and regular examination for various tax years generally beginning in fiscal year 2000. The Company is currently under examination in France, Australia, and Canada for certain fiscal years ending through 2007.
13.	Restructuring Charges
	In connection with its cost reduction efforts, the Company has formulated the Fiscal 2009 Cost Reduction Plan (the “Plan”). During the six months ended April 30, 2009, the Company has recorded $8.3 million in severance charges in SG&A, which includes $5.6 million in the Americas segment, $1.7 million in the European segment and $1.0 million in corporate operations. The Plan covers the global operations of the Company but is primarily concentrated in the United States. The Company continues to evaluate its cost structure and additional cost reductions are likely necessary.
	Activity and liability balances recorded as part of the Plan are as follows:

In thousands	Workforce
Balance, November 1, 2008	$	—
Charged to expense		8,307
Cash payments		(2,041	)
Foreign currency translation		20
Balance, April 30, 2009	$	6,286

26

14.	Debt and Subsequent Events
	The Company’s current lines of credit allow for total maximum cash borrowings and letters of credit of $609.1 million. The Company’s total maximum borrowings and actual availability fluctuate depending on the extent of assets comprising the Company’s borrowing base under certain credit facilities. The Company had $437.9 million of borrowings drawn on these lines of credit as of April 30, 2009, and letters of credit issued at that time totaled $66.3 million. The amount of availability for borrowings under these lines as of April 30, 2009 was $62.3 million of which $21.6 million was committed. Of this $21.6 million in committed capacity, the entire amount can also be used for letters of credit. In addition to the $62.3 million of availability for borrowings, the Company also had $42.6 million in additional capacity for letters of credit in Europe and Asia/Pacific as of April 30, 2009.
	In March 2009, the Company extended the maturity date of a $73.3 million European credit facility, which was previously due on March 14, 2009, to June 30, 2009. In connection with this extension, the interest rate of the credit facility was adjusted to Euribor plus a margin of 2.8%. The Company is in discussions with its European banking partners to repay this credit facility with a new committed multi-year facility, along with the refinancing of its uncommitted short-term debt. If the European multi-year facility is not closed prior to the June 30, 2009 maturity date, then this maturity is expected to be extended to coincide with the expected close of the European refinancing transaction.
	In June 2009, the Company entered into an agreement with a strategic partner which has committed to provide a $150 million five year senior secured term loan, conditioned on the successful closing of a new multi-year facility in Europe, the new Americas asset-based credit facility and other customary closing conditions. Upon funding, the Company will issue warrants for up to 19.9% of the outstanding equity of the Company (at issuance) at a strike price of $1.86 per share. The fair value of these warrants will be determined on the date of grant and is expected to be recorded as a debt discount to be amortized into interest expense over the term of the loan. If the Company elects another alternative to the term loan, it will be required to issue warrants, based on the same general terms for 10% of the Company’s outstanding equity (at issuance) as a break-up fee. The term loan will primarily be secured by certain of the Company’s trademarks in the Americas and a first or second interest in substantially all property related to the Company’s Americas business. The term loan will bear an interest rate of 15% on a $125 million tranche, with 6% of that interest payable in kind or in cash, at the Company’s option. The remaining $25 million tranche will be denominated in euros (€20.0 million) and will bear an interest rate of 15%, with the full 15% payable in kind or cash at the Company’s option. The Company will incur a 3% fee plus other related costs. These debt issuance costs will be deferred and amortized into interest expense over the term of the loan. Net proceeds from the new term loan will be used to reduce other borrowings.
	In June 2009, the Company entered into an agreement with certain U.S. banks to provide a new $200 million three year asset-based credit facility for its Americas segment (with the option to expand the facility to $250.0 million on certain conditions). This credit facility is conditioned on the closing of the five year senior secured term loan and is subject to certain other customary closing conditions. This credit facility would include a $100 million sublimit for letters of credit and will bear interest at a rate of LIBOR plus a margin of 400 to 450 basis points, depending upon availability. The credit facility will be secured by the Company’s U.S. and Canadian accounts receivable, inventory, certain intangibles, a second priority interest in substantially all other personal property and a second priority pledge of shares of certain of the Company’s domestic subsidiaries. The borrowing base is limited to certain percentages of eligible accounts receivable and inventory from participating subsidiaries. The Company will incur a fee of 2.5% plus other related costs. This credit facility will contain customary default provisions for facilities of this type. This facility will replace the Company’s existing credit facility in the Americas which expires in April 2010. The existing facility has $148.6 million in outstanding borrowings and is classified as short-term as of April 30, 2009 in the accompanying balance sheet.
	The multi-year European facility, the Americas credit facility and the senior secured term loan are expected to close during the three months ending July 31, 2009.

27

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

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

Over the past 38 years, Quiksilver has been established as a leading global brand representing the casual, youth lifestyle associated with boardriding sports.

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

In November 2008, we completed the sale of our Rossignol business, which includes the brands Rossignol, Dynastar, Look and Lange. Our Rossignol business, including both wintersports equipment and related apparel, is classified as discontinued operations. The assets and related liabilities of our Rossignol business are classified as held for sale, and the operations are classified as discontinued in our condensed consolidated financial statements. Also, as part of our acquisition of Rossignol in 2005, we acquired a majority interest in Roger Cleveland Golf Company, Inc. Our golf equipment operations were subsequently sold in December 2007 and are also classified as discontinued operations in our condensed consolidated financial statements. As a result of these dispositions, the information herein has been adjusted to exclude both our Rossignol and golf equipment businesses.

We operate in the outdoor market of the sporting goods industry in which we design, produce and distribute branded apparel, footwear, accessories and related products. We currently operate in three segments: the Americas, Europe and Asia/Pacific. Our former wintersports equipment segment has been classified as discontinued operations. The Americas segment includes revenues primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Royalties earned from various licensees in other international territories are categorized in corporate operations along with revenues from sourcing services to our licensees.

28

We operate in markets that are highly competitive, and our ability to evaluate and respond to changing consumer demands and tastes is critical to our success. If we are unable to remain competitive and maintain our consumer loyalty, our business will be negatively affected. We believe that our historical success is due to the development of an experienced team of designers, artists, sponsored athletes, technicians, researchers, merchandisers, pattern makers and contractors. Our team and the heritage and current strength of our brands has helped us remain competitive in our markets. Our success in the future will depend, in part, on our ability to continue to design products that are acceptable to the marketplace and competitive in the areas of quality, brand image, technical specifications, distribution methods, price, customer service and intellectual property protection.

Results of Operations

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

	Three Months Ended						Six Months Ended
	April 30,						April 30,
	2009			2008			2009			2008
Statements of Operations data
Revenues, net		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		47.2			50.4			47.0			49.8
Selling, general and administrative expense		41.0			38.7			43.7			41.4
Asset impairment		—			0.1			—			0.0
Operating income		6.2			11.6			3.3			8.4
Interest expense		2.7			2.2			3.0			2.2
Foreign currency, minority interest and other expense		0.6			0.1			0.4			0.1
Income (loss) before provision for income taxes		2.9			9.3			(0.1	)		6.1
Other data
Adjusted EBITDA(1)		8.7	%		14.5	%		6.2	%		11.5	%

⁽¹⁾ Adjusted EBITDA is defined as income from continuing operations before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-cash stock-based compensation expense and (v) asset impairments. Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”), and it may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA, along with other GAAP measures, as a measure of profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense. We believe EBITDA is useful to investors as it is a widely used measure of performance and the adjustments we make to EBITDA provide further clarity on our profitability. We remove the effect of non-cash stock-based compensation from our earnings which can vary based on share price, share price volatility and expected life of the equity instruments we grant. In addition, this stock-based compensation expense does not result in cash payments by us. We remove the effect of asset impairments from Adjusted EBITDA for the same reason that we remove depreciation and amortization as it is part of the impact of our asset base. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes, the effect of our expenditures for capital assets and certain intangible assets, the effect of non-cash stock-based compensation expense and the effect of asset impairments. The following is a reconciliation of income (loss) from continuing operations to Adjusted EBITDA:

29

	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2009		2008		2009			2008
Income (loss) from continuing operations	$	4,945	$	38,725	$	(60,917	)	$	46,295
Provision for income taxes		9,528		16,558		60,109			20,596
Interest expense		13,552		12,996		27,706			24,044
Depreciation and amortization		13,435		14,563		26,738			28,093
Non-cash stock-based compensation expense		1,665		3,055		4,372			6,551
Non-cash asset impairments		—		350		—			350
Adjusted EBITDA	$	43,125	$	86,247	$	58,008		$	125,929

Three Months Ended April 30, 2009 Compared to Three Months Ended April 30, 2008

Our total net revenues for the three months ended April 30, 2009 decreased 17% to $494.2 million from $596.3 million in the comparable period of the prior year. In constant currency, net revenues decreased 8% compared to the prior year. Our net revenues in each of the Americas, Europe and Asia/Pacific segments include apparel, footwear and accessories product lines for our Quiksilver, Roxy and DC brands, and other brands which include Hawk, Raisins, Leilani, Radio Fiji, Lib Technologies, Gnu and Bent Metal.

In order to better understand growth rates in our foreign operating segments, we make reference to constant currency. Constant currency improves visibility into actual growth rates as it adjusts for the effect of changing foreign currency exchange rates from period to period. For income statement items, constant currency is calculated by taking the average foreign currency exchange rate used in translation for the current period and applying that same rate to the prior period. Our European segment is translated into constant currency using euros and our Asia/Pacific segment is translated into constant currency using Australian dollars as these are the primary functional currencies of each reporting segment. A constant currency translation based upon each individual currency could yield a different result compared to using only euros and Australian dollars. The following table presents revenues by segment in both historical currency and constant currency for the three months ended April 30, 2009 and 2008:

	Americas			Europe			Asia/Pacific			Corporate			Total
Historical currency (as reported)
April 30, 2008	$	247,615		$	284,500		$	62,484		$	1,681		$	596,280
April 30, 2009		229,990			210,498			52,299			1,386			494,173
Percentage decrease		(7	%)		(26	%)		(16	%)		(18	%)		(17	%)
Constant currency (current year exchange rates)
April 30, 2008		247,615			241,794			45,814			1,681			536,904
April 30, 2009		229,990			210,498			52,299			1,386			494,173
Percentage (decrease) increase		(7	%)		(13	%)		14	%		(18	%)		(8	%)

Revenues in the Americas decreased 7% to $230.0 million for the three months ended April 30, 2009 from $247.6 million in the comparable period of the prior year, while European revenues decreased 26% to $210.5 million from $284.5 million and Asia/Pacific revenues decreased 16% to $52.3 million from $62.5 million for those same periods. The decrease in the Americas came primarily from both our Roxy and Quiksilver brands in apparel and, to a lesser extent, accessories and footwear. Our DC brand revenues decreased slightly, with growth in apparel being more than offset by a decrease in footwear revenue. Europe’s net revenues decreased 13% in constant currency. The currency adjusted revenue decrease in Europe was driven by our Quiksilver and Roxy brands, partially offset by an increase in our DC brand. DC brand revenue growth came from apparel, which was slightly offset by a decrease in footwear revenue. Decreases in our Quiksilver and Roxy brands came primarily from our apparel product lines and, to a lesser extent, our accessories and footwear product lines. Asia/Pacific’s net revenues increased 14% in constant currency. The currency adjusted increase in Asia/Pacific came across all product lines from our Quiksilver and DC brands and, to a lesser extent, our Roxy brand.

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Our consolidated gross profit margin for the three months ended April 30, 2009 decreased to 47.2% from 50.4% in the comparable period of the prior year. The gross profit margin in the Americas segment decreased to 36.9% from 42.7%, while our European segment gross profit margin decreased slightly to 56.7% from 56.8%, and our Asia/Pacific segment gross profit margin increased to 55.1% from 50.7% for those same periods. The decrease in the Americas segment gross profit margin was due primarily to market related price compression in both our company-owned stores and our wholesale business. Our European segment gross profit margin remained largely unchanged. In our Asia/Pacific segment, our gross profit margin increase was primarily due to improved wholesale margins in Australia compared to the prior year.

Our selling, general and administrative expense (“SG&A”) for the three months ended April 30, 2009 decreased 12% to $202.6 million from $230.8 million in the comparable period of the prior year. Consolidated SG&A decreased 3% in constant currency. In the Americas segment, these expenses decreased 1% to $89.0 million from $89.7 million in the comparable period of the prior year, while our European segment SG&A decreased 19% to $79.1 million from $98.1 million, and our Asia/Pacific segment SG&A decreased 18% to $26.3 million from $32.2 million for those same periods. As a percentage of revenues, SG&A increased to 41.0% for the three months ended April 30, 2009 from 38.7% for the three months ended April 30, 2008. In the Americas, SG&A as a percentage of revenues increased to 38.7% compared to 36.2% the year before. In Europe, SG&A as a percentage of revenues increased to 37.6% from 34.5%, and in Asia/Pacific, SG&A as a percentage of revenues decreased to 50.3% from 51.5% for those same periods. The increase in SG&A as a percentage of revenue in our Americas segment was primarily caused by lower revenues. Expense reductions were partially offset by approximately $3.4 million in incremental bad debt expense and approximately $3.5 million in charges related primarily to restructuring activities, a legal settlement and severance. The increase in SG&A as a percentage of revenue in our European segment was primarily caused by lower revenues and, to a lesser extent, the cost of operating additional retail stores and severance costs of approximately $1.7 million. In our Asia/Pacific segment, the decrease in SG&A as a percentage of revenue primarily related to leverage on sales growth, partially offset by the cost of operating additional retail stores.

Interest expense for the three months ended April 30, 2009 increased to $13.6 million from $13.0 million in the comparable period of the prior year. This increase was primarily the result of additional interest expense in 2009, which was allocated to the discontinued operations of Rossignol in 2008, almost wholly offset by lower interest rates on variable rate debt in Europe and the United States and favorable translation rates of European interest expense in the current year. Including both continuing and discontinued operations for the three months ending April 30, 2009 and 2008, interest expense was $13.6 million and $16.9 million, respectively. In the prior year, the discontinued Rossignol business was allocated interest based on intercompany borrowings. We are working to refinance certain components of our debt and as a result, interest expense could be materially higher in future periods.

Our foreign currency loss amounted to $1.9 million for the three months ended April 30, 2009 compared to $1.4 million in the same period last year. This loss primarily resulted from the foreign currency exchange effect of certain non-U.S. dollar denominated liabilities and the settlement of certain foreign exchange contracts.

Our effective income tax rate for the three months ended April 30, 2009 was 65.8% compared to 30.0% for the three months ended April 30, 2008. The income tax rate for the three months ended April 30, 2009 was primarily impacted by limitations on deductibility of losses in the United States.

Our income from continuing operations for the three months ended April 30, 2009 was $4.9 million or $0.04 per share on a diluted basis, compared to income from continuing operations of $38.7 million, or $0.30 per share on a diluted basis, in the same period of the prior year. Adjusted EBITDA was $43.1 million, down from $86.2 million for those same periods.

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Six Months Ended April 30, 2009 Compared to Six Months Ended April 30, 2008

Our total net revenues for the six months ended April 30, 2009 decreased 14% to $937.5 million from $1,092.9 million in the comparable period of the prior year. Net revenues decreased 6% in constant currency.

The following table presents revenues by segment in both historical currency and constant currency for the six months ended April 30, 2009 and 2008:

	Americas			Europe			Asia/Pacific			Corporate			Total
Historical currency (as reported)
April 30, 2008	$	482,550		$	484,783		$	122,860		$	2,668		$	1,092,861
April 30, 2009		433,403			392,196			109,889			1,963			937,451
Percentage decrease		(10	%)		(19	%)		(11	%)		(26	%)		(14	%)
Constant currency (current year exchange rates)
April 30, 2008		482,550			421,951			91,459			2,668			998,628
April 30, 2009		433,403			392,196			109,889			1,963			937,451
Percentage (decrease) increase		(10	%)		(7	%)		20	%		(26	%)		(6	%)

Revenues in the Americas decreased 10% to $433.4 million for the six months ended April 30, 2009 from $482.6 million in the comparable period of the prior year, while European revenues decreased 19% to $392.2 million from $484.8 million and Asia/Pacific revenues decreased 11% to $109.9 million from $122.9 million for those same periods. In the Americas, the decrease in revenues came primarily from Roxy brand revenue and, to a lesser extent, Quiksilver and DC brand revenues. Decreases in Roxy and Quiksilver brand revenues came primarily from apparel and accessories product lines and, to a lesser extent, footwear product lines. The decrease in DC brand revenues came primarily from decreases in its footwear product line revenues. European net revenues decreased 7% in constant currency. The currency adjusted decrease in Europe came primarily from decreases in our Roxy and Quiksilver brand revenues, partially offset by increases in our DC brand revenues. Decreases in our Roxy and Quiksilver brand revenues came primarily from our apparel product lines and, to a lesser extent, our Roxy accessories and footwear product lines. Increases in DC brand revenues came primarily from growth in apparel product lines, partially offset by a slight decrease in footwear product lines. Asia/Pacific’s net revenues increased 20% in constant currency. The currency adjusted increase in Asia/Pacific revenues came primarily from our Roxy and Quiksilver brands and, to a lesser extent, our DC brand across all product lines.

Our consolidated gross profit margin for the six months ended April 30, 2009 decreased to 47.0% from 49.8% in the comparable period of the prior year. The gross profit margin in the Americas segment decreased to 37.0% from 43.0%, while our European segment gross profit margin increased slightly to 56.1% from 56.0%, and our Asia/Pacific segment gross profit margin increased to 54.2% from 51.6% for those same periods. The decrease in the Americas segment gross profit margin was due primarily to market related price compression in both our company-owned retail stores and our wholesale business. Our European segment gross profit margin remained largely unchanged. In our Asia/Pacific segment, our gross profit margin increase was primarily due to improved margins in Japan compared to the prior year and, to a lesser extent, improved wholesale margins in Australia.

Our SG&A for the six months ended April 30, 2009 decreased 9% to $409.4 million from $452.2 million in the comparable period of the prior year. SG&A decreased 1% in constant currency. In the Americas segment, these expenses decreased 2% to $181.0 million from $184.3 million in the comparable period of the prior year, while our European segment SG&A decreased 15% to $157.8 million from $186.1 million, and our Asia/Pacific segment SG&A decreased 11% to $53.2 million from $60.1 million for those same periods. As a percentage of revenues, SG&A increased to 43.7% for the six months ended April 30, 2009 from 41.4% for the six months ended April 30, 2008. In the Americas, SG&A as a percentage of revenues increased to 41.8% compared to 38.2% the year before. In Europe, SG&A as a percentage of revenues increased to 40.2% from 38.4%, and in Asia/Pacific, SG&A as a percentage of revenues

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decreased to 48.4% from 48.9% for those same periods. The increase in SG&A as a percentage of revenue in our Americas segment was primarily due to lower revenues. Expense reductions were partially offset by incremental bad debt expense of $3.8 million and $9.5 million in charges primarily related to restructuring activities, a legal settlement and severance costs. The increase in SG&A as a percentage of revenue in our European segment was primarily caused by lower revenues and, to a lesser extent, the cost of operating additional retail stores and severance costs of approximately $1.7 million. In our Asia/Pacific segment, the decrease in SG&A as a percentage of revenue primarily related to leverage on sales growth, partially offset by the cost of operating additional retail stores.

Interest expense for the six months ended April 30, 2009 increased to $27.7 million from $24.0 million in the comparable period of the prior year. This increase was primarily due to additional interest expense previously allocated to the discontinued operations of Rossignol in the prior year, partially offset by lower interest rates on variable rate debt in Europe and the United States and favorable translation rates of European interest expense in the current period. Including both continuing and discontinued operations for the six months ended April 30, 2009 and 2008, interest expense was $27.7 million and $31.8 million, respectively. In the prior year, the discontinued Rossignol business was allocated interest based on intercompany borrowings. We are working to refinance certain components of our debt and as a result, interest expense could be materially higher in future periods.

Our foreign currency loss amounted to $3.4 million for the six months ended April 30, 2009 compared to $0.8 million in the comparable period of the prior year. This current year loss resulted primarily from the foreign currency exchange effect of certain non-U.S. dollar denominated liabilities and the settlement of certain foreign exchange contracts.

Our income tax for the six months ended April 30, 2009 was $60.1 million compared to $20.6 million for the six months ended April 30, 2008. The income tax rate for the six months ended April 30, 2009 was unfavorably impacted by a valuation allowance of $45.9 million recorded against our deferred tax assets in the United States.

Our loss from continuing operations for the six months ended April 30, 2009 was $60.9 million, or $0.48 per share on a diluted basis, compared to income from continuing operations of $46.3 million, or $0.36 per share on a diluted basis, in the same period of the prior year. Adjusted EBITDA was $58.0 million, down from $125.9 million for those same periods.

Financial Position, Capital Resources and Liquidity

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

Cash Flows

We generated $35.6 million of cash from operating activities of continuing operations in the six months ended April 30, 2009 compared to $81.0 million for the same period of the prior year. This $45.4 million decrease in cash provided was primarily due to increases in our net loss adjusted for other non-cash charges of $56.5 million, partially offset by improvements in working capital of $11.1 million.

Capital expenditures of continuing operations totaled $21.5 million for the six months ended April 30, 2009, compared to $43.2 million in the comparable period of the prior year. These investments included company-owned retail stores and ongoing investments in computer and warehouse equipment. We had no acquisitions during the six month period ended April 30, 2009. We generated $21.8 million in cash from investing activities of discontinued operations, which is primarily related to the net proceeds from the sale of our Rossignol wintersports business during the six months ended April 30, 2009.

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During the six months ended April 30, 2009, net cash used in financing activities of continuing operations totaled $10.5 million, compared to $56.3 million provided by financing activities of continuing operations in the comparable period of the prior year.

The net increase in cash and cash equivalents for the six months ended April 30, 2009 was $21.0 million compared to $17.0 million in the comparable period of the prior year. Cash and cash equivalents totaled $74.1 million at April 30, 2009 compared to $53.0 million at October 31, 2008, while working capital was $296.9 million at April 30, 2009 compared to $631.3 million at October 31, 2008. Working capital decreased as a result of the disposal of the Rossignol wintersports business in November 2008 and our Americas credit facility being classified as short-term in the current period.

We are highly leveraged. However, we believe that our cash flow from operations, together with our existing credit facilities and planned refinancings will be adequate to fund our capital requirements for at least the next twelve months. In March 2009, we extended the maturity date of a $73.3 million European credit facility, which was previously due on March 14, 2009, to June 30, 2009. Our European banks have extended the maturity of this credit facility on four separate occasions through June 30, 2009. In connection with current negotiations, the European banks have indicated a willingness to extend this maturity again but have not yet done so based on the progress of current negotiations for a new multi-year facility. This proposed multi-year facility would include the refinancing of all uncommitted European debt and a majority of our existing term loans in Europe. We believe that our short-term uncommitted lines of credit will continue to be made available until refinanced on a longer term basis in our European and Asia/Pacific segments.

In June 2009, we entered into an agreement with a strategic partner which has committed to provide a $150 million five year senior secured term loan, conditioned on the successful closing of a new multi-year facility in Europe, a new Americas asset-based credit facility (discussed below) and other customary closing conditions. Upon funding, we will issue warrants for up to 19.9% of our outstanding equity (at issuance) at a strike price of $1.86 per share. The fair value of these warrants will be determined on the date of grant and is expected to be recorded as a debt discount to be amortized into interest expense over the term of the loan. If we elect another alternative to the term loan, we will be required to issue warrants, based on the same general terms for 10% of our outstanding equity (at issuance) as a break-up fee. The term loan will primarily be secured by certain of our trademarks in the Americas and a first or second interest in substantially all property related to our Americas business. The term loan will bear an interest rate of 15% on a $125 million tranche, with 6% of that interest payable in kind or in cash, at our option. The remaining $25 million tranche will be denominated in euros (€20.0 million) and will bear an interest rate of 15%, with the full 15% payable in kind or cash at our option. We will incur a 3% fee plus other related costs. These debt issuance costs will be deferred and amortized into interest expense over the term of the loan. Net proceeds from the new term loan will be used to reduce other borrowings.

In June 2009, we entered into an agreement with certain U.S. banks to provide a new $200 million three year asset-based credit facility for our Americas segment (with the option to expand the facility to $250.0 million on certain conditions). This credit facility is conditioned on the closing of the five year senior secured term loan and is subject to certain customary closing conditions. This credit facility would include a $100 million sublimit for letters of credit and will bear interest at a rate of LIBOR plus a margin of 400 to 450 basis points, depending upon availability. The credit facility will be secured by our U.S. and Canadian accounts receivable, inventory, certain intangibles, a second priority interest in substantially all other personal property and a second priority pledge of shares of certain of our domestic subsidiaries. The borrowing base is limited to certain percentages of eligible accounts receivable and inventory from participating subsidiaries. We will incur a fee of 2.5% plus other related costs. This credit facility will contain customary default provisions for facilities of this type. This facility will replace our existing credit facility in the Americas which expires in April 2010. The existing facility has $148.6 million in outstanding borrowings and is classified as short-term as of April 30, 2009 in our balance sheet.

If we are unsuccessful in closing these transactions or if our short-term uncommitted lines of credit in Europe and Asia/Pacific are no longer made available, we could be adversely affected by having current maturities with limited means of repayment. The current maturities include the $73.3 million credit facility

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due on June 30, 2009, the European uncommitted debt of $113.3 million and the Asia/Pacific uncommitted debt of $37.9 million, for a total of $224.5 million. While possible, we believe that it is unlikely that a repayment requirement would come from these banks based on the current stage of negotiations and because the debt currently has no associated collateral. We believe that the more likely scenario would be a request for collateral to secure this debt. At the current time, the European banks have not asked for collateral on this debt as they are all working toward the planned multi-year facility. Without the financing arrangements previously described, we may not be able to meet our current obligations and would have to seek other alternatives. The continuing turmoil in the financial markets and economic conditions worldwide could make it more difficult for us to close and fund these planned refinancing and strategic investment transactions. Therefore, no assurances can be given that we will be successful in these efforts.

Trade Accounts Receivable and Inventories

Our trade accounts receivable decreased 13% to $411.0 million at April 30, 2009 from $470.1 million at October 31, 2008. Accounts receivable in our Americas segment decreased 23% to $196.9 million at April 30, 2009 from $254.2 million at October 31, 2008, while European segment accounts receivable increased 13% to $181.6 million from $160.0 million and Asia/Pacific segment accounts receivable decreased 42% to $32.5 million from $55.8 million. Compared to April 30, 2008, accounts receivable decreased 1% in the Americas segment, 21% in our European segment and 27% in the Asia/Pacific segment. Consolidated accounts receivable decreased 4% in constant currency. Included in accounts receivable at April 30, 2009 are approximately $25.1 million of value added tax and goods and services tax related to foreign accounts receivable. Such taxes are not reported as net revenues and as such must be deducted from accounts receivable to more accurately compute days sales outstanding. Overall days sales outstanding increased by approximately three days at April 30, 2009 compared to April 30, 2008.

Consolidated inventories decreased 1% to $307.7 million at April 30, 2009 from $312.1 million at October 31, 2008. Inventories in the Americas segment increased 4% to $168.2 million from $162.2 million at October 31, 2008, while European segment inventories decreased 16% to $86.0 million from $102.6 million, and Asia/Pacific segment inventories increased 13% to $53.8 million from $47.4 million for those same periods. Compared to April 30, 2008, inventories increased 12% in the Americas segment, decreased 14% in our European segment, and decreased 2% in the Asia/Pacific segment. Consolidated inventories increased 12% in constant currency compared to April 30, 2008. Consolidated average annual inventory turnover was approximately 3.3 at April 30, 2009, compared to approximately 3.5 at April 30, 2008.

Restructuring

In connection with our cost reduction efforts, we have formulated the Fiscal 2009 Cost Reduction Plan (the “Plan”). During the six months ended April 30, 2009, we have recorded $8.3 million in severance charges. The Plan covers our global operations but is primarily concentrated in the United States. We continue to evaluate our cost structure and additional cost reductions may be necessary. As of April 30, 2009, we have obligations to pay approximately $6.3 million under the Plan with a majority of these payments occurring in fiscal 2009.

Commitments

As of April 30, 2009, there have been no material changes in our contractual obligations since October 31, 2008. However, upon closing of the expected refinancings in Europe and the Americas and the funding of the senior secured term loan, a significant portion of our short-term maturities will be extended on a long-term basis.

Critical Accounting Policies

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

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Revenue Recognition

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

Accounts Receivable

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

Inventories

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

• weakening economic conditions;

• terrorist acts or threats;

• unanticipated changes in consumer preferences;

• reduced customer confidence in the retail market; and

• unseasonable weather.

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

Long-Lived Assets

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

Goodwill

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

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Stock-Based Compensation Expense

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

Income Taxes

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

On November 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN 48 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the tax position. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of our provision for income taxes. The application of FIN 48 can create significant variability in our tax rate from period to period upon changes in or adjustments to our uncertain tax positions.

Foreign Currency Translation

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

As part of our overall strategy to manage our level of exposure to the risk of fluctuations in foreign currency exchange rates, we enter into various foreign currency exchange contracts generally in the form of forward contracts. For all contracts that qualify as cash flow hedges, we record the changes in the fair value of the derivatives in other comprehensive income.

New Accounting Pronouncements

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

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Forward-Looking Statements

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

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

• our ability to close our refinancing and strategic investment transactions on reasonable terms and in a timely manner;

• our ability to sell certain assets on reasonable terms;

• our ability to remain compliant with our debt covenants;

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

• payments due on contractual commitments and other debt obligations;

• future expenditures for capital projects;

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

• foreign currency exchange rate fluctuations; and

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

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained herein will, in fact, transpire.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency and Derivatives

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

European revenues decreased 13% in euros during the three months ended April 30, 2009 compared to the three months ended April 30, 2008. As measured in U.S. dollars and reported in our consolidated statements of operations, European revenues decreased 26% as a result of a stronger U.S. dollar versus the euro in comparison to the prior year.

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Asia/Pacific revenues increased 14% in Australian dollars during the three months ended April 30, 2009 compared to the three months ended April 30, 2008. As measured in U.S. dollars and reported in our consolidated statements of operations, Asia/Pacific revenues decreased 16% as a result of a stronger U.S. dollar versus the Australian dollar in comparison to the prior year.

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

Item 4. Controls and Procedures

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

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2009, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of April 30, 2009.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended April 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders was held on March 25, 2009. A total of 105,750,221 shares of our common stock were present or represented by proxy at the meeting, representing more than 82% of our shares outstanding as of the January 30, 2009 record date. The matters submitted for a vote and the related results are as follows:

Election of six nominees to serve as directors until the next annual meeting and until their respective successors are elected and qualified. The result of the vote taken was as follows:

	Votes For		Votes Withheld
Douglas K. Ammerman		101,605,473		4,144,748
William M. Barnum, Jr.		98,310,196		7,440,025
Charles E. Crowe		101,895,773		3,854,448
James G. Ellis		102,029,812		3,720,409
Charles S. Exon		100,721,393		5,028,828
Robert B. McKnight		100,749,076		5,001,145

	Votes		Votes		Votes		Broker
	For		Against		Abstained		Non-Votes
Amendment and Restatement of the Quiksilver, Inc. 2000 Stock Incentive Plan		56,943,816		20,823,095		27,923		27,955,387
Amendment and Restatement of the Quiksilver, Inc. 2000 Employee Stock Purchase Plan		75,406,288		2,358,602		29,943		27,955,388

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Item 6. Exhibits

Exhibits
2.1	Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated October 30, 2007 (incorporated by reference to Exhibit 2.3 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.2	Amendment No. 1 to the Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated December 7, 2007 (incorporated by reference to Exhibit 2.4 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.3	Offer Letter dated August 25, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 27, 2008).
2.4	Amended and Restated Offer Letter dated October 31, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 31, 2008).
2.5	Stock Purchase Agreement dated November 12, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc., Chartreuse et Mont Blanc LLC, Chartreuse et Mont Blanc SAS, Chartreuse et Mont Blanc Global Holdings S.C.A., Macquarie Asset Finance Limited and Mavilia SAS (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 18, 2008).
3.1	Restated Certificate of Incorporation of Quiksilver, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2004).
3.2	Certificate of Amendment of Restated Certificate of Incorporation of Quiksilver, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2005).
3.3	Amended and Restated Bylaws of Quiksilver, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 7, 2007).
4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed July 25, 2005).
10.1	Tenth Amendment to the Amended and Restated Credit Agreement dated March 6, 2009 (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009).
10.2	English Translation of Amendment No. 3 to Line of Credit Agreement dated March 14, 2008 between Pilot S.A.S. and Societe Generale, BNP Paribas and Le Credit Lyonnais dated March 9, 2009 (incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009).
10.3	Quiksilver, Inc. 2000 Stock Incentive Plan, as amended and restated, together with form Stock Option and Restricted Stock Agreements. (1)
10.5	Commitment Letter by and among Quiksilver, Inc., Quiksilver Americas, Inc., Bank of America, N.A., Banc of America Securities LLC, General Electric Capital Corporation and GE Capital Markets, Inc. dated June 8, 2009 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on June 9, 2009).
10.6	Commitment Letter by and among Quiksilver, Inc., Quiksilver Americas, Inc. and Rhone Capital III L.P dated June 8, 2009 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on June 9, 2009).

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Exhibits
10.4	Quiksilver, Inc. 2000 Employee Stock Purchase Plan, as amended and restated. (1)
31.1	Rule 13a-14(a)/15d-14(a) Certifications — Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications — Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Financial Officer

(1) Management contract or compensatory plan.

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SIGNATURES

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

	QUIKSILVER, INC., a Delaware corporation
June 9, 2009	/s/ Brad L. Holman
	Brad L. Holman
	Vice President of Accounting and Financial Reporting (Principal Accounting Officer and Authorized Signatory)

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Exhibit Index

Exhibit No.	Description
2.1	Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated October 30, 2007 (incorporated by reference to Exhibit 2.3 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.2	Amendment No. 1 to the Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated December 7, 2007 (incorporated by reference to Exhibit 2.4 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.3	Offer Letter dated August 25, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 27, 2008).
2.4	Amended and Restated Offer Letter dated October 31, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 31, 2008).
2.5	Stock Purchase Agreement dated November 12, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc., Chartreuse et Mont Blanc LLC, Chartreuse et Mont Blanc SAS, Chartreuse et Mont Blanc Global Holdings S.C.A., Macquarie Asset Finance Limited and Mavilia SAS (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 18, 2008).
3.1	Restated Certificate of Incorporation of Quiksilver, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2004).
3.2	Certificate of Amendment of Restated Certificate of Incorporation of Quiksilver, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2005).
3.3	Amended and Restated Bylaws of Quiksilver, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 7, 2007).
4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed July 25, 2005).
10.1	Tenth Amendment to the Amended and Restated Credit Agreement dated March 6, 2009 (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009).
10.2	English Translation of Amendment No. 3 to Line of Credit Agreement dated March 14, 2008 between Pilot S.A.S. and Societe Generale, BNP Paribas and Le Credit Lyonnais dated March 9, 2009 (incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2009).
10.3	Quiksilver, Inc. 2000 Stock Incentive Plan, as amended and restated, together with form Stock Option and Restricted Stock Agreements. (1)
10.4	Quiksilver, Inc. 2000 Employee Stock Purchase Plan, as amended and restated. (1)
10.5	Commitment Letter by and among Quiksilver, Inc., Quiksilver Americas, Inc., Bank of America, N.A., Banc of America Securities LLC, General Electric Capital Corporation and GE Capital Markets, Inc. dated June 8, 2009 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on June 9, 2009).
10.6	Commitment Letter by and among Quiksilver, Inc., Quiksilver Americas, Inc. and Rhone Capital III L.P dated June 8, 2009 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on June 9, 2009).
31.1	Rule 13a-14(a)/15d-14(a) Certifications — Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications — Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Financial Officer

(1) Management contract or compensatory plan.

EX-10.3

Exhibit 10.3

QUIKSILVER, INC.
2000 STOCK INCENTIVE PLAN¹

(As Amended and Restated through February 5, 2009)

ARTICLE ONE

GENERAL PROVISIONS

1.1. PURPOSE OF THE PLAN

     This amended and restated 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 not otherwise defined herein shall have the meanings assigned to such terms in the attached Appendix.

1.2. STRUCTURE OF THE PLAN

     A. The Plan as hereby amended and restated is divided into four separate equity incentive 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 Restricted Stock Program, under which eligible persons may be awarded restricted shares of Common Stock by and at the discretion of the Plan Administrator, that vest upon, among other things, the completion of a designated service period and/or the attainment of pre-established performance milestones or other criteria,

• the Restricted Stock Unit Program, under which eligible persons may be awarded restricted stock units by and at the discretion of the Plan Administrator, that vest upon, among other things, the completion of a designated service period and/or the attainment of pre-established performance milestones or other criteria, and

• the Director Automatic Grant Program under which Eligible Directors shall automatically receive option grants and restricted shares of Common Stock at designated intervals over their period of Board service.

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 and a 2 for 1 stock split effected through a stock dividend on April 27, 2005.

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

1.3. ADMINISTRATION OF THE PLAN

     A. The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant, Restricted Stock and Restricted Stock Unit Programs with respect to Section 16 Insiders. Administration of the Discretionary Option Grant, Restricted Stock and Restricted Stock Unit Programs with respect to all other persons eligible to participate in those programs 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 those programs with respect to all such persons. However, any discretionary Awards to members of the Primary Committee must be authorized and approved 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, Restricted Stock and Restricted Stock Unit Programs and to make such determinations under, and issue such interpretations of, the provisions of those programs and any outstanding Awards 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, Restricted Stock and Restricted Stock Unit Programs under its jurisdiction or any Award thereunder.

     D. 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 Award under the Plan.

     E. Administration of the Director Automatic Grant Program shall be self-executing in accordance with the terms of that program, and no Plan Administrator shall exercise any discretionary functions with respect to any Award under that program.

1.4. ELIGIBILITY

     A. The persons eligible to participate in the Discretionary Option Grant, Restricted Stock and Restricted Stock Unit Programs are as follows:

          (i) Employees,

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

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

     B. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine (i) with respect to Awards made under the Discretionary Option Grant Program, which eligible persons are to receive such Awards, the time or times when those Awards are to be made, the number of shares to be covered by each such Award, the status of any awarded option as either an Incentive Option or a Non-Statutory Option, the exercise price per share in effect for each Award (subject to the limitations set forth in Article Two), the time or times when each Award is to vest and become exercisable and the maximum term for which the Award is to remain outstanding and (ii) with respect to Awards under the Restricted Stock and Restricted Stock Unit Programs, which eligible persons are to receive such Awards, the time or times when the Awards are to be made, the number of shares subject to each Award, the vesting schedule applicable to the shares subject to such Award, and the cash consideration, if any, payable for such shares.

     C. The Plan Administrator shall have the absolute discretion to grant options, Restricted Stock and Restricted Stock Units in accordance with the Discretionary Option Grant Program, the Restricted Stock Program and the Restricted Stock Unit Program.

     D. Eligible Directors for purposes of the Director Automatic Grant Program shall be limited to members of the Board who are not, at the time of such determination, employees of the Corporation (or any Parent or Subsidiary).

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 33,444,836 shares. Such share reserve consists 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 2,000,000 shares approved by the Corporation’s stockholders in connection with the adoption of this Plan, (iii) an increase of 2,800,000 shares approved by the Corporation’s stockholders on March 30, 2001, (iv) an increase of 2,400,000 shares approved by the Corporation’s stockholders on March 26, 2002 (v) an increase of 3,200,000 shares approved by the Corporation’s stockholders on March 28, 2003, (vi) an increase of 5,600,000 shares approved by the Corporation’s stockholders on March 26, 2004, (vii) an increase of 1,500,000 shares approved by the Corporation’s stockholders on March 24, 2005, (viii) an increase of 1,000,000 shares approved by the Corporation’s stockholders on March 24, 2006 and (ix) an increase of 2,000,000 shares approved by the Corporation’s stockholders on March 16, 2007.

     B. No one person participating in the Plan may receive Awards for more than 800,000 shares of Common Stock in the aggregate per calendar year. To the extent required by Section 162(m) of the Code, shares subject to options or stock appreciation rights which are canceled shall continue to be counted against the limit.

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     C. The maximum number of shares of Common Stock reserved for issuance pursuant to Awards of Restricted Stock and Restricted Stock Units under the Plan is 800,000.

     D. Shares of Common Stock subject to outstanding Awards under the Plan (including options incorporated into this Plan from the Predecessor Plans) shall be available for subsequent issuance under the Plan to the extent those Awards expire or terminate for any reason prior to the issuance of the shares of Common Stock subject to those Awards. Unvested shares issued under the Plan and subsequently canceled or repurchased by the Corporation at the original exercise or 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 subsequent reissuance 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 or the issuance of shares 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 or the gross number of shares issued under the Plan, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. Shares of Common Stock underlying one or more stock appreciation rights exercised under the Plan shall NOT be available for subsequent issuance under the Plan.

     E. 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 maximum number and/or class of securities for which any one person may be granted Awards under the Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made under the Director Automatic Grant Program to new and continuing Eligible Directors, (iv) the number and/or class of securities and the exercise or base price per share (or any other cash consideration payable per share) in effect under each outstanding Award under the Discretionary Option Grant and Director Automatic Grant Programs, (v) the number and/or class of securities and exercise price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plans, (vi) the number and/or class of securities subject to each outstanding Award under the Restricted Stock and Restricted Stock Unit Programs and the cash consideration (if any) payable per share thereunder, and (vii) the maximum number of shares which may be issued pursuant to Awards of Restricted Stock and Restricted Stock Units under the Plan. Such adjustments to the outstanding Awards are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under those Awards. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

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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 or stock appreciation rights and may not grant new options or stock appreciation rights in exchange for the cancellation of outstanding options or stock appreciation rights with a higher exercise price.

          2. The exercise price shall become immediately due upon exercise of the option and shall 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 valued at Fair Market Value on the Exercise Date and held for the period (if any) necessary to avoid any additional charges to the Corporation’s earnings for financial reporting purposes, 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.

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     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 or otherwsie specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with Optionee, 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 or should the Optionee otherwise engage in Misconduct while holding one or more outstanding options under this Article Two, then all those options 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 that option is at the time exercisable. No additional shares shall vest under the option following the Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator in its sole discretion pursuant to an express written agreement with the Optionee. 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 shares for which the option has not been exercised.

          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.

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

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

     F. TRANSFERABILITY OF OPTIONS. The transferability of options granted under the Plan shall be governed by the following provisions:

          (i) Incentive 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.

          (ii) Non-Statutory Options. Non-Statutory Options shall be subject to the same limitation on transfer as Incentive Options, except that the Plan Administrator may structure one or more Non-Statutory Options so that the option may be assigned in whole or in part during the Optionee’s lifetime by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established exclusively for Optionee and/or 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.

          (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two (whether Incentive Options or Non-Statutory Options), 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, together with any additions, deletions or changes thereto imposed from time to time pursuant to the provisions of the Code governing Incentive Options, 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 Six shall be applicable to Incentive Options.

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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, then for purposes of the foregoing limitation on the exercisability of those options as Incentive Options, such options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.

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

2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

     A. No Award outstanding under the Discretionary Option Grant Program at the time of a Corporate Transaction shall vest and become exercisable on an accelerated basis if and to the extent that (i) such Award is, in connection with the Corporate Transaction, assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction or (ii) such Award is replaced with a cash incentive program of the successor corporation which preserves the spread (the excess of the Fair Market Value of those shares over the exercise price in effect for the shares) existing at the time of the Corporate Transaction on the shares of Common Stock as to which the Award is not otherwise at that time vested and exercisable and provides for subsequent payout in accordance with the same exercise/vesting schedule applicable to those shares or (iii) the acceleration of such Award is subject to other limitations imposed by the Plan Administrator. However, if none of the foregoing conditions are satisfied, each Award outstanding under the Discretionary Option Grant Program at the time of the Corporate Transaction shall automatically accelerate so that each such Award shall, immediately prior to the effective date of the Corporate Transaction, vest and become exercisable as to all shares of Common Stock at the time subject to such Award and may be exercised for any or all of those shares as fully vested shares of Common Stock.

     B. All outstanding repurchase rights under the Discretionary Option Grant Program 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 the Corporate Transaction or otherwise continue in full force and effect pursuant to the express terms of the Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator.

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     C. Immediately following the consummation of the Corporate Transaction, all outstanding Awards under the Discretionary Option Grant Program 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 or otherwise expressly continued in full force and effect pursuant to the express terms of the Corporate Transaction.

     D. Each Award which is assumed in connection with a Corporate Transaction or otherwise continued in effect 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 Award 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 Award, 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 Awards under the Plan per calendar year. 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 the outstanding Awards under the Discretionary Option Grant Program, 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.

     E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding Awards under the Discretionary Option Grant Program so that those Awards shall, immediately prior to the effective date of such Corporate Transaction, vest and become exercisable for all the shares of Common Stock at the time subject to those Awards and may be exercised for any or all of those shares as fully vested shares of Common Stock, whether or not those Awards are to be assumed or otherwise continued in full force and effect pursuant to the terms of 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 immediately terminate at the time of such Corporate Transaction and shall not be assignable to the successor corporation (or parent thereof), and the shares subject to those terminated rights shall accordingly vest in full at the time of such Corporate Transaction.

     F. The Plan Administrator shall have full power and authority to structure one or more outstanding Awards under the Discretionary Option Grant Program so that those Awards shall immediately vest and become exercisable for all the shares of Common Stock at the time subject to those Awards 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 Awards do not otherwise vest on an accelerated basis. Any Awards so accelerated shall remain exercisable as to fully vested shares until the expiration or sooner termination of their term. In addition, the Plan Administrator may structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall immediately terminate with respect

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to any shares held by the Optionee at the time of his or her 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 Awards under the Discretionary Option Grant Program so that those Awards shall, immediately prior to the effective date of a Change in Control or Hostile Take-Over, as the case may be, vest and become exercisable for all the shares of Common Stock at the time subject to those Awards 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 or Hostile Take-Over, as the case may be, 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 Awards 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 Involuntary Termination of the Optionee’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of such Change in Control or Hostile Take-Over, as the case may be. Each Award so accelerated shall remain exercisable for fully vested shares until the expiration or sooner termination of their term.

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

     I. Awards outstanding 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.

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          (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 option is otherwise at that time exercisable for those shares) over (B) the aggregate exercise price payable for those shares. Such cash distribution shall be paid within five (5) days following the option surrender date.

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

ARTICLE THREE

RESTRICTED STOCK PROGRAM

3.1. RESTRICTED STOCK TERMS

     A. ISSUANCES. Shares of Restricted Stock may be issued under the Restricted Stock Program at the discretion of the Plan Administrator through direct and immediate issuances without any intervening option grants. Each such issuance of Restricted Stock shall be evidenced by a Restricted Stock Agreement that complies with the terms specified below and such other provisions as the Plan Administrator shall determine. Participants shall have no rights

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with respect to the shares of Restricted Stock covered by a Restricted Stock Agreement until the Participant has paid the full purchase price, if any, to the Corporation and has executed and delivered to the Corporation the applicable Restricted Stock Agreement.

     B. PURCHASE PRICE.

          1. The purchase price per share of Restricted Stock issued under the Restricted Stock Program shall be fixed by the Plan Administrator in its sole discretion, including no consideration or such minimum consideration as may be required by applicable law.

          2. Shares of Restricted Stock may be issued under the Restricted Stock Program for any of the following items of consideration that the Plan Administrator may deem appropriate in each individual instance:

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

               (ii) any other valid form of consideration permissible under the Delaware General Corporation Law at the time such shares are issued.

     C. VESTING PROVISIONS

          1. Shares of Restricted Stock issued under the Restricted Stock Program may, in the discretion of the Plan Administrator, vest in one or more installments over the Participant’s period of Service and/or upon attainment of specified performance objectives or such other criteria as the Plan Administrator shall determine. The elements of the vesting schedule applicable to any unvested shares of Restricted Stock issued under the Restricted Stock Program shall be determined by the Plan Administrator and incorporated into the Restricted Stock Agreement. Notwithstanding the foregoing, Awards of Restricted Stock issued subject to time-based vesting under the Restricted Stock Program may not be made with a vesting schedule providing for full vesting in less than three years from the date awarded. Awards of Restricted Stock issued subject to performance-based vesting, as provided in Section 3.1.C.2 below, may not vest unless the Participant remains in the Corporation’s Service for at least one year following the date awarded.

          2. The Plan Administrator shall also have the discretionary authority, consistent with Code Section 162(m), to structure one or more Awards under the Restricted Stock Program so that the shares of Restricted Stock subject to those Awards shall vest upon the achievement of certain pre-established corporate performance goals based on one or more of the following criteria: (i) return on total shareholder equity; (ii) earnings or net income per share of Common Stock; (iii) net income or operating income; (iv) earnings before interest, taxes, depreciation, amortization and stock-based compensation costs, or operating income before depreciation and amortization; (v) sales or revenue targets; (vi) return on assets, capital or investment; (vii) cash flow; (viii) market share; (ix) cost reduction goals; (x) budget comparisons; (xi) implementation or completion of projects or processes strategic or critical to the Corporation’s business operations; (xii) measures of customer satisfaction; (xiii) any combination of, or a specified increase in, any of the foregoing; and (xiv) the formation of joint ventures, research and development collaborations, marketing or customer service collaborations, or the completion of other corporate transactions intended to enhance the

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Corporation’s revenue or profitability or expand its customer base; provided, however, that for purposes of items (ii), (iii), (iv) and (vii) above, the Plan Administrator may, at the time the Awards under the Restricted Stock Program are made, specify certain adjustments to such items as reported in accordance with generally accepted accounting principles in the U.S. (“GAAP”), which will exclude from the calculation of those performance goals one or more of the following: certain charges related to acquisitions, stock-based compensation, employer payroll tax expense on certain stock option exercises, settlement costs, restructuring costs, gains or losses on strategic investments, non-operating gains or losses, certain other non-cash charges, valuation allowance on deferred tax assets, and the related income tax effects, purchases of property and equipment, and any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30, provided that such adjustments are in conformity with those reported by the Corporation on a non-GAAP basis. In addition, such performance goals may be based upon the attainment of specified levels of the Corporation’s performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of the Corporation’s business groups or divisions or any Parent or Subsidiary. Performance goals may include a minimum threshold level of performance below which no award will be earned, levels of performance at which specified portions of an award will be earned and a maximum level of performance at which an award will be fully earned. The Plan Administrator may provide that, if the actual level of attainment for any performance objective is between two specified levels, the amount of the Award attributable to that performance objective shall be interpolated on a straight-line basis.

          3. Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Restricted Stock by reason of any stock dividend, stock split, 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 shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Restricted Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

          4. The Participant shall have full voting rights with respect to any shares of Restricted Stock issued to the Participant under the Restricted Stock Program, whether or not the Participant’s interest in those shares is vested. Unless otherwise provided by the Plan Administrator in the Restricted Stock Agreement, Participant shall also have the right to receive any regular cash dividends paid on such shares. The Plan Administrator may apply any restrictions to the dividends that the Plan Administrator deems appropriate. Without limiting the generality of the preceding sentence, if the grant or vesting of shares of Restricted Stock is designed to comply with the requirements of the performance-based exception from the tax deductibility limitations of Code Section 162(m), the Plan Administrator may apply any restrictions it deems appropriate to the payment of dividends declared with respect to such shares of Restricted Stock, such that the dividends and/or the shares of Restricted Stock maintain eligibility for such exception.

          5. The effect which death, Permanent Disability, termination of Service (other than for Misconduct) or other event designated by the Plan Administrator is to have upon

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the vesting schedule of a Restricted Stock Award shall be determined by the Plan Administrator and incorporated into the Restricted Stock Agreement.

          6. Should the Participant’s Service be terminated for Misconduct or should the Participant otherwise engage in Misconduct while holding one or more unvested shares of Restricted Stock, then all such unvested shares of Restricted Stock shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares of Restricted Stock were previously issued to the Participant for consideration paid in cash, cash equivalent or otherwise, the Corporation shall repay to the Participant the same form of consideration as the Participant paid for the surrendered shares.

          7. Should the Participant cease to remain in Service while holding one or more unvested shares of Restricted Stock issued under the Restricted Stock Program or should the performance objectives or other criteria not be attained with respect to one or more such unvested shares of Restricted Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash, cash equivalent or otherwise, the Corporation shall repay to the Participant the same form of consideration as the Participant paid for the surrendered shares.

          8. In the event of the Participant’s death, Permanent Disability, termination of Service (other than for Misconduct), retirement or a Corporate Transaction or Change in Control, the Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Restricted Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives or other criteria applicable to those shares. The Plan Administrator shall not otherwise have discretion to waive the surrender and cancellation of unvested shares of Restricted Stock (or other assets attributable thereto) which would otherwise occur pursuant to a previously determined vesting schedule. Any such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Restricted Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives or other criteria. However, no vesting requirements tied to the attainment of performance objectives may be waived with respect to shares that were intended at the time of issuance to qualify as performance-based compensation under Code Section 162(m), except as otherwise provided in Section 3.2.D of this Article Three.

3.2. CORPORATE TRANSACTION/CHANGE IN CONTROL

     A. No shares of Restricted Stock shall vest at the time of a Corporate Transaction on an accelerated basis if and to the extent that (i) the Restricted Stock Agreement is, in connection with the Corporate Transaction, continued or assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction, (ii) substitution of new agreements of comparable value covering shares of the successor corporation (or parent thereof) in exchange for such shares of Restricted Stock,

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with appropriate adjustments as to the number and kind of shares and purchase price, is provided for pursuant to the express terms of the Corporate Transaction or (iii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator. However, if none of the foregoing conditions are satisfied, immediately prior to the effective date of the Corporate Transaction, all the shares of Restricted Stock shall automatically vest in full.

     B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares of Restricted Stock are issued or at any time while they remain outstanding under the Plan, to provide that the unvested shares of Restricted Stock shall immediately vest upon a Corporate Transaction or Change in Control or upon an event or events associated with or following such transactions, including termination of Service.

     C. If the Restricted Stock Agreement is continued or assumed by a successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction or such accelerated vesting is precluded by other limitations imposed by the Plan Administrator, each outstanding Award under the Restricted Stock Program in effect shall be adjusted immediately after the consummation of that Corporate Transaction to apply to the number and class of securities into which the shares of Restricted Stock subject to the Award immediately prior to the Corporate Transaction would have been converted upon consummation of such Corporate Transaction had those shares actually been outstanding and vested at that time, and appropriate adjustments shall also be made to the consideration (if any) payable per share thereunder, provided that the aggregate amount of such consideration shall remain the same.

     D. The Plan Administrator’s authority under Paragraph B of this Section 3.2 shall also extend to any Awards intended to qualify as performance-based compensation under Code Section 162(m), even though the automatic vesting of those Awards pursuant to Paragraph B of this Section 3.2 may result in their loss of performance-based status under Code Section 162(m).

3.3. TRANSFERABILITY OF RESTRICTED STOCK

     Unvested shares of Restricted Stock may not be assigned, transferred, pledged or otherwise encumbered or disposed of other than by will or the laws of inheritance following the Participant’s death. Upon vesting, and after all other conditions and restrictions applicable to such shares of Restricted Stock have been satisfied or lapse (including satisfaction of any applicable Withholding Tax) pursuant to the applicable Restricted Stock Agreement, such shares of Restricted Stock shall become freely transferable (subject to any restrictions under applicable securities laws) by Participant.

3.4. DELIVERY OF SHARES/LEGENDS

     Unvested shares of Restricted Stock may, in the Plan Administrator’s discretion, be issued in book entry or certificate form and shall remain in the possession or control of the Corporation until such shares have vested, and all other conditions and restrictions applicable to such shares have been satisfied or lapse (including satisfaction of any applicable Withholding Tax), in accordance with the terms of the Restricted Stock Agreement. If issued in certificate form, such certificates shall include such restrictive legends as deemed appropriate by the Plan

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Administrator. The Plan Administrator may require a stock power endorsed in blank with respect to shares of Restricted Stock whether or not certificated.

ARTICLE FOUR

RESTRICTED STOCK UNIT PROGRAM

4.1. RESTRICTED STOCK UNIT TERMS

     A. ISSUANCES. Restricted Stock Units which entitle the Participant to receive shares of Common Stock underlying those units over the Participant’s period of Service and/or upon attainment of specified performance objectives or such other criteria as the Plan Administrator shall determine may be issued under the Restricted Stock Unit Program at the discretion of the Plan Administrator. Each such issuance of Restricted Stock Units shall be evidenced by a Restricted Stock Unit Agreement that complies with the terms specified below and such other provisions as the Plan Administrator shall determine. Participants shall have no rights with respect to the Restricted Stock Units covered by a Restricted Stock Unit Agreement until the Participant has paid the full purchase price, if any, to the Corporation and has executed and delivered to the Corporation the applicable Restricted Stock Unit Agreement.

     B. PURCHASE PRICE.

          1. The purchase price for Restricted Stock Units issued under the Restricted Stock Unit Program shall be fixed by the Plan Administrator in its sole discretion, including no consideration or such minimum consideration as may be required by applicable law.

          2. Restricted Stock Units may be issued under the Restricted Stock Unit Program for any of the following items of consideration that the Plan Administrator may deem appropriate in each individual instance:

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

               (ii) any other valid form of consideration permissible under the Delaware General Corporation Law at the time such units are issued.

     C. VESTING PROVISIONS

          1. Restricted Stock Units issued under the Restricted Stock Unit Program may, in the discretion of the Plan Administrator, vest in one or more installments over the Participant’s period of Service and/or upon attainment of specified performance objectives or such other criteria as the Plan Administrator shall determine. The elements of the vesting schedule applicable to any unvested Restricted Stock Units issued under the Restricted Stock Unit Program shall be determined by the Plan Administrator and incorporated into the Restricted Stock Unit Agreement. Notwithstanding the foregoing, Awards of Restricted Stock Units issued subject to time-based vesting under the Restricted Stock Unit Program may not be made with a vesting schedule providing for full vesting in less than three years from the date awarded. Awards of Restricted Stock Units issued subject to performance-based vesting, as provided in

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Section 4.1.C.2 below, may not vest unless the Participant remains in the Corporation’s Service for at least one year following the date awarded.

          2. The Plan Administrator shall also have the discretionary authority, consistent with Code Section 162(m), to structure one or more Awards under the Restricted Stock Unit Program so that the Restricted Stock Units subject to those Awards shall vest upon the achievement of certain pre-established corporate performance goals based on one or more of the following criteria: (i) return on total shareholder equity; (ii) earnings or net income per share of Common Stock; (iii) net income or operating income; (iv) earnings before interest, taxes, depreciation, amortization and stock-based compensation costs, or operating income before depreciation and amortization; (v) sales or revenue targets; (vi) return on assets, capital or investment; (vii) cash flow; (viii) market share; (ix) cost reduction goals; (x) budget comparisons; (xi) implementation or completion of projects or processes strategic or critical to the Corporation’s business operations; (xii) measures of customer satisfaction; (xiii) any combination of, or a specified increase in, any of the foregoing; and (xiv) the formation of joint ventures, research and development collaborations, marketing or customer service collaborations, or the completion of other corporate transactions intended to enhance the Corporation’s revenue or profitability or expand its customer base; provided, however, that for purposes of items (ii), (iii), (iv) and (vii) above, the Plan Administrator may, at the time the Awards under the Restricted Stock Unit Program are made, specify certain adjustments to such items as reported in accordance with GAAP, which will exclude from the calculation of those performance goals one or more of the following: certain charges related to acquisitions, stock-based compensation, employer payroll tax expense on certain stock option exercises, settlement costs, restructuring costs, gains or losses on strategic investments, non-operating gains or losses, certain other non-cash charges, valuation allowance on deferred tax assets, and the related income tax effects, purchases of property and equipment, and any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30, provided that such adjustments are in conformity with those reported by the Corporation on a non-GAAP basis. In addition, such performance goals may be based upon the attainment of specified levels of the Corporation’s performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of the Corporation’s business groups or divisions or any Parent or Subsidiary. Performance goals may include a minimum threshold level of performance below which no award will be earned, levels of performance at which specified portions of an award will be earned and a maximum level of performance at which an award will be fully earned. The Plan Administrator may provide that, if the actual level of attainment for any performance objective is between two specified levels, the amount of the Award attributable to that performance objective shall be interpolated on a straight-line basis.

          3. The Participant shall not have any stockholder rights with respect to the shares of Common Stock subject to a Restricted Stock Unit until that Award vests, all other conditions and restrictions applicable to such Restricted Stock Unit have been satisfied or lapsed (including satisfaction of any applicable Withholding Tax) pursuant to the applicable Restricted Stock Unit Agreement, and the shares of Common Stock are actually issued thereunder. However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom shares of Common Stock, on outstanding Restricted Stock Unit Awards, subject to such terms and conditions as the Plan Administrator may deem appropriate.

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          4. The effect which death, Permanent Disability, termination of Service (other than for Misconduct) or other event designated by the Plan Administrator is to have upon the vesting schedule of a Restricted Stock Unit Award shall be determined by the Plan Administrator and incorporated into the Restricted Stock Unit Agreement.

          5. Should the Participant’s Service be terminated for Misconduct or should the Participant otherwise engage in Misconduct while holding one or more unvested Restricted Stock Units, then all such unvested Restricted Stock Units shall be immediately and automatically canceled, no shares of Common Stock will be issued in satisfaction of those units, and the Participant shall have no further rights with respect to those units. To the extent the canceled Restricted Stock Units were previously issued to the Participant for consideration paid in cash, cash equivalent or otherwise, the Corporation shall repay to the Participant the same form of consideration as the Participant paid for the canceled units.

          6. Should the Participant cease to remain in Service while holding one or more unvested Restricted Stock Units issued under the Restricted Stock Unit Program or should the performance objectives not be attained with respect to one or more such unvested Restricted Stock Units, then those units shall be immediately and automatically canceled, no shares of Common Stock will be issued in satisfaction of those units, and the Participant shall have no further rights with respect to those units. To the extent the canceled Restricted Stock Units were previously issued to the Participant for consideration paid in cash, cash equivalent or otherwise, the Corporation shall repay to the Participant the same form of consideration as the Participant paid for the canceled units.

          7. Outstanding Restricted Stock Units under the Restricted Stock Unit Program shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those units, if the performance goals or other criteria established for such units or the Service requirements established for such units are not attained or satisfied. The Plan Administrator, however, shall have the discretionary authority to issue vested shares of Common Stock under one or more outstanding Restricted Stock Units as to which the designated performance goals or other criteria or Service requirements have not been attained or satisfied, but only in the event of the Participant’s death, Permanent Disability, termination of Service (other than for Misconduct), retirement or a Corporate Transaction or Change in Control. The Plan Administrator shall not otherwise have discretion to waive the surrender and cancellation of unvested Restricted Stock Units (or other assets attributable thereto) which would otherwise occur pursuant to a previously determined vesting schedule. However, no vesting requirements tied to the attainment of performance goals may be waived with respect to Awards of Restricted Stock Units which were at the time of grant intended to qualify as performance-based compensation under Code Section 162(m), except as otherwise provided in Section 4.2.D of this Article Four.

4.2. CORPORATE TRANSACTION/CHANGE IN CONTROL

     A. No Restricted Stock Units shall vest at the time of a Corporate Transaction on an accelerated basis if and to the extent that (i) the Restricted Stock Unit Agreement is, in connection with the Corporate Transaction, continued or assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of

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the Corporate Transaction, (ii) substitution of new agreements of comparable value covering shares of the successor corporation (or parent thereof) in exchange for such Restricted Stock Units, with appropriate adjustments as to the number and kind of shares and purchase price, is provided for pursuant to the terms of the Corporate Transaction or (iii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator. However, if none of the foregoing conditions are satisfied, immediately prior to the effective date of the Corporate Transaction, all the unvested Restricted Stock Units shall automatically vest in full.

     B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested Restricted Stock Units are issued or at any time while they remain outstanding under the Plan, to provide that the unvested Restricted Stock Units shall immediately vest upon a Corporate Transaction or Change in Control or upon an event or events associated with or following such transactions, including termination of Service.

     C. If the Restricted Stock Unit Agreement is continued or assumed by a successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction or such accelerated vesting is precluded by other limitations imposed by the Plan Administrator, each outstanding Award under the Restricted Stock Unit Program in effect shall be adjusted immediately after the consummation of that Corporate Transaction to apply to the number and class of securities into which the shares of Common Stock underlying those Restricted Stock Units subject to the Award immediately prior to the Corporate Transaction would have been converted in consummation of such Corporate Transaction had those units actually been outstanding and vested at that time, and appropriate adjustments shall also be made to the consideration (if any) payable per unit thereunder, provided that the aggregate amount of such consideration shall remain the same.

     D. The Plan Administrator’s authority under Paragraph B of this Section 4.2 shall also extend to any Awards intended to qualify as performance-based compensation under Code Section 162(m), even though the automatic vesting of those Awards pursuant to Paragraph B of this Section 4.2 may result in their loss of performance-based status under Code Section 162(m).

4.3. TRANSFERABILITY OF RESTRICTED STOCK UNITS

     Until vested, Restricted Stock Units may not be assigned, transferred, pledged or otherwise encumbered or disposed of other than by will or the laws of inheritance following the Participant’s death. Upon vesting, and after all other conditions and restrictions applicable to such Common Stock subject to such Restricted Stock Units have been satisfied or lapse (including satisfaction of any applicable Withholding Tax) pursuant to the applicable Restricted Stock Unit Agreement, the shares of Common Stock subject to such Restricted Stock Unit shall become freely transferable (subject to any restrictions under applicable securities laws) by Participant.

4.4. DELIVERY OF SHARES/COMPLIANCE WITH SECTION 409A

     A. Upon vesting and satisfaction of all other conditions and restrictions applicable to the Restricted Stock Units (including satisfaction of any applicable Withholding Tax) pursuant to

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the applicable Restricted Stock Unit Agreement, certificates representing the shares of Common Stock underlying such Restricted Stock Units shall be issued to Participant.

     B. Notwithstanding the foregoing, the Plan Administrator may permit or require a Participant to defer such Participant’s delivery of shares of Common Stock that would otherwise be due to such Participant with respect to the Restricted Stock Units. If any such deferral or election is required or permitted, the Plan Administrator shall, in its sole discretion, establish rules and procedures for such delivery deferrals which shall be consistent with the requirements of Code Section 409A and the Treasury regulations and rules promulgated thereunder, and including the requirement that the deferral election be entered into at the time of the grant and that the delivery date thereof be consistent with a permissible distribution date under Code Section 409A.

ARTICLE FIVE

DIRECTOR AUTOMATIC GRANT PROGRAM

5.1. TERMS

     This Article Five of the Plan was amended and restated effective as of February 6, 2007. All options outstanding under the Automatic Option Grant Program on February 6, 2007 continued in full force and effect in accordance with the existing terms of the agreements evidencing those options, and no change in this Article Five affected those options.

     A. GRANT/ISSUANCE DATES. Grants and issuances under this amended and restated Article Five shall be made on the dates specified below:

          1. On the date of each annual meeting of stockholders, beginning with the 2007 Annual Meeting of Stockholders, each individual who is to continue to serve as an Eligible Director, whether or not that individual is standing for re-election to the Board at that particular annual meeting, shall automatically be issued 5,000 shares of Restricted Stock and granted a Non-Statutory Option to purchase 7,500 shares of Common Stock, provided that such individual has served as an Eligible Director for at least six (6) months. Notwithstanding the foregoing, all Eligible Directors at the Corporation’s 2007 Annual Meeting of Stockholders will be entitled to receive the grants set forth in this Section 5.1.A.1 even though they may not have served as an Eligible Director for six months prior to the date of such annual meeting. There shall be no limit on the number of such annual option grants and Restricted Stock Awards any one Eligible Director may receive over his or her period of Board Service.

          2. Each individual who is first elected or appointed as an Eligible Director at any time on or after the 2007 Annual Meeting of Stockholders, other than at an annual meeting of stockholders, shall, on the date he or she commences Service as an Eligible Director, automatically be issued 5,000 shares of Restricted Stock and granted a Non-Statutory Option to purchase 7,500 shares of Common Stock.

          3. Each such issuance of Restricted Stock pursuant to the Director Automatic Grant Program shall be evidenced by a Restricted Stock Agreement that complies with the terms

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specified below. Participants shall have no rights with respect to the shares of Restricted Stock covered by a Restricted Stock Agreement until the Participant has executed and delivered to the Corporation the applicable Restricted Stock Agreement.

     B. OPTION EXERCISE PRICE

          1. The exercise price per share for each option granted under this Article Five 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 seven (7) years measured from the option grant date.

     D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately exercisable and fully vested as of the grant date for any or all of the option shares.

     E. TRANSFERABILITY OF OPTIONS. Each option granted under the Director Automatic Grant Program may be assigned in whole or in part during the Optionee’s lifetime by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established exclusively for Optionee and/or 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 outstanding options under the Director Automatic Grant Program held by the Optionee at the time the Optionee ceases to serve as a Board member:

          (i) Subject to (ii) below, 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.

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          (ii) 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 shares for which the option has not been exercised.

     G. VESTING OF RESTRICTED STOCK. Each Restricted Stock Award under the Director Automatic Grant Program shall vest in a series of three successive annual installments over the three-year period measured from the grant date of such Award.

          1. The annual vesting dates for Restricted Stock Awards pursuant to Section 5.1.A.1 shall be as follows:

               (i) 1,666 shares of Restricted Stock shall vest on the earlier of (i) the first anniversary of the grant date of such Award or (ii) the day immediately preceding the date of the first annual meeting of stockholders following the grant date of such Award;

               (ii) 1,666 shares of Restricted Stock shall vest on the earlier of (i) the second anniversary of the grant date of such Award or (ii) the day immediately preceding the date of the second annual meeting of stockholders following the grant date of such Award; and

               (iii) 1,667 shares of Restricted Stock shall vest on the earlier of (i) the third anniversary of the grant date of such Award or (ii) the day immediately preceding the date of the third annual meeting of stockholders following the grant date of such Award.

          2. The annual vesting dates for Restricted Stock Awards pursuant to Section 5.1.A.2 shall be as follows:

               (i) 1,666 shares of Restricted Stock shall vest on the first anniversary of the grant date of such Award;

               (ii) 1,666 shares of Restricted Stock shall vest on the second anniversary of the grant date of such Award; and

               (iii) 1,667 shares of Restricted Stock shall vest on the third anniversary of the grant date of such Award.

The Board member shall not vest in any additional shares of Restricted Stock following his or her cessation of Service as a Board member; provided, however, that each Restricted Stock Award held by an Eligible Director under the Director Automatic Grant Program will immediately vest in full upon his or her cessation of Board Service by reason of death or Permanent Disability. Upon the cessation of Service of any Board member while holding one or more unvested shares of Restricted Stock issued under the Director Automatic Grant Program, those unvested shares of Restricted Stock shall be immediately surrendered to the Corporation for cancellation, and the Board member shall have no further stockholder rights with respect to those shares.

          3. Unvested shares of Restricted Stock may be issued in book entry or certificate form and shall remain in the possession or control of the Corporation until such shares

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have vested, and all other conditions and restrictions applicable to such shares have been satisfied or lapse (including satisfaction of any applicable Withholding Tax), in accordance with the terms of the Restricted Stock Agreement. If issued in certificate form, such certificates shall include restrictive legends. A stock power endorsed in blank with respect to shares of Restricted Stock whether or not certificated will be required.

     H. TRANSFERABILITY OF RESTRICTED STOCK. Unvested shares of Restricted Stock may not be assigned, transferred, pledged or otherwise encumbered or disposed of other than by will or the laws of inheritance following the Participant’s death. Upon vesting, and after all other conditions and restrictions applicable to such shares of Restricted Stock have been satisfied or lapse (including satisfaction of any applicable Withholding Tax) pursuant to the applicable Restricted Stock Agreement, such shares of Restricted Stock shall become freely transferable (subject to any restrictions under applicable securities laws) by Participant.

5.2. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

     A. In the event of a Corporate Transaction while the Eligible Director remains a Board member, the following provisions shall apply:

          (i) 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) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction.

          (ii) The shares of Restricted Stock subject to any outstanding Restricted Stock Award made to such Eligible Director under the Director Automatic Grant Program which remain unvested at the time of such Corporate Transaction shall, immediately prior to the effective date of the Corporate Transaction, automatically vest in full.

     B. In the event of a Change in Control while the Eligible Director remains a Board member, the following provisions shall apply:

          (i) Each automatic option grant to such Eligible Director under the Director Automatic Grant Program shall remain exercisable for such 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.

          (ii) The shares of Restricted Stock subject to any outstanding Restricted Stock Award made to such Eligible Director under the Director Automatic Grant Program which remain unvested at the time of such Change in Control shall, immediately prior to the effective date of the Change in Control, automatically vest in full.

     C. Upon the occurrence of a Hostile Take-Over while the Eligible Director remains a Board member, the Eligible Director shall have a thirty (30)-day period in which to surrender to the Corporation each of his or her outstanding option grants under the Director Automatic Grant Program. The Eligible Director 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 Eligible

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Director 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. Each option which is assumed in connection with a Corporate Transaction or otherwise continued in full force or effect 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 Eligible Director 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 and (ii) the number and/or class of securities for which grants are subsequently to be made under the Director Automatic Grant Program to new and continuing Eligible Directors. 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 the outstanding options under the Director Automatic Grant Program, 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.

     E. The existence of any Awards under the Director Automatic 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.

5.3. REMAINING TERMS

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

     B. The remaining terms of each Restricted Stock Award under the Director Automatic Grant Program shall be the same as the terms in effect for Restricted Stock Awards under the Restricted Stock Program.

ARTICLE SIX

MISCELLANEOUS

6.1. TAX WITHHOLDING

     A. The Corporation’s obligation to deliver shares of Common Stock upon the issuance, exercise or vesting of Awards 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 Optionees or Participants to whom Awards are made under the Plan (other than Awards made under the

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Director Automatic Grant Program) with the right to use either or both of the following methods to satisfy all or part of the Withholding Taxes to which those holders may become subject in connection with the issuance, exercise or vesting of those Awards:

          Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the issuance, exercise or vesting of those Awards, 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 Optionee or Participant and make a cash payment equal to such Fair Market Value directly to the appropriate taxing authorities on such individual’s behalf.

          Stock Delivery: The election to deliver to the Corporation, at the time the Award is issued, exercised or vests, one or more shares of Common Stock previously acquired by such Optionee or Participant (other than in connection with the option issuance, exercise or 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 such holder. The shares of Common Stock so delivered shall not be added to the shares of Common Stock authorized for issuance under the Plan.

6.2. EFFECTIVE DATE AND TERM OF THE PLAN

     A. The Plan became effective on the Plan Effective Date. Awards may be granted under the Discretionary Option Grant Program, the Restricted Stock Program, the Restricted Stock Unit Program and the Director Automatic Grant Program.

     B. The Plan shall serve as the successor to 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 were 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, Change in Control and Hostile Take-Over 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 was amended and restated by the Board on February 5, 2009 (the “2009 Restatement”), subject to stockholder approval at the 2009 Annual Meeting of Stockholders, to (i) extend the term of the Plan through February 5, 2019; (ii) establish minimum vesting periods for Restricted Stock issued under the Restricted Stock Program and Restricted Stock Units issued under the Restricted Stock Unit Program; (iii) limit discretionary acceleration of established vesting schedules by the Plan Administrator for Restricted Stock issued under the Restricted Stock Program and Restricted Stock Units issued under the Restricted Stock Unit Program; and

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(iv) effect various technical and clarifying revisions to facilitate administration of the Plan. Such revisions shall not become effective unless the stockholders approve the 2009 Restatement at the 2009 Annual Meeting of Stockholders. Should the Corporation’s stockholders not approve the 2009 Restatement at the 2009 Annual Meeting of Stockholders, then none of the changes and revisions effected to the Plan by the 2009 Restatement shall become effective. The Plan will, however, continue in effect as it existed immediately prior to February 5, 2009, and Awards will continue to be made under the Plan until all the shares available for issuance under the Plan have been issued pursuant to Awards made under the Plan. In addition, the Director Automatic Grant Program will continue in effect in accordance with the provisions of that program as they existed immediately prior to February 5, 2009.

     E. The Plan shall terminate upon the earliest to occur of (i) February 5, 2019, (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 Awards in connection with a Corporate Transaction. Should the Plan terminate on February 5, 2019, then all Awards outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing such Awards.

6.3. AMENDMENT OF THE PLAN.

     Except as provided below, the Board shall have complete and exclusive power and authority to amend, modify, suspend or terminate the Plan in any or all respects. However, no such amendment, modification, suspension or termination shall adversely affect the rights and obligations with respect to Awards at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification or, unless approved by the stockholders, permit the Plan Administrator to reset the exercise price of outstanding options or grant new Awards in exchange for the cancellation of outstanding options with a higher exercise price. In addition, stockholder approval will be required for any amendment to the Plan that would (i) materially increase the benefits accruing to the Optionees and Participants under the Plan or materially reduce the price at which shares of Common Stock may be issued or purchased under the Plan, (ii) materially increase the aggregate number of securities that may be issued under the Plan, (iii) materially modify the requirements as to eligibility for participation in the Plan, (iv) materially extend the term of the Plan or (v) expand the type of awards available for issuance under 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.

6.4. 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.

6.5. REGULATORY APPROVALS

     A. The implementation of the Plan, the grant of any Award and the issuance of shares of Common Stock in connection with the issuance, exercise or vesting of any Award shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory

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authorities having jurisdiction over the Plan, Awards made under the Plan and the shares of Common Stock issuable pursuant to those Awards.

     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 on which Common Stock is then listed for trading.

6.6. 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.

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APPENDIX

     The following definitions shall be in effect under the Plan:

     A. Award shall mean any of the following stock or stock-based awards authorized for issuance or grant under the Plan: stock option, stock appreciation right, Restricted Stock or Restricted Stock Unit award.

     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.

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     H. Director Automatic Grant Program shall mean the director automatic grant program in effect under Article Five of the Plan for the Eligible Directors.

     I. Discretionary Option Grant Program shall mean the discretionary option grant program in effect under Article Two of the Plan.

     J. Eligible Director shall mean a Board member who is not, at the time of such determination, an employee of the Corporation (or any Parent or Subsidiary) and who is accordingly eligible to participate in the Director Automatic Grant Program in accordance with the eligibility provisions of Articles One and Five.

     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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

          (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

     N. Family Member means, with respect to a particular Optionee or Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

     O. 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

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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.

     P. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

     Q. Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:

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

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

     R. 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).

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

     T. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

     U. Optionee shall mean any person to whom an option is granted under the Discretionary Option Grant or Director Automatic Grant Program.

     V. 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.

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     W. Participant shall mean any person who is issued shares of Restricted Stock under the Restricted Stock Program or under the Director Automatic Grant Program, and any person who is issued Restricted Stock Units under the Restricted Stock Unit Program.

     X. 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 which is both (i) expected to result in death or determined to be total and permanent by two (2) physicians selected by the Corporation or its insurers and acceptable to the Optionee or the Participant (or the Optionee’s or Participant’s legal representative), and (ii) to the extent the Optionee is eligible to participate in the Corporation’s long-term disability plan, entitles the Optionee or the Participant to the payment of long-term disability benefits from the Corporation’s long-term disability plan. The process for determining a Permanent Disability in accordance with the foregoing shall be completed no later than the later of (i) the close of the calendar year in which the Optionee’s or the Participant’s Service terminates by reason of the physical or mental impairment triggering the determination process or (ii) the fifteenth day of the third calendar month following such termination of Service. However, solely for purposes of the Director Automatic Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the Eligible Director 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.

     Y. Plan shall mean the Corporation’s 2000 Stock Incentive Plan, as amended and restated and set forth in this document.

     Z. 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, Restricted Stock and Restricted Stock Unit Programs 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.

     AA. Plan Effective Date shall mean March 31, 2000.

     BB. 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 was in effect immediately prior to the Plan Effective Date hereunder.

     CC. Primary Committee shall mean the committee of two (2) or more Eligible Directors appointed by the Board to administer the Discretionary Option Grant, Restricted Stock and Restricted Stock Unit Programs with respect to Section 16 Insiders.

     DD. Restricted Stock shall mean shares of Common Stock issued to a Participant pursuant to the Restricted Stock or Director Automatic Grant Program, subject to such restrictions and conditions as are established pursuant to such Restricted Stock or Director Automatic Grant Program.

31

     EE. Restricted Stock Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of grant of Restricted Stock under the Restricted Stock or Automatic Director Grant Programs.

     FF. Restricted Stock Program shall mean the discretionary Restricted Stock program under Article Three of the Plan.

     GG. Restricted Stock Unit shall mean the right to receive one share of Common Stock issued pursuant to the Restricted Stock Unit Program, subject to such restrictions and conditions as are established pursuant to the Restricted Stock Unit Program.

     HH. Restricted Stock Unit Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of grant of Restricted Stock Units under the Restricted Stock Unit Program.

     II. Restricted Stock Unit Program shall mean the discretionary Restricted Stock Unit program under Article Four of the Plan.

     JJ. Secondary Committee shall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Option Grant, Restricted Stock and Restricted Stock Unit Programs with respect to eligible persons other than Section 16 Insiders.

     KK. Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liability provisions of Section 16 of the 1934 Act.

     LL. Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, an Eligible Director or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the Award made to such person. For purposes of the Plan, an Optionee or Participant shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Optionee or Participant no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Optionee or Participant is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee or Participant may subsequently continue to perform services for that entity.

     MM. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

     NN. 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.

     OO. 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

32

tender offeror in effecting such Hostile Take-Over through the acquisition of Common Stock. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share.

     PP. 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).

     QQ. Withholding Taxes shall mean the federal, state and local income and employment withholding taxes to which the Optionee or Participant may become subject in connection with the issuance, exercise or vesting of an Award made to him or her under the Plan.

33

NOTICE OF GRANT OF STOCK OPTION

(Standard 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:
Number of Options Shares:		Exercise Price:
Type of Option:	o Incentive Stock Option	Expiration Date:
	o Non-Statutory Stock Option

     Exercise and Vesting Schedule: Subject to the limitations contained in this Option and the Plan, this Option shall vest and 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. amended and restated 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.

Date:
	QUIKSILVER, INC.
	By:
OPTIONEE		Title:
Address:
	ATTACHMENTS
	Exhibit A — Stock Option Agreement

EXHIBIT A

QUIKSILVER, INC.
STOCK OPTION AGREEMENT

RECITALS

          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) 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 only by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members. 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.

               (b) Except as provided in Paragraph 3(a) above, 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

A-1
(Employee Form)

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.

          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. Notwithstanding the foregoing, should the Optionee elect to exercise this option during any period during which the Optionee is under investigation by the Corporation for Misconduct, then any Option Shares acquired by the Optionee as a result of such exercise and/or the net proceeds of any sale or sales of those acquired Option Shares (the gross sale proceeds less any Exercise Price payment or withholding taxes due the Corporation in broker commissions) during such period shall be held by the Corporation in escrow until such time as the investigation is satisfactorily completed.

          5. Cessation of Service/Termination of Option. 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) The applicable post-Service exercise period in effect for this option pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within that otherwise applicable post-Service exercise period in which the exercise of this option or the immediate sale of the Option Shares acquired hereunder cannot be effected in compliance with applicable federal and state

A-2
(Employee Form)

securities laws, but in no event shall such an extension result in the continuation of this option beyond the Expiration Date.

               (e) 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.

               (f) 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 NOT vest or become exercisable on an accelerated basis 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 otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction 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. However, if none of the foregoing conditions apply to this option at the time of the Corporate Transaction, then this option shall automatically accelerate so that such option shall, immediately prior to the effective date of that Corporate Transaction, become exercisable for all the shares of Common Stock at the time subject to this option and may be exercised for any or all of those shares as fully vested shares of Common Stock.

               (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 or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction.

               (c) If this option is assumed in connection with a Corporate Transaction or otherwise continued in effect, 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

A-3
(Employee Form)

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.

          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) shares of Common Stock valued at Fair Market Value on the Exercise Date and held by Optionee (or any other person or persons exercising the option) for the period, if any, necessary to avoid any charge to the Corporation’s earnings for financial reporting purposes; or

                         (C) 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 to (i) 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-4
(Employee Form)

(ii) 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 over-the-counter 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-5
(Employee Form)

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. 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.

          14. 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.

          15. 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.

          16. 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

A-6
(Employee Form)

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, for purposes of the foregoing limitations on the exercisability of such options as Incentive Options, this option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.

A-7
(Employee Form)

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 amended and restated 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
(Employee Form)

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

          D. Common Stock shall mean shares of the Corporation’s common stock.

          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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of

A-9
(Employee Form)

Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

     (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          L. Family Member shall mean, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

          M. Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

          N. 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.

          O. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

          P. 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).

A-10
(Employee Form)

          Q. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

          R. Notice of Exercise shall mean the notice of exercise in substantially the form attached hereto as Exhibit A-1.

          S. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

          T. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

          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 to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is both (i) expected to result in death or determined to be total and permanent by two (2) physicians selected by the Corporation or its insurers and acceptable to the Optionee (or the Optionee’s legal representative), and (ii) to the extent the Optionee is eligible to participate in the Corporation’s long-term disability plan, entitles the Optionee to the payment of long-term disability benefits from the Corporation’s long-term disability plan. The process for determining a Permanent Disability in accordance with the foregoing shall be completed no later than the later of (i) the close of the calendar year in which the Optionee’s Service terminates by reason of the physical or mental impairment triggering the determination process or (ii) the fifteenth day of the third calendar month following such termination of Service.

          W. Plan shall mean the Corporation’s amended and restated 2000 Stock Incentive Plan.

          X. Plan Administrator shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan.

          Y. 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. An Optionee shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Optionee is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee may subsequently continue to perform services for that entity.

          Z. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

A-11
(Employee Form)

          AA. 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-12
(Employee Form)

NOTICE OF GRANT OF STOCK OPTION

(Selected Officer 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:
Number of Options Shares:		Exercise Price:
Type of Option:	o Incentive Stock Option	Expiration Date:
	o Non-Statutory Stock Option

     Exercise and Vesting Schedule: Subject to the limitations contained in this Option and the Plan, this Option shall vest and 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. amended and restated 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.

Date:
	QUIKSILVER, INC.
	By:
OPTIONEE		Title:
Address:
	ATTACHMENTS
	Exhibit A — Stock Option Agreement

EXHIBIT A

QUIKSILVER, INC.
STOCK OPTION AGREEMENT

RECITALS

          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 ______ (___) 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) 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 only by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members. 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.

               (b) Except as provided in Paragraph 3(a) above, 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

A-1
(Selected Officer Form)

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.

          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. Notwithstanding the foregoing, should the Optionee elect to exercise this option during any period during which the Optionee is under investigation by the Corporation for Misconduct, then any Option Shares acquired by the Optionee as a result of such exercise and/or the net proceeds of any sale or sales of those acquired Option Shares (the gross sale proceeds less any Exercise Price payment or withholding taxes due the Corporation in broker commissions) during such period shall be held by the Corporation in escrow until such time as the investigation is satisfactorily completed.

          5. Cessation of Service/Termination of Option. 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 by reason of Optionee terminating his or her Service with the Corporation for other than Good Reason, as such term is defined in Optionee’s employment agreement in effect on the date of grant of this option (the “Employment Agreement”), 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) Should Optionee cease Service by reason of termination by the Corporation without Cause (other than as a result of Optionee’s death, Permanent Disability or Misconduct), as such term is defined in the Employment Agreement, or by Optionee for Good Reason, as such term is defined in the Employment Agreement, while holding this option, then Optionee shall have a period of twelve (12) months (commencing with the date of such cessation

A-2
(Selected Officer Form)

of Service) during which to exercise this option. In no event shall this option be exercisable at any time after the Expiration Date.

               (e) The applicable post-Service exercise period in effect for this option pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within that otherwise applicable post-Service exercise period in which the exercise of this option or the immediate sale of the Option Shares acquired hereunder cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of this option beyond the Expiration Date.

               (f) 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.

               (g) Should Optionee’s Service be terminated for Misconduct or Cause, as such term is defined in the Employment Agreement, 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 NOT vest or become exercisable on an accelerated basis 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 otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction 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. However, if none of the foregoing conditions apply to this option at the time of the Corporate Transaction, then this option shall automatically accelerate so that such option shall, immediately prior to the effective date of that Corporate Transaction, become exercisable for all the shares of Common Stock at the time subject to this option and may be exercised for any or all of those shares as fully vested shares of Common Stock.

               (b) Immediately following the Corporate Transaction, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation

A-3
(Selected Officer Form)

(or parent thereof) in connection with the Corporate Transaction or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction.

               (c) If this option is assumed in connection with a Corporate Transaction or otherwise continued in effect, 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.

               (e) This option, to the extent outstanding at the time Optionee ceases Service with the Corporation by reason of Optionee’s death, Permanent Disability, termination by the Corporation without Cause (as defined in the Employment Agreement) or termination by Optionee for Good Reason (as defined in the Employment Agreement) but not otherwise fully exercisable, shall automatically accelerate so that this option shall immediately prior to such termination of Service, 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.

          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:

A-4
(Selected Officer Form)

                    (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) shares of Common Stock valued at Fair Market Value on the Exercise Date and held by Optionee (or any other person or persons exercising the option) for the period, if any, necessary to avoid any charge to the Corporation’s earnings for financial reporting purposes; or

                         (C) 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 to (i) 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) 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

A-5
(Selected Officer Form)

exchange (or over-the-counter 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. 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.

          14. 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.

          15. 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.

          16. 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

A-6
(Selected Officer Form)

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, for purposes of the foregoing limitations on the exercisability of such options as Incentive Options, this option and each of those other options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.

A-7
(Selected Officer Form)

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 amended and restated 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
(Selected Officer Form)

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

          D. Common Stock shall mean shares of the Corporation’s common stock.

          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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of

A-9
(Selected Officer Form)

Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

     (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          L. Family Member shall mean, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

          M. Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

          N. 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.

          O. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

          P. 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).

A-10
(Selected Officer Form)

          Q. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

          R. Notice of Exercise shall mean the notice of exercise in substantially the form attached hereto as Exhibit A-1.

          S. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

          T. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

          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 to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is both (i) expected to result in death or determined to be total and permanent by two (2) physicians selected by the Corporation or its insurers and acceptable to the Optionee (or the Optionee’s legal representative), and (ii) to the extent the Optionee is eligible to participate in the Corporation’s long-term disability plan, entitles the Optionee to the payment of long-term disability benefits from the Corporation’s long-term disability plan. The process for determining a Permanent Disability in accordance with the foregoing shall be completed no later than the later of (i) the close of the calendar year in which the Optionee’s Service terminates by reason of the physical or mental impairment triggering the determination process or (ii) the fifteenth day of the third calendar month following such termination of Service.

          W. Plan shall mean the Corporation’s amended and restated 2000 Stock Incentive Plan.

          X. Plan Administrator shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan.

          Y. 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. An Optionee shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Optionee is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee may subsequently continue to perform services for that entity.

          Z. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

A-11
(Selected Officer Form)

          AA. 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-12
(Selected Officer Form)

NOTICE OF GRANT OF
NON-EMPLOYEE DIRECTOR AUTOMATIC STOCK OPTION

(Annual Meeting and Initial Grant 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:
Number of Options Shares:	5,000	Exercise Price:
Type of Option:	o Incentive Stock Option	Expiration Date:
	þ Non-Statutory Stock Option

     Exercise and Vesting Schedule: The option shall be fully vested and exercisable immediately upon grant.

     Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Director Automatic Grant Program under the Quiksilver, Inc. amended and restated 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 Automatic 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.

     Impairment of Rights. Nothing in this Notice or in the attached Automatic Stock Option Agreement or in the Plan shall interfere with or otherwise restrict in any way the rights of the Corporation and the Corporation’s stockholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law.

     Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice or in the attached Stock Option Agreement.

Date:
	QUIKSILVER, INC.
	By:
OPTIONEE		Title:
Address:
	ATTACHMENTS
	Exhibit A — Automatic Stock Option Agreement

EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT

RECITALS

          A. The Corporation has implemented an automatic grant program under the Plan pursuant to which eligible non-employee members of the Board will automatically receive option grants at periodic intervals over their period of Board service to provide such individuals with a meaningful incentive to continue to serve as members of the Board.

          B. Optionee is an eligible non-employee Board member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the automatic grant of an option to purchase shares of Common Stock under the Plan.

          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, a Non-Statutory 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 seven (7) 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 may be assigned in whole or in part during Optionee’s lifetime only by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members. 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.

               (b) Except as provided in Paragraph 3(a) above, 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

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(Non-Employee Director)

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.

          4. Dates of Exercise. This option shall be fully vested and immediately exercisable for the Option Shares and shall remain so until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6.

          5. Cessation of Board Service/Termination of Option. Should Optionee’s Service as a Board member cease while this option is outstanding, then the option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance with the following provisions:

               (a) Should Optionee cease to serve as a Board member for any reason while this option is outstanding, then the period during which this option may be exercised shall be reduced to a twelve (12)-month period measured from the date of such cessation of Board Service, but in no event shall this option be exercisable at any time after the Expiration Date. During such limited period of exercisability, Optionee (or the person or persons to whom this option is transferred pursuant to a permitted transfer under Paragraph 3) may exercise this option with respect to any Option Shares for which the option has not been exercised. 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.

               (b) The applicable post-Service exercise period in effect for this option pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within that otherwise applicable post-Service exercise period in which the exercise of this option or the immediate sale of the Option Shares acquired hereunder cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of this option beyond the Expiration Date.

           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 or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction.

               (b) If this option is assumed in connection with a Corporate Transaction or otherwise continued in effect, 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,

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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.

               (d) Upon the occurrence of a Hostile Take-Over while Optionee remains a Board member, the Optionee shall have a thirty (30)-day period immediately following the consummation of the Hostile Take-Over in which to surrender to the Corporation this option in exchange for 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. This Paragraph 6(d) limited stock appreciation right shall in all events terminate upon the expiration or sooner termination of the option term and may not be assigned or transferred by Optionee, except to the extent the option is transferred in accordance with the provisions of this Agreement.

               (e) To exercise the Paragraph 6(d) limited stock appreciation right, Optionee must, during the applicable thirty (30)-day exercise period, provide the Corporation with written notice of the option surrender in which there is specified the number of Option Shares as to which the option is being surrendered. Such notice must be accompanied by the return of Optionee’s copy of this Agreement, together with any written amendments to such Agreement. The cash distribution shall be paid to Optionee within five (5) business days following such delivery date. The exercise of such limited stock appreciation right in accordance with the terms of this Paragraph 6 has been pre-approved pursuant to the express provisions of the Director Automatic Grant Program, and neither the approval of the Plan Administrator nor the consent of the Board shall be required at the time of the actual option surrender and cash distribution. Upon receipt of the cash distribution, this option shall be canceled with respect to the shares subject to the surrendered option (or the surrendered portion) and Optionee shall cease to have any further right to acquire those Option Shares under this Agreement. This option shall, however, remain outstanding for the balance of the Option Shares (if any) in accordance with the terms and provisions of this Agreement, and the Corporation shall accordingly issue a replacement stock option agreement (substantially in the same form as this Agreement) for those remaining Option Shares.

          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.

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          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) shares of Common Stock valued at Fair Market Value on the Exercise Date and held by Optionee (or any other person or persons exercising the option) for the period, if any, necessary to avoid any charge to the Corporation’s earnings for financial reporting purposes; or

                         (C) 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 to (i) 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) 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.

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          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 over-the-counter 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. 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.

          14. 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.

          15. 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.

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(Non-Employee Director)

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 amended and restated 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:

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(Non-Employee Director)

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

          D. Common Stock shall mean shares of the Corporation’s common stock.

          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. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

          H. Exercise Price shall mean the exercise price per Option Share as specified in the Grant Notice.

          I. Expiration Date shall mean the date on which the option expires as specified in the Grant Notice.

          J. 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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. If there is no closing selling

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(Non-Employee Director)

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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

     (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          K. Family Member shall mean, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

          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 substantially the form attached hereto as Exhibit A-1.

          Q. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

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(Non-Employee Director)

          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.

          U. Plan shall mean the Corporation’s amended and restated 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. An Optionee shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Optionee is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee may subsequently continue to perform services for that entity.

          X. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market 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 through the acquisition of Common Stock.

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

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(Non-Employee Director)

NOTICE OF GRANT OF ATHLETE STOCK OPTION

(Athlete 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:
Number of Options Shares:		Exercise Price:
Type of Option:	o Incentive Stock Option	Expiration Date:
	þ Non-Statutory Stock Option

     Exercise and Vesting Schedule: Subject to the limitations contained in this Option and the Plan, this Option shall vest and become exercisable in installments as follows:

Number of Shares	Date of Earliest Exercise
(Installment)	(Vesting)

     Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Quiksilver, Inc. amended and restated 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.

Date:
	QUIKSILVER, INC.
	By:
OPTIONEE		Title:
Address:
	ATTACHMENTS
	Exhibit A — Stock Option Agreement

EXHIBIT A

QUIKSILVER, INC.
STOCK OPTION AGREEMENT

RECITALS

          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, a Non-Statutory 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 ______ (___) 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 may be assigned in whole or in part during Optionee’s lifetime only by gift or pursuant to a domestic relations order to one or more Family Members of the Optionee or to a trust established for the exclusive benefit of Optionee and/or one or more such Family Members. 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.

               (b) Except as provided in Paragraph 3(a) above, 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

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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.

          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. Notwithstanding the foregoing, should the Optionee elect to exercise this option during any period during which the Optionee is under investigation by the Corporation for Misconduct, then any Option Shares acquired by the Optionee as a result of such exercise and/or the net proceeds of any sale or sales of those acquired Option Shares (the gross sale proceeds less any Exercise Price payment or withholding taxes due the Corporation in broker commissions) during such period shall be held by the Corporation in escrow until such time as the investigation is satisfactorily completed.

          5. Cessation of Service/Termination of Option. 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) The applicable post-Service exercise period in effect for this option pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within that otherwise applicable post-Service exercise period in which the exercise of this option or the immediate sale of the Option Shares acquired hereunder cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of this option beyond the Expiration Date.

               (e) 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

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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.

               (f) 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 NOT vest or become exercisable 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 otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction 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. However, if none of the foregoing conditions apply to this option at the time of the Corporate Transaction, then this option shall automatically accelerate so that such option shall, immediately prior to the effective date of that Corporate Transaction, become exercisable for all the shares of Common Stock at the time subject to this option and may be exercised for any or all of those shares as fully vested shares of Common Stock.

               (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 or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction.

               (c) If this option is assumed in connection with a Corporate Transaction or otherwise continued in effect, 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

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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.

          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) shares of Common Stock valued at Fair Market Value on the Exercise Date and held by Optionee (or any other person or persons exercising the option) for the period, if any, necessary to avoid any charge to the Corporation’s earnings for financial reporting purposes; or

                         (C) 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 to (i) 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) 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.

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                    (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 over-the-counter 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. 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.

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          14. 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.

          15. 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.

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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 amended and restated 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:

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

          D. Common Stock shall mean shares of the Corporation’s common stock.

          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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or

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the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

     (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          L. Family Member shall mean, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law.

          M. Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

          N. 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.

          O. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

          P. 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).

          Q. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

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          R. Notice of Exercise shall mean the notice of exercise in substantially the form attached hereto as Exhibit A-1.

          S. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

          T. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

          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 to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is both (i) expected to result in death or determined to be total and permanent by two (2) physicians selected by the Corporation or its insurers and acceptable to the Optionee (or the Optionee’s legal representative), and (ii) to the extent the Optionee is eligible to participate in the Corporation’s long-term disability plan, entitles the Optionee to the payment of long-term disability benefits from the Corporation’s long-term disability plan. The process for determining a Permanent Disability in accordance with the foregoing shall be completed no later than the later of (i) the close of the calendar year in which the Optionee’s Service terminates by reason of the physical or mental impairment triggering the determination process or (ii) the fifteenth day of the third calendar month following such termination of Service.

          W. Plan shall mean the Corporation’s amended and restated 2000 Stock Incentive Plan.

          X. Plan Administrator shall mean either the Board or a committee of the Board acting in its capacity as administrator of the Plan.

          Y. 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. An Optionee shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Optionee is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee may subsequently continue to perform services for that entity.

          Z. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

          AA. 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

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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.

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QUIKSILVER, INC.

RESTRICTED STOCK AGREEMENT

(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

Director:
Grant Date:
Number of Shares of Restricted Stock Granted:	5,000

           THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) dated as of [_______________], 200___ (the “Grant Date”) is entered into by and between Quiksilver, Inc., a Delaware corporation (the “Corporation”), and the Director specified above, pursuant to the Director Automatic Grant Program under the Quiksilver, Inc. amended and restated 2000 Stock Incentive Plan (the “Plan”). Capitalized terms used herein and not otherwise defined in the attached Appendix or elsewhere herein shall have the meaning assigned to such terms in the Plan.

          NOW, THEREFORE, in consideration of services rendered and to be rendered by the Director, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

     1. Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Director an aggregate of 5,000 restricted shares of Common Stock of the Corporation (the “Restricted Stock”).

     2. Vesting.

          (a) Time Vesting. Subject to Section 7 below, the Restricted Stock shall vest, and restrictions shall lapse, as follows:

               (i) 1,666 shares of Restricted Stock shall vest on the first anniversary of the Grant Date or, if this grant is being made on the date of an annual meeting of stockholders of the Corporation, on the day immediately preceding the date of the first annual meeting of stockholders of the Corporation following the Grant Date, if earlier than such first anniversary;

               (ii) 1,666 shares of Restricted Stock shall vest on the second anniversary of the Grant Date or, if this grant is being made on the date of an annual meeting of stockholders of the Corporation, on the day immediately preceding the date of the second annual meeting of stockholders of the Corporation following the Grant Date, if earlier than such second anniversary;

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

               (iii) 1,667 shares of Restricted Stock shall vest on the third anniversary of the Grant Date or, if this grant is being made on the date of an annual meeting of stockholders of the Corporation, on the day immediately preceding the date of the third annual meeting of stockholders of the Corporation following the Grant Date, if earlier than such third anniversary.

          (b) Acceleration of Vesting Upon Corporate Transaction/Change in Control. All of the Restricted Stock shall accelerate and vest and all restrictions shall lapse, immediately prior to the effective date of a Corporate Transaction or Change in Control.

          (c) Acceleration of Vesting Upon Death or Permanent Disability. In the event of the death or Permanent Disability of Director, all of the Restricted Stock shall accelerate and vest and all restrictions shall lapse immediately prior to such death or Permanent Disability.

     3. Continuance of Service. Vesting of the Restricted Stock requires continued Service of the Director as a member of the Corporation’s Board of Directors from the Grant Date through each applicable vesting date as a condition to the vesting of the applicable installment of the Restricted Stock and the rights and benefits under this Agreement. Nothing contained in this Agreement or the Plan constitutes a service commitment by the Corporation, confers upon the Director any right to remain in service to the Corporation, interferes in any way with the right of the Corporation at any time to terminate such services, or affects the right of the Corporation to increase or decrease the Director’s other compensation or benefits. Nothing in this section, however, is intended to adversely affect any independent contractual right of the Director without his or her consent thereto.

     4. Dividend and Voting Rights. After the Grant Date, the Director shall be entitled to voting rights and any regular cash dividends with respect to the shares of Restricted Stock even though such shares are not vested, provided that such rights shall terminate immediately as to any shares of Restricted Stock that are forfeited pursuant to Section 7 below.

     5. Restrictions on Transfer. Prior to the time that they have become vested, neither shares of the Restricted Stock, nor any interest therein, amount payable in respect thereof, or Restricted Property (as defined in Section 8 hereof) may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered (collectively, a “Transfer”), either voluntarily or involuntarily. The Transfer restrictions in the preceding sentence shall not apply to (i) transfers to the Corporation, or (ii) transfers by will or the laws of descent and distribution. After any shares of Restricted Stock have vested, the Director shall be permitted to Transfer such shares of Restricted Stock, subject to applicable securities law requirements, the Corporation’s insider trading policies, and other applicable laws and regulations.

     6. Stock Certificates.

          (a) Book Entry Form. The Corporation shall issue the shares of Restricted Stock either: (i) in certificate form as provided in Section 6(b) below; or (ii) in book entry form, registered in the name of the Director with notations regarding the applicable restrictions on transfer imposed under this Agreement.

          (b) Certificates to be Held by Corporation; Legend. Any certificates representing shares of Restricted Stock that may be delivered to the Director by the Corporation

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prior to vesting shall be redelivered to the Corporation to be held by the Corporation until the restrictions on such shares shall have lapsed and the shares shall thereby have become vested or the shares represented thereby have been forfeited hereunder. Such certificates shall bear the following legend:

“The ownership of this certificate and the shares of stock evidenced hereby and any interest therein are subject to substantial restrictions on transfer under an Agreement entered into between the registered owner and Quiksilver, Inc. A copy of such Agreement is on file in the office of the Secretary of Quiksilver, Inc.”

          (c) Delivery of Certificates Upon Vesting. Promptly after shares of Restricted Stock have vested, and all other conditions and restrictions applicable to such Restricted Stock have been satisfied or lapse (including satisfaction of any applicable Withholding Taxes), the Corporation shall, as applicable, either remove the notations on any shares of Restricted Stock issued in book entry form which have vested or deliver to the Director a certificate or certificates evidencing the number of shares of Restricted Stock which have vested (or, in either case, such lesser number of shares as may be permitted pursuant to Section 9). The Director (or the beneficiary or personal representative of the Director in the event of the Director’s death or Permanent Disability, as the case may be) shall deliver to the Corporation any representations or other documents or assurances as the Corporation may deem desirable to assure compliance with all applicable legal and accounting requirements. The shares so delivered shall no longer be Restricted Stock hereunder.

          (d) Stock Power; Power of Attorney. Concurrently with the execution and delivery of this Agreement, the Director shall deliver to the Corporation an executed stock power in the form attached hereto as Exhibit A, in blank, with respect to such shares. The Director, by acceptance of the Restricted Stock, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Corporation and each of its authorized representatives as the Director’s attorney(s)-in-fact to effect any transfer of unvested forfeited shares of Restricted Stock (or shares otherwise reacquired by the Corporation hereunder) to the Corporation as may be required pursuant to the Plan or this Agreement and to execute such documents as the Corporation or such representatives deem necessary or advisable in connection with any such transfer.

     7. Effect of Termination of Service. Subject to earlier vesting as provided in Section 2 hereof, if the Director ceases to provide Service to the Corporation as a member of the Corporation’s Board of Directors, the Director’s shares of Restricted Stock (and related Restricted Property as defined in Section 8 hereof) shall be forfeited to the Corporation to the extent such shares have not become vested pursuant to Section 2 upon the date the Director’s Service as a member of the Board of Directors terminates (the “Severance Date”), regardless of the reason for such termination (whether with or without cause, voluntarily or involuntarily). Upon the occurrence of any forfeiture of shares of Restricted Stock hereunder, such unvested, forfeited shares and related Restricted Property shall be automatically transferred to the Corporation, without any other action by the Director. No additional consideration shall be paid by the Corporation with respect to such transfer. The Corporation may exercise its powers under Section 6(d) hereof and take any other action necessary or advisable to evidence such transfer.

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The Director shall deliver any additional documents of transfer that the Corporation may request to confirm the transfer of such unvested, forfeited shares and related Restricted Property to the Corporation.

     8. Adjustments Upon Specified Events. 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, appropriate adjustment shall be made to the number and/or class of securities in effect under this Agreement. Such adjustments to the outstanding Restricted Stock are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under this Agreement. The adjustments determined by the Corporation shall be final, binding and conclusive. If any adjustment shall be made pursuant to the foregoing or any dividend other than a regular cash dividend is declared and the shares of Restricted Stock are not fully vested upon such event or prior thereto, the restrictions applicable to such shares of Restricted Stock shall continue in effect with respect to any consideration or other securities (the “Restricted Property” and, for the purposes of this Agreement, “Restricted Stock” shall include “Restricted Property,” unless the context otherwise requires) received in respect of such Restricted Stock. Such Restricted Property shall vest at such times and in such proportion as the shares of Restricted Stock to which the Restricted Property is attributable vest, or would have vested pursuant to the terms hereof if such shares of Restricted Stock had remained outstanding.

     9. Taxes.

          (a) Tax Withholding. The Corporation shall be entitled to require a cash payment by or on behalf of the Director and/or to deduct from other compensation payable to the Director any sums required with respect to Withholding Taxes. Alternatively, the Director or other person in whom the Restricted Stock vests may irrevocably elect, in such manner and at such time or times prior to any applicable tax date as may be permitted or required under rules established by the Corporation, to have the Corporation withhold and reacquire shares of Restricted Stock at their Fair Market Value at the time of vesting to satisfy all or part of the minimum Withholding Taxes of the Corporation with respect to such vesting. Any election to have shares so held back and reacquired shall be subject to such rules and procedures, which may include prior approval of the Corporation, as the Corporation may impose, and shall not be available if the Director makes or has made an election pursuant to Section 83(b) of the Code with respect to such Restricted Stock.

          (b) Tax Consequences to Director. Director acknowledges that the issuance and the vesting of the Restricted Stock may have significant and adverse tax consequences for Director and that Director has been advised by the Corporation to review the Questions and Answers on Federal Income Tax Consequences portion of the Corporation’s Stock Plan Summary and Prospectus and to consult Director’s personal tax advisor regarding the consequences of the issuance and vesting of the Restricted Stock to Director.

     10. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Director at the Director’s last address reflected on the Corporation’s records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch office regularly maintained by the United States Government. Any such notice shall be given only when received, but shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 10.

     11. Plan. The Restricted Stock and all rights of the Director under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Director agrees to be bound by the terms of the Plan and this Agreement. The Director acknowledges having read and understanding the Plan, the Plan Summary and Prospectus for the Plan, and this Agreement.

     12. Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 6.3 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Director hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

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

     14. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

     15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of law principles thereunder.

[Signature page follows]

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

          IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Director has hereunto set his or her hand as of the date and year first above written.

QUIKSILVER, INC., a Delaware corporation
By:
	Print Name:
	Its:
DIRECTOR
Signature
Print Name

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. “Board” shall mean the Corporation’s Board of Directors.

          B. “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 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.

          C. “Common Stock” shall mean the Corporation’s common stock.

          D. “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.

          E. “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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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.

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

               (ii) If the Common Stock is at the time listed on any other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

               (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          F. “Permanent Disability” or “Permanently Disabled” shall mean the inability of the Director 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.

          G. “Service” shall mean the performance of services for the Corporation by a person in the capacity of a member of the Corporation’s Board of Directors.

          H. “Stock Exchange” shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

          I. “Withholding Taxes” shall mean the federal, state and local income and employment withholding taxes to which the Director may become subject in connection with the issuance or vesting of shares of Restricted Stock or upon the disposition of shares acquired pursuant to this Agreement.

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

CONSENT OF SPOUSE

          In consideration of the execution of the foregoing Restricted Stock Agreement by Quiksilver, Inc., I, __________________, the spouse of the Director therein named, do hereby join with my spouse in executing the foregoing Restricted Stock Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated: ________________, 200___

Signature of Spouse 

Print Name 

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

STOCK POWER

          FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Agreement between Quiksilver, Inc., a Delaware corporation (the “Corporation”), and the individual named below (the “Individual”) dated as of _________, 200___, the Individual, hereby sells, assigns and transfers to the Corporation, an aggregate _________ shares of Common Stock of the Corporation, standing in the Individual’s name on the books of the Corporation and represented by stock certificate number(s) _________ to which this instrument is attached, and hereby irrevocably constitutes and appoints ________________________ as his or her attorney in fact and agent to transfer such shares on the books of the Corporation, with full power of substitution in the premises.

Dated ______________, _________

Signature 

Print Name 

     (Instruction: Please do not fill in any blanks other than the signature line. The purpose of the assignment is to enable the Corporation to exercise its sale/purchase option set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Individual.)

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(Non-Employee Director Automatic Grant — Annual Meeting and Initial Grant Form)

FORM

QUIKSILVER, INC.

RESTRICTED STOCK AGREEMENT

(Employee Grant)

Participant:

Grant Date:

Number of Shares of
Restricted Stock Granted:

           THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) dated as of [                                  ], 200___ (the “Grant Date”) is entered into by and between Quiksilver, Inc., a Delaware corporation (the “Corporation”), and the Participant specified above, pursuant to the Restricted Stock Program under the Quiksilver, Inc. amended and restated 2000 Stock Incentive Plan (the “Plan”). Capitalized terms used herein and not otherwise defined in the attached Appendix or elsewhere herein shall have the meaning assigned to such terms in the Plan.

          NOW, THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

     1. Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Participant an aggregate of                      restricted shares of Common Stock of the Corporation (the “Restricted Stock”).

     2. Vesting.

          (a) Time Vesting. Subject to Section 7 below, the Restricted Stock shall vest, and restrictions shall lapse, as follows:

               [Insert Vesting Provisions]

          (b) Acceleration of Vesting Upon Corporate Transaction. No shares of the Restricted Stock shall vest at the time of a Corporate Transaction on an accelerated basis if and to the extent that (i) this Agreement is, in connection with the Corporate Transaction, continued or assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction, or (ii) substitution of new agreements of comparable value covering shares of the successor corporation (or parent thereof) in exchange for such shares of Restricted Stock, with appropriate adjustments as to the number and kind of shares and purchase price, is provided for pursuant to the express terms of the Corporation Transaction. However, if none of the foregoing conditions are satisfied,

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(Employee Grant Form)

immediately prior to the effective date of the Corporate Transaction, all of the Restricted Stock shall accelerate and vest and all restrictions shall lapse, immediately prior to the effective date of the Corporate Transaction. In addition, if this Agreement is continued or assumed by a successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Corporate Transaction or new agreements of comparable value covering shares of the successor corporation (or parent thereof) are substituted in exchange for the shares of Restricted Stock, and the successor corporation (or parent thereof) terminates Participant as an employee, other than for Misconduct, all of the Restricted Stock shall accelerate and vest and all restrictions shall lapse immediately prior to such termination of Participant as an employee of the successor corporation (or parent thereof).

          (c) Acceleration of Vesting Upon Change in Control. In the event that the Corporation terminates Participant as an Employee, other than for Misconduct, following a Change in Control, all of the Restricted Stock shall accelerate and vest and all restrictions shall lapse, immediately prior to such termination of Participant as an Employee.

          (d) Acceleration of Vesting Upon Death or Permanent Disability. In the event of the death or Permanent Disability of Participant, all of the Restricted Stock shall accelerate and vest and all restrictions shall lapse immediately prior to such death or Permanent Disability.

     3. Continuance of Service. Vesting of the Restricted Stock requires continued Service of the Participant from the Grant Date through each applicable vesting date as a condition to the vesting of the applicable installment of the Restricted Stock and the rights and benefits under this Agreement. Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Participant’s status as an employee at will who is subject to termination without cause, confers upon the Participant any right to remain employed by or in service to the Corporation (or any Parent or Subsidiary), interferes in any way with the right of the Corporation (or any Parent or Subsidiary) at any time to terminate such employment or services, or affects the right of the Corporation (or any Parent or Subsidiary) to increase or decrease the Participant’s other compensation or benefits. Nothing in this section, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

     4. Dividend and Voting Rights. After the Grant Date, the Participant shall be entitled to voting rights and any regular cash dividends with respect to the shares of Restricted Stock even though such shares are not vested, provided that such rights shall terminate immediately as to any shares of Restricted Stock that are forfeited pursuant to Section 7 below.

     5. Restrictions on Transfer. Prior to the time that they have become vested, neither shares of the Restricted Stock, nor any interest therein, amount payable in respect thereof, or Restricted Property (as defined in Section 8 hereof) may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered (collectively, a “Transfer”), either voluntarily or involuntarily. The Transfer restrictions in the preceding sentence shall not apply to (i) transfers to the Corporation, or (ii) transfers by will or the laws of descent and distribution. After any shares of Restricted Stock have vested, the Participant shall be permitted to Transfer such shares of Restricted Stock, subject to applicable securities law requirements, the Corporation’s insider trading policies, and other applicable laws and regulations.

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(Employee Grant Form)

     6. Stock Certificates.

          (a) Book Entry Form. The Corporation shall issue the shares of Restricted Stock either: (i) in certificate form as provided in Section 6(b) below; or (ii) in book entry form, registered in the name of the Participant with notations regarding the applicable restrictions on transfer imposed under this Agreement.

          (b) Certificates to be Held by Corporation; Legend. Any certificates representing shares of Restricted Stock that may be delivered to the Participant by the Corporation prior to vesting shall be redelivered to the Corporation to be held by the Corporation until the restrictions on such shares shall have lapsed and the shares shall thereby have become vested or the shares represented thereby have been forfeited hereunder. Such certificates shall bear the following legend:

“The ownership of this certificate and the shares of stock evidenced hereby and any interest therein are subject to substantial restrictions on transfer under an Agreement entered into between the registered owner and Quiksilver, Inc. A copy of such Agreement is on file in the office of the Secretary of Quiksilver, Inc.”

          (c) Delivery of Certificates Upon Vesting. Promptly after shares of Restricted Stock have vested, and all other conditions and restrictions applicable to such Restricted Stock have been satisfied or lapse (including satisfaction of any applicable Withholding Taxes), the Corporation shall, as applicable, either remove the notations on any shares of Restricted Stock issued in book entry form which have vested or deliver to the Participant a certificate or certificates evidencing the number of shares of Restricted Stock which have vested (or, in either case, such lesser number of shares as may be permitted pursuant to Section 9). The Participant (or the beneficiary or personal representative of the Participant in the event of the Participant’s death or Permanent Disability, as the case may be) shall deliver to the Corporation any representations or other documents or assurances as the Corporation may deem desirable to assure compliance with all applicable legal and accounting requirements. The shares so delivered shall no longer be Restricted Stock hereunder.

          (d) Stock Power; Power of Attorney. Concurrently with the execution and delivery of this Agreement, the Participant shall deliver to the Corporation an executed stock power in the form attached hereto, in blank, with respect to such shares. The Participant, by acceptance of the Restricted Stock, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Corporation and each of its authorized representatives as the Participant’s attorney(s)-in-fact to effect any transfer of unvested forfeited shares of Restricted Stock (or shares otherwise reacquired by the Corporation hereunder) to the Corporation as may be required pursuant to the Plan or this Agreement and to execute such documents as the Corporation or such representatives deem necessary or advisable in connection with any such transfer.

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(Employee Grant Form)

     7. Effect of Termination of Service; Misconduct.

          (a) Termination of Service. Subject to earlier vesting as provided in Section 2 hereof, if the Participant ceases to provide Service to the Corporation (or a Parent or Subsidiary), the Participant’s shares of Restricted Stock (and related Restricted Property as defined in Section 8 hereof) shall be forfeited to the Corporation to the extent such shares have not become vested pursuant to Section 2 upon the date the Participant’s Service terminates, regardless of the reason for such termination (whether with or without cause, voluntarily or involuntarily).

          (b) Misconduct. Subject to earlier vesting as provided in Section 2 hereof, if the Participant engages in Misconduct, the Participant’s shares of Restricted Stock (and related Restricted Property as defined in Section 8 hereof) shall be forfeited to the Corporation to the extent such shares have not become vested pursuant to Section 2 immediately prior to the date the Participant first engaged in Misconduct.

          (c) Forfeiture Procedures. Upon the occurrence of any forfeiture of shares of Restricted Stock under this Section 7, such unvested, forfeited shares and related Restricted Property shall be automatically transferred to the Corporation, without any other action by the Participant. No additional consideration shall be paid by the Corporation with respect to such transfer. The Corporation may exercise its powers under Section 6(d) hereof and take any other action necessary or advisable to evidence such transfer. The Participant shall deliver any additional documents of transfer that the Corporation may request to confirm the transfer of such unvested, forfeited shares and related Restricted Property to the Corporation.

     8. Adjustments Upon Specified Events. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, Corporate Transaction (not resulting in acceleration of vesting pursuant to Section 2(b)) or other change affecting the outstanding Common Stock as a class, appropriate adjustment shall be made to the number and/or class of securities in effect under this Agreement. Such adjustments to the outstanding Restricted Stock are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under this Agreement. The adjustments determined by the Corporation shall be final, binding and conclusive. If any adjustment shall be made pursuant to the foregoing or any dividend other than a regular cash dividend is declared and the shares of Restricted Stock are not fully vested upon such event or prior thereto, the restrictions applicable to such shares of Restricted Stock shall continue in effect with respect to any consideration or other securities (the “Restricted Property” and, for the purposes of this Agreement, “Restricted Stock” shall include “Restricted Property,” unless the context otherwise requires) received in respect of such Restricted Stock. Such Restricted Property shall vest at such times and in such proportion as the shares of Restricted Stock to which the Restricted Property is attributable vest, or would have vested pursuant to the terms hereof if such shares of Restricted Stock had remained outstanding.

     9. Taxes.

          (a) Tax Withholding. The Corporation (or any Parent or Subsidiary last employing the Participant) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums

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(Employee Grant Form)

required with respect to Withholding Taxes. Alternatively, the Participant or other person in whom the Restricted Stock vests may irrevocably elect, in such manner and at such time or times prior to any applicable tax date as may be permitted or required under rules established by the Corporation, to have the Corporation withhold and reacquire shares of Restricted Stock at their Fair Market Value at the time of vesting to satisfy all or part of the minimum Withholding Taxes of the Corporation (or any Parent or Subsidiary) with respect to such vesting. Any election to have shares so held back and reacquired shall be subject to such rules and procedures, which may include prior approval of the Corporation, as the Corporation may impose, and shall not be available if the Participant makes or has made an election pursuant to Section 83(b) of the Code with respect to such Restricted Stock.

          (b) Tax Consequences to Participant. Participant acknowledges that the issuance and the vesting of the Restricted Stock may have significant and adverse tax consequences for Participant and that Participant has been advised by the Corporation to review the Questions and Answers on Federal Income Tax Consequences portion of the Corporation’s Stock Plan Summary and Prospectus and to consult Participant’s personal tax advisor regarding the consequences of the issuance and vesting of the Restricted Stock to Participant.

     10. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Participant is no longer an Employee shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 10.

     11. Plan. The Restricted Stock and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Participant agrees to be bound by the terms of the Plan and this Agreement. The Participant acknowledges having read and understanding the Plan, the Plan Summary and Prospectus for the Plan, and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Committee do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or otherwise in the sole discretion of the Board or the Committee so conferred by appropriate action of the Board or the Committee under the Plan after the date hereof.

     12. Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 6.3 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

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(Employee Grant Form)

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

     14. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

     15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of law principles thereunder.

          IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Participant has hereunto set his or her hand as of the date and year first above written.

QUIKSILVER, INC., a Delaware corporation
By:
	Print Name:
	Its:
PARTICIPANT
Signature
Print Name

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(Employee Grant Form)

APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. “Board” shall mean the Corporation’s Board of Directors.

          B. “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 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.

          C. “Committee” shall mean the Compensation Committee of the Board of Directors.

          D. “Common Stock” shall mean the Corporation’s common stock.

          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. “Employee” shall mean any 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.

          G. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

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(Employee Grant Form)

               (i) If the Common Stock is at the time traded on the Nasdaq Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on the Nasdaq Global Stock Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) 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.

               (iii) If the Common Stock is at the time not listed on any established stock exchange, the Fair Market Value shall be determined by the Board in good faith.

          H. “Misconduct” shall mean the commission 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 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 definitions 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 Participant or other person in the Service of the Corporation (or any Parent or Subsidiary).

          I. “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.

          J. “Permanent Disability” or “Permanently Disabled” shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is both (i) expected to result in death or determined to be total and permanent by two (2) physicians selected by the Corporation or its insurers and acceptable to the Participant (or the Participant’s legal representative), and (ii) to the extent the Participant is eligible to participate in the Corporation’s long-term disability plan, entitles the Participant to the payment of long-term disability benefits from the Corporation’s long-term disability plan. The process for determining a Permanent Disability in accordance with the foregoing shall be completed no later than the later of (i) the close of the calendar year in which the Participant’s Service terminates by reason of the physical or mental impairment triggering the determination process or (ii) the fifteenth day of the third calendar month following such termination of Service.

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(Employee Grant Form)

          K. “Service” shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee. Participant shall be deemed to cease Service immediately upon the occurrence of either of the following events: (i) the Participant no longer performs services in the capacity of an Employee for the Corporation or any Parent or Subsidiary; or (ii) the entity for which the Participant is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Participant may subsequently continue to perform services for that entity.

          L. “Stock Exchange” shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

          M. “Subsidiary” shall mean any corporation (other than the Corporation) in the 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.

          N. “Withholding Taxes” shall mean the federal, state and local income and employment withholding taxes to which the Participant may become subject in connection with the issuance or vesting of shares of Restricted Stock or upon the disposition of shares acquired pursuant to this Agreement.

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(Employee Grant Form)

CONSENT OF SPOUSE

          In consideration of the execution of the foregoing Restricted Stock Agreement by Quiksilver, Inc., I,                                         , the spouse of the Participant therein named, do hereby join with my spouse in executing the foregoing Restricted Stock Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated: ________________, 200___

Signature of Spouse
 

Print Name 

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(Employee Grant Form)

STOCK POWER

          FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Agreement between Quiksilver, Inc., a Delaware corporation (the “Corporation”), and the individual named below (the “Individual”) dated as of                      , 200___, the Individual, hereby sells, assigns and transfers to the Corporation, an aggregate                       shares of Common Stock of the Corporation, standing in the Individual’s name on the books of the Corporation and represented by stock certificate number(s)                      to which this instrument is attached, and hereby irrevocably constitutes and appoints                                          as his or her attorney in fact and agent to transfer such shares on the books of the Corporation, with full power of substitution in the premises.

Dated ______________, _________

Signature
 

Print Name 

(Instruction: Please do not fill in any blanks other than the signature line. The purpose of the assignment is to enable the Corporation to exercise its sale/purchase option set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Individual.)

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(Employee Grant Form)

EX-10.4

Exhibit 10.4

QUIKSILVER, INC.
EMPLOYEE STOCK PURCHASE PLAN¹

(As amended and restated February 5, 2009)

     1. PURPOSE OF THE PLAN

     This Employee Stock Purchase Plan is intended to promote the interests of Quiksilver, Inc., a Delaware corporation, by providing eligible employees with the opportunity to acquire a proprietary interest in the Corporation through participation in a payroll-deduction based employee stock purchase plan designed to qualify under Section 423 of the Code.

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

     This February 5, 2009 amendment and restatement shall become effective upon approval of such amendment and restatement by the Corporation’s stockholders at the 2009 Annual Meeting of Stockholders. In the event such stockholder approval is not obtained, then the revisions to the Plan effected by this amendment and restatement shall have no force and effect; however, the Employee Stock Purchase Plan shall continue in effect in accordance with the terms and provisions of the plan in effect on the date prior to this amendment and restatement.

     2. ADMINISTRATION OF THE PLAN

     The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary to comply with the requirements of Code Section 423. Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan.

     3. STOCK SUBJECT TO PLAN

          A. The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The number of shares of Common Stock reserved for issuance over the term of the Plan shall be limited to 3,700,000 shares. Such share reserve consists of (i) 800,000 shares approved by the Corporation’s stockholders in connection with the initial adoption of the Plan, (ii) an increase of 900,000 shares approved by the Corporation’s stockholders on March 16, 2007 and (iii) an increase of 2,000,000 shares for which approval by the Corporation’s stockholders will be sought at the 2009 Annual Meeting of Stockholders.

          B. 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

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 and a 2 for 1 stock split effected through a stock dividend on April 27, 2005.

affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and class of securities issuable under the Plan, (ii) the maximum number and class of securities purchasable per Participant on any one Purchase Date, (iii) the maximum number and class of securities purchasable by all Participants in the aggregate on any one Purchase Date, and (iv) the number and class of securities and the price per share in effect under each outstanding purchase right. The adjustments shall be made in such manner as the Plan Administrator deems appropriate to prevent the dilution or enlargement of benefits under the Plan and the outstanding purchase rights, and such adjustments shall be final, binding and conclusive.

     4. PURCHASE PERIODS

     Shares of Common Stock shall be offered for purchase under the Plan through a series of successive Purchase Periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated.

     5. ELIGIBILITY

          A. Each individual who is an Eligible Employee on the start date of any Purchase Period under the Plan may enter that Purchase Period on such start date.

          B. To participate in the Plan for a particular Purchase Period, the Eligible Employee must complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization) and file such forms with the Plan Administrator (or its designate) in advance of that Purchase Period and in accordance with such terms and conditions as the Plan Administrator may impose.

     6. PAYROLL DEDUCTIONS

          A. The payroll deduction authorized by the Participant for purposes of acquiring shares of Common Stock during a Purchase Period may be any multiple of one percent (1%) of the Base Salary paid to the Participant during the Purchase Period, up to a maximum of fifteen percent (15%). The deduction rate so authorized shall continue in effect, except to the extent such rate is changed in accordance with the following guidelines:

               (i) The Participant may, at any time during the Purchase Period, reduce his or her rate of payroll deduction to become effective as soon as possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Purchase Period.

               (ii) The Participant may, prior to the commencement of any new Purchase Period, increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the fifteen percent (15%) maximum) shall become effective on the start date of the first Purchase Period following the filing of such form.

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          B. Payroll deductions shall begin on the first pay day administratively feasible following the beginning of the Purchase Period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that Purchase Period. The amounts so collected shall be credited to the Participant’s book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account. The amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Corporation and used for general corporate purposes.

          C. Payroll deductions shall automatically cease upon the termination of the Participant’s purchase right in accordance with the provisions of the Plan.

          D. The Participant’s acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participant’s acquisition of Common Stock on any subsequent Purchase Date.

     7. PURCHASE RIGHTS

          A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a separate purchase right for each Purchase Period in which he or she participates. The purchase right shall be granted on the first business day of the Purchase Period and shall provide the Participant with the right to purchase shares of Common Stock upon the terms set forth below. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.

     Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Corporation or any Corporate Affiliate.

          B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be automatically exercised on each successive Purchase Date, and shares of Common Stock shall accordingly be purchased on behalf of each Participant on each such Purchase Date. The purchase shall be effected by applying the Participant’s payroll deductions for the Purchase Period ending on such Purchase Date to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date.

          C. PURCHASE PRICE. The purchase price per share at which Common Stock will be purchased on the Participant’s behalf on each Purchase Date shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the first business day of the Purchase Period or (ii) the Fair Market Value per share of Common Stock on that Purchase Date.

          D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock purchasable by a Participant on each Purchase Date shall be the number of whole shares obtained by dividing the amount collected from the Participant through payroll deductions during the Purchase Period ending with that Purchase Date by the purchase price in

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effect for the Participant for that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall not exceed 4,000 shares, subject to periodic adjustments in the event of certain changes in the Corporation’s capitalization. In addition, the maximum number of shares of Common Stock purchasable in the aggregate by all Participants on any one Purchase Date shall not exceed 400,000 shares, subject to periodic adjustments in the event of certain changes in the Corporation’s capitalization. However, the Plan Administrator shall have the discretionary authority, exercisable prior to the start of any Purchase Period under the Plan, to increase or decrease the limitations to be in effect for the number of shares purchasable per Participant and in the aggregate by all Participants on each Purchase Date.

          E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any payroll deductions not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable per Participant or in the aggregate on the Purchase Date shall be promptly refunded.

          F. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern the termination of outstanding purchase rights:

          (A) A Participant may, at any time prior to the next scheduled Purchase Date, terminate his or her outstanding purchase right by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions shall be collected from the Participant with respect to the terminated purchase right. Any payroll deductions collected during the Purchase Period in which such termination occurs shall, at the Participant’s election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time such purchase right is terminated, then the payroll deductions collected with respect to the terminated right shall be refunded as soon as possible.

          (B) The termination of such purchase right shall be irrevocable, and the Participant may not subsequently rejoin the Purchase Period for which the terminated purchase right was granted. In order to resume participation in any subsequent Purchase Period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms).

          (C) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participant’s payroll deductions for the Purchase Period in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Period in which such leave commences, to (a) withdraw all the payroll deductions collected to

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date on his or her behalf for that Purchase Period or (b) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. In no event, however, shall any further payroll deductions be collected on the Participant’s behalf during such leave. Upon the Participant’s return to active service (x) within ninety (90) days following the commencement of such leave or (y) prior to the expiration of any longer period for which such Participant’s right to reemployment with the Corporation is guaranteed by statute or contract, his or her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. An individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period will be treated as anew Employee for purposes of subsequent participation in the Plan and must accordingly re- enroll in the Plan (by making a timely filing of the prescribed enrollment forms).

          G. CHANGE IN CONTROL. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Change in Control, by applying the payroll deductions of each Participant for the Purchase Period in which such Change in Control occurs to the purchase of whole shares of Common Stock at a purchase price per share equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the first business day of the Purchase Period in which such Change in Control occurs or (ii) the Fair Market Value per share of Common Stock immediately prior to the effective date of such Change in Control. However, the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of shares of Common Stock purchasable in the aggregate by all participants.

     The Corporation shall use its best efforts to provide at least ten (10)-days prior written notice of the occurrence of any Change in Control, and Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control.

          H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded.

          I. ASSIGNABILITY. The purchase right shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant.

          J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant’s behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares.

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     8. ACCRUAL LIMITATIONS

          A. No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under this Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the Corporation or any Corporate Affiliate (determined on the basis of the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding.

          B. For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect:

               (i) The right to acquire Common Stock under each outstanding purchase right shall accrue on each successive Purchase Date on which such right remains outstanding.

               (ii) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock (determined on the basis of the Fair Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding.

          C. If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a particular Purchase Period, then the payroll deductions which the Participant made during that Purchase Period with respect to such purchase right shall be promptly refunded.

          D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article shall be controlling.

     9. EFFECTIVE DATE AND TERM OF THE PLAN

          A. The Plan was originally adopted by the Board on February 15, 2000 and became effective at the Effective Time. This amendment and restatement was adopted by the Board on February 5, 2009 and shall become effective upon approval thereof by the Corporation’s stockholders at the 2009 Annual Meeting of Stockholders. In no event, however, shall any payroll deductions be collected or purchase rights be exercised, and no shares of Common Stock shall be issued, pursuant to this February 5, 2009 amendment and restatement unless the Corporation is at the time in compliance with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on an appropriate form filed with the Securities and Exchange Commission), all applicable listing requirements of any stock exchange on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation.

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          B. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) February 5, 2019, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Change in Control. No further purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination.

     10. AMENDMENT/TERMINATION OF THE PLAN

          A. The Board may alter, amend, suspend or terminate the Plan at any time to become effective immediately following the close of any Purchase Period.

          B. In no event may the Board effect any of the following amendments or revisions to the Plan without the approval of the Corporation’s stockholders: (i) increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments in the event of certain changes in the Corporation’s capitalization, (ii) alter the purchase price formula so as to reduce the purchase price payable for the shares of Common Stock purchasable under the Plan or (iii) modify the eligibility requirements for participation in the Plan.

     11. GENERAL PROVISIONS

          A. All costs and expenses incurred in the administration of the Plan shall be paid by the Corporation; however, each Plan Participant shall bear all costs and expenses incurred by such individual in the sale or other disposition of any shares purchased under the Plan.

          B. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Corporation or any Corporate Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Corporate Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person’s employment at any time for any reason, with or without cause.

          C. The provisions of the Plan shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules.

          D. The Corporation shall have the right to take whatever steps the Plan Administrator deems necessary or appropriate to comply with all applicable federal, state, local and employment tax withholding requirements, and the Corporation’s obligations to deliver shares under this Plan shall be conditioned upon compliance with all such withholding tax requirements. Without limiting the generality of the foregoing, the Corporation shall have the right to withhold taxes from any other compensation or other amounts that it may owe to the Participant, or to require the Participant to pay to the Corporation the amount of any taxes that the Corporation may be required to withhold with respect to such shares. The Plan Administrator may require the Participant to notify the Plan Administrator or the Corporation before the Participant sells or otherwise disposes of any shares acquired under the Plan.

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APPENDIX

     The following definitions shall be in effect under the Plan:

     A. BASE SALARY shall mean the regular base salary paid to a Participant by one or more Participating Companies during such individual’s period of participation in one or more Purchase Periods under the Plan. Base Salary shall be calculated before deduction of (A) any income or employment tax withholdings or (B) any and all contributions made by the Participant to any Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or hereafter established by the Corporation or any Corporate Affiliate. Base Salary shall NOT include (i) any overtime payments, bonuses, commissions, profit-sharing distributions and other incentive- type payments received during the period of participation in the Plan and (ii) any contributions made on the Participant’s behalf by the Corporation or any Corporate Affiliate to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from Base Salary).

     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 any of the following transactions:

          (i) a stockholder-approved 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) a stockholder-approved sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation, or

          (iii) 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 Securities Exchange Act of 1934) 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 pursuant to a private transaction or series of related transactions with one or more of the Corporation’s stockholders.

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

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

     F. CORPORATE AFFILIATE shall mean any parent or subsidiary corporation of the Corporation (as determined in accordance with Code Section 424), whether now existing or subsequently established.

     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. EFFECTIVE TIME shall mean July 1, 2000. Any Corporate Affiliate which becomes a Participating Corporation after such Effective Time shall designate a subsequent Effective Time with respect to its employee-Participants.

     I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a Participating Corporation on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings considered wages under Code Section 3401(a).

     J. 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 Global Select Market (or the Nasdaq Global Market), then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular trading hours (i.e., before after-hours trading begins) on the Nasdaq Global Select Market (or the Nasdaq Global Market) on the date in question, as such price is reported by The Wall Street Journal. 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 other Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock at the close of regular trading hours (i.e., before after-hours trading begins) 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.

     K. 1933 ACT shall mean the Securities Act of 1933, as amended.

     L. PARTICIPANT shall mean any Eligible Employee of a Participating Corporation who is actively participating in the Plan.

     M. PARTICIPATING CORPORATION shall mean the Corporation and such Corporate Affiliate or Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. The Participating Corporations in the Plan as of February 5, 2009 are listed in attached Schedule A.

     N. PLAN shall mean the Corporation’s amended and restated Employee Stock Purchase Plan, as set forth in this document.

     O. PLAN ADMINISTRATOR shall mean the committee of two (2) or more Board members appointed by the Board to administer the Plan.

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     P. PURCHASE DATE shall mean the last business day of each Purchase Period. The initial Purchase Date shall be December 29, 2000.

     Q. PURCHASE PERIOD shall mean each successive approximate six (6)-month period, beginning on the first business day in each of July and January and ending on the last business day in each of June and December of each year, at the end of which there shall be purchased shares of Common Stock on behalf of each Participant.

     R. STOCK EXCHANGE shall mean the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange.

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Schedule A

Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time

EX-31.1

Exhibit 31.1

§ 302 CERTIFICATION

          I, Robert B. McKnight, certify that:

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

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

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

     (4) The registrant’s other certifying 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

     (5) The registrant’s other certifying 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 functions):

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

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

Date: June 9, 2009	/s/ Robert B. McKnight, Jr.
	Robert B. McKnight, Jr.
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

§ 302 CERTIFICATION

          I, Joseph Scirocco, certify that:

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

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

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

     (4) The registrant’s other certifying 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

     (5) The registrant’s other certifying 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 functions):

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

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

Date: June 9, 2009	/s/ Joseph Scirocco
	Joseph Scirocco
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. McKnight, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Robert B. McKnight, Jr.  

Robert B. McKnight, Jr. 

Chief Executive Officer 

June 9, 2009

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Scirocco, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Joseph Scirocco  

Joseph Scirocco 

Chief Financial Officer 

June 9, 2009