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, 2007

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ           Accelerated Filer o           Non-Accelerated Filer 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 4, 2007 was 124,493,814

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, 2007 and 2006		3
Quiksilver, Inc. Condensed Consolidated Statements of Comprehensive Income Three Months Ended April 30, 2007 and 2006		3
Quiksilver, Inc. Condensed Consolidated Statements of Operations Six Months Ended April 30, 2007 and 2006		4
Quiksilver, Inc. Condensed Consolidated Statements of Comprehensive Income Six Months Ended April 30, 2007 and 2006		4
Quiksilver, Inc. Condensed Consolidated Balance Sheets April 30, 2007 and October 31, 2006		5
Quiksilver, Inc. Condensed Consolidated Statements of Cash Flows Six Months Ended April 30, 2007 and 2006		6
Quiksilver, Inc. Notes to Condensed Consolidated Financial Statements		7
Roger Cleveland Golf Company, Inc. Condensed Statement of Operations and Comprehensive Income Three Months Ended April 30, 2007 and 2006		24
Roger Cleveland Golf Company, Inc. Condensed Statement of Operations and Comprehensive Income Six Months Ended April 30, 2007 and 2006		25
Roger Cleveland Golf Company, Inc. Condensed Balance Sheets April 30, 2007 and October 31, 2006		26
Roger Cleveland Golf Company, Inc. Condensed Statements of Cash Flows Six Months Ended April 30, 2007 and 2006		27
Roger Cleveland Golf Company, Inc. Notes to Condensed Financial Statements		28
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations		32
Three Months Ended April 30, 2007 Compared to Three Months Ended April 30, 2006		33
Six Months Ended April 30, 2007 Compared to Six Months Ended April 30, 2006		35
Financial Position, Capital Resources and Liquidity		36
Critical Accounting Policies		38
New Accounting Pronouncements		40
Forward-Looking Statements		41

1

QUIKSILVER, INC.

FORM 10-Q
INDEX — Continued

	Page No.
Item 3. Quantitative and Qualitative Disclosures About Market Risk		42
Item 4. Controls and Procedures		42
Part II — OTHER INFORMATION
Item 1. Legal Proceedings		43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 4. Submission of Matters to a Vote of Security Holders		44
Item 6. Exhibits		45
SIGNATURES		46
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

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	2007			2006
Revenues, net	$	603,799		$	516,928
Cost of goods sold		332,936			282,438
Gross profit		270,863			234,490
Selling, general and administrative expense		262,082			215,838
Operating income		8,781			18,652
Interest expense		14,789			11,949
Foreign currency loss (gain)		1,473			(496	)
Minority interest and other expense		(457	)		1,637
(Loss) income before (benefit) provision for income taxes		(7,024	)		5,562
(Benefit) provision for income taxes		(2,224	)		1,833
Net (loss) income	$	(4,800	)	$	3,729
Net (loss) income per share	$	(0.04	)	$	0.03
Net (loss) income per share, assuming dilution	$	(0.04	)	$	0.03
Weighted average common shares outstanding —		123,596			122,018
Weighted average common shares outstanding, assuming dilution		123,596			127,790

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended April 30,
In thousands	2007			2006
Net (loss) income	$	(4,800	)	$	3,729
Other comprehensive income (loss):
Foreign currency translation adjustment		48,293			26,258
Net unrealized loss on derivative instruments, net of tax of $(4,971) (2007), $(1,894) (2006)		(10,175	)		(3,883	)
Comprehensive income	$	33,318		$	26,104

See notes to condensed consolidated financial statements.

3

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Six months ended April 30,
In thousands, except per share amounts	2007			2006
Revenues, net	$	1,156,323		$	1,058,070
Cost of goods sold		627,109			575,019
Gross profit		529,214			483,051
Selling, general and administrative expense		501,301			427,143
Operating income		27,913			55,908
Interest expense		30,343			24,540
Foreign currency loss (gain)		3,416			(993	)
Minority interest and other expense		(2,148	)		411
(Loss) income before (benefit) provision for income taxes		(3,698	)		31,950
(Benefit) provision for income taxes		(1,373	)		9,618
Net (loss) income	$	(2,325	)	$	22,332
Net (loss) income per share	$	(0.02	)	$	0.18
Net (loss) income per share, assuming dilution	$	(0.02	)	$	0.18
Weighted average common shares outstanding		123,323			121,721
Weighted average common shares outstanding, assuming dilution		123,323			127,479

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Six months ended April 30,
In thousands	2007			2006
Net (loss) income	$	(2,325	)	$	22,332
Other comprehensive income (loss):
Foreign currency translation adjustment		56,824			26,329
Net unrealized loss on derivative instruments, net of tax of $(5,510) (2007), $(2,255) (2006)		(11,291	)		(4,569	)
Comprehensive income	$	43,208		$	44,092

See notes to condensed consolidated financial statements.

4

QUIKSILVER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	April 30,			October 31,
In thousands, except share amounts	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	64,455		$	36,834
Trade accounts receivable, less allowances of $34,339 (2007) and $32,840 (2006)		603,650			721,562
Other receivables		42,885			35,324
Inventories		463,313			425,864
Deferred income taxes		93,281			84,672
Prepaid expenses and other current assets		34,459			28,926
Total current assets		1,302,043			1,333,182
Fixed assets, less accumulated depreciation and amortization of $203,595 (2007) and $176,647 (2006)		313,756			282,334
Intangible assets, net		255,529			248,206
Goodwill		547,377			515,710
Other assets		42,741			45,954
Assets held for sale		19,494			21,842
Total assets	$	2,480,940		$	2,447,228
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	268,500		$	315,891
Accounts payable		226,728			220,177
Accrued liabilities		163,980			201,087
Current portion of long-term debt		26,108			24,621
Income taxes payable		748			2,810
Total current liabilities		686,064			764,586
Long-term debt, net of current portion		745,857			689,690
Deferred income taxes and other long-term liabilities		98,463			100,632
Total liabilities		1,530,384			1,554,908
Minority interest		10,072			11,193
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 — 127,352,347 (2007) and 126,401,836 (2006)		1,274			1,264
Additional paid-in capital		290,627			274,488
Treasury stock, 2,885,200 shares		(6,778	)		(6,778	)
Retained earnings		556,734			559,059
Accumulated other comprehensive income		98,627			53,094
Total stockholders’ equity		940,484			881,127
Total liabilities and stockholders’ equity	$	2,480,940		$	2,447,228

See notes to condensed consolidated financial statements.

5

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended April 30,
In thousands	2007			2006
Cash flows from operating activities:
Net (loss) income	$	(2,325	)	$	22,332
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		34,116			31,352
Stock-based compensation		9,147			11,324
Provision for doubtful accounts		4,540			3,210
Gain on disposal of fixed assets		(514	)		(19	)
Foreign currency loss (gain)		903			(256	)
Minority interest and equity in earnings		(1,723	)		911
Changes in operating assets and liabilities, net of the effect from business acquisitions:
Trade accounts receivable		141,389			128,592
Other receivables		(5,787	)		1,003
Inventories		(17,056	)		(2,044	)
Prepaid expenses and other current assets		(4,693	)		(2,561	)
Other assets		4,333			(3,377	)
Accounts payable		(3,196	)		(20,494	)
Accrued liabilities and other long-term liabilities		(41,446	)		(34,701	)
Income taxes payable		(1,573	)		(21,129	)
Net cash provided by operating activities		116,115			114,143
Cash flows from investing activities:
Proceeds from the sale of properties and equipment		10,471			—
Capital expenditures		(53,544	)		(42,736	)
Business acquisitions, net of cash acquired		(34,138	)		(28,447	)
Net cash used in investing activities		(77,211	)		(71,183	)
Cash flows from financing activities:
Borrowings on lines of credit		45,258			137,932
Payments on lines of credit		(105,164	)		(174,759	)
Borrowings on long-term debt		104,262			116,014
Payments on long-term debt		(59,735	)		(107,367	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		7,000			4,666
Net cash used in financing activities		(8,379	)		(23,514	)
Effect of exchange rate changes on cash		(2,904	)		1,774
Net increase in cash and cash equivalents		27,621			21,220
Cash and cash equivalents, beginning of period		36,834			75,598
Cash and cash equivalents, end of period	$	64,455		$	96,818
Supplementary cash flow information:
Cash paid (received) during the period for:
Interest	$	31,120		$	23,712
Income taxes	$	(1,926	)	$	32,859

See notes to condensed consolidated financial statements.

6

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, 2007 and 2006. 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, 2006 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.
	For the three and six months ended April 30, 2007, the potential dilutive effect of common stock equivalents was not included in the weighted average shares for the computation of diluted earnings per share, as the effect was antidilutive.
2.	New Accounting Pronouncements
	In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections,” (“SFAS No. 154”) which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154 applies to all voluntary changes in accounting principles and requires retrospective application (a term defined by the statement) to prior periods’ financial statements, unless it is impracticable to determine the effect of a change. It also applies to changes required by an accounting pronouncement that does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted this standard during the six months ended April 30, 2007. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.
	In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the application of SFAS No. 109, “Accounting for Income Taxes,” by defining criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in the Company’s financial statements and also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects to adopt FIN 48 on November 1, 2007. The Company is currently assessing the impact the adoption of FIN 48 will have on its financial position and results of operations.
	In September 2006, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views regarding the process of quantifying materiality of financial statement misstatements. The Company adopted this standard during the six months ended April 30, 2007. 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.
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company expects to adopt this standard at the beginning of the Company’s fiscal year

7

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	ending October 31, 2009. The adoption of this accounting pronouncement is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
	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. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company has not determined the effect that the adoption of SFAS No. 159 will have on its consolidated financial statements.
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, 2007 and 2006, options were valued assuming a risk-free interest rate of 4.8% and 4.5%, respectively, volatility of 43.1% and 44.9%, respectively, zero dividend yield, and an expected life of 5.6 and 5.2 years, respectively. The weighted average fair value of options granted was $7.19 and $6.32 for the six months ended April 30, 2007 and 2006, 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, 2007, the Company had approximately $16.4 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.2 years. Compensation expense was included as selling, general and administrative expense for the period.
	Changes in shares under option for the six months ended April 30, 2007 are as follows:

				Weighted		Weighted		Aggregate
Dollar amounts in thousands,				Average		Average		Intrinsic
except per share amounts	Shares			Price		Life		Value
Outstanding, October 31, 2006		18,135,699		$	8.61
Granted		1,212,051			15.25
Exercised		(960,511	)		5.88			$	8,517
Canceled		(182,852	)		12.92
Outstanding, April 30, 2007		18,204,387		$	9.15		6.1	$	83,054
Options exercisable, April 30, 2007		12,970,902		$	7.33		5.2	$	79,832

Changes in non-vested shares under option for the six months ended April 30, 2007 are as follows:

				Weighted-
				Average Grant
	Shares			Date Fair Value
Non-vested, October 31, 2006		6,958,526		$	6.29
Granted		1,212,051			7.19
Vested		(2,920,675	)		5.86
Canceled		(16,417	)		6.83
Non-vested, April 30, 2007		5,233,485		$	6.71

8

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

Changes in restricted stock for the six months ended April 30, 2007 are as follows:

	Shares
Outstanding, October 31, 2006		800,000
Granted		35,000
Vested		—
Forfeited		(45,000	)
Outstanding, April 30, 2007		790,000

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, 2007, there had been no acceleration of the amortization period. During the six months ended April 30, 2007, the Company recognized approximately $0.5 million in related compensation expense. As of April 30, 2007, the Company had approximately $8.5 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.3 years.

4.

Inventories

     Inventories consist of the following:

	April 30,		October 31,
In thousands	2007		2006
Raw materials	$	79,111	$	40,951
Work in-process		15,615		12,991
Finished goods		368,587		371,922
	$	463,313	$	425,864

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

	April 30, 2007							October 31, 2006
						Net							Net
	Gross		Amorti-			Book		Gross		Amorti-			Book
In thousands	Amount		zation			Value		Amount		zation			Value
Amortizable trademarks	$	9,540	$	(3,365	)	$	6,175	$	7,965	$	(2,659	)	$	5,306
Amortizable licenses		11,153		(4,926	)		6,227		10,332		(4,047	)		6,285
Other amortizable intangibles		27,439		(7,257	)		20,182		27,379		(5,484	)		21,895
Non-amortizable trademarks		222,945		—			222,945		214,720		—			214,720
	$	271,077	$	(15,548	)	$	255,529	$	260,396	$	(12,190	)	$	248,206

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, 2007 and 2006 was $2.9 million and $2.6 million, respectively. Annual amortization expense is estimated to be approximately $5.7 million in the fiscal year ending October 31, 2007, approximately $4.1 million in the fiscal years ending October 31, 2008 through

9

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2010 and approximately $3.9 million in the fiscal year ending October 31, 2011. Goodwill related to the Company’s operating segments is as follows:

	April 30,		October 31,
In thousands	2007		2006
Americas	$	132,048	$	132,674
Europe		277,972		255,558
Asia/Pacific		137,357		127,478
	$	547,377	$	515,710

	Goodwill increased $31.7 million during the six months ended April 30, 2007. Of this amount, approximately $8.9 million related to acquisitions of certain other distributors and retail store locations, and $22.8 million related to the effect of changes in foreign currency exchange rates.
6.	Accumulated Other Comprehensive Income
	The components of accumulated other comprehensive income include changes in fair value of derivative instruments qualifying as cash flow hedges, the fair value of interest rate swaps and foreign currency translation adjustments. The components of accumulated other comprehensive income, net of income taxes, are as follows:

	April 30,			October 31,
In thousands	2007			2006
Foreign currency translation adjustment	$	111,865		$	55,041
Loss on cash flow hedges and interest rate swaps		(13,238	)		(1,947	)
	$	98,627		$	53,094

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, produces and distributes clothing, wintersports and golf equipment, footwear, accessories and related products. The Company operates in three segments, the Americas, Europe and Asia/Pacific. Costs that support all three operating segments, including trademark protection, trademark maintenance and licensing functions are part of corporate operations. Corporate operations also includes sourcing income and gross profit earned from the Company’s licensees. The Company’s largest customer accounted for approximately 4% of the Company’s net revenues for the six months ended April 30, 2007.

10

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

	Three Months Ended April 30,
In thousands	2007			2006
Revenues, net:
Americas	$	279,810		$	250,042
Europe		268,829			217,149
Asia/Pacific		53,957			48,247
Corporate operations		1,203			1,490
	$	603,799		$	516,928
Gross profit:
Americas	$	111,274		$	103,166
Europe		133,040			108,512
Asia/Pacific		25,501			22,045
Corporate operations		1,048			767
	$	270,863		$	234,490
Operating income:
Americas	$	11,911		$	21,657
Europe		14,088			12,350
Asia/Pacific		(2,401	)		(2,289	)
Corporate operations		(14,817	)		(13,066	)
	$	8,781		$	18,652
	Six Months Ended April 30,
In thousands	2007			2006
Revenues, net:
Americas	$	520,368		$	470,760
Europe		522,826			478,301
Asia/Pacific		111,152			106,589
Corporate operations		1,977			2,420
	$	1,156,323		$	1,058,070
Gross profit:
Americas	$	208,023		$	190,948
Europe		268,364			243,220
Asia/Pacific		51,269			47,857
Corporate operations		1,558			1,026
	$	529,214		$	483,051
Operating income:
Americas	$	9,950		$	25,620
Europe		47,822			55,603
Asia/Pacific		(3,022	)		679
Corporate operations		(26,837	)		(25,994	)
	$	27,913		$	55,908
Identifiable assets:
Americas	$	831,020		$	735,377
Europe		1,257,820			1,043,136
Asia/Pacific		337,020			296,482
Corporate operations		55,080			57,420
	$	2,480,940		$	2,132,415

11

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. In addition, interest rate swaps are used to manage the Company’s exposure to the risk of fluctuations in interest rates.
	Derivatives that do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks are marked to fair value with corresponding gains or losses recorded in earnings. A loss of $0.3 million was recognized related to these types of derivatives during the six months ended April 30, 2007. For all qualifying cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. As of April 30, 2007, the Company was hedging forecasted transactions expected to occur through July 2009. Assuming exchange rates at April 30, 2007 remain constant, $13.2 million of losses, net of tax, related to hedges of these transactions are expected to be reclassified into earnings over the next 27 months.
	On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. In this documentation, the Company identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicates how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company would discontinue hedge accounting prospectively (i) if management determines that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) because a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if management determines that designation of the derivative as a hedge instrument is no longer appropriate. During the six months ended April 30, 2007, the Company reclassified into earnings a net loss of $2.0 million resulting from the expiration, sale, termination, or exercise of derivative contracts.
	The Company enters into forward exchange and other derivative contracts with major banks and is exposed to credit losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.

12

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A summary of derivative contracts at April 30, 2007 is as follows:

	Notional			Fair
In thousands	Amount		Maturity	Value
United States dollar	$	461,261	May 2007 – Jul 2009	$	(21,857	)
British pound		32,954	May 2007 – Oct 2007		1,173
Canadian dollar		1,791	Jul 2007		(32	)
Interest rate swap		22,529	Apr 2008 – Sep 2009		(3	)
	$	518,535		$	(20,719	)

9.

Business Acquisitions

Effective July 31, 2005, the Company acquired Skis Rossignol SA (“Rossignol”), a wintersports and golf equipment manufacturer. Rossignol offers a full range of wintersports equipment under the Rossignol, Dynastar, Lange, Look and Kerma brands, and also sells golf products under the Cleveland Golf and Never Compromise brands. The Company has included the operations of Rossignol in its results since August 1, 2005. The purchase price, excluding transaction costs, included cash of approximately $208.3 million, approximately 2.2 million restricted shares of the Company’s common stock, valued at $28.9 million, a deferred purchase price obligation of approximately $32.5 million, a liability of approximately $16.9 million for the mandatory purchase of approximately 0.7 million outstanding public shares of Rossignol representing less than 5% of the share capital of Rossignol, and a liability of approximately $2.0 million for the estimated fair value of 0.1 million fully vested Rossignol stock options. Transaction costs totaled approximately $16.0 million. The valuation of the common stock issued in connection with the acquisition was based on its quoted market price for the five days before and after the announcement date, discounted to reflect the estimated effect of its trading restrictions. The deferred purchase price obligation is expected to be paid in 2010 and will accrue interest equal to the 3-month euro interbank offered rate (“Euribor”) plus 2.35% (currently 6.4%). The mandatory purchase of the remaining Rossignol shares was required under French law as the Company had obtained over 95% of the outstanding shares of Rossignol through a combination of share purchases, including a public tender offer. The purchase of these shares was completed in the quarter ended October 31, 2005 and the Company now owns 100% of the shares in Rossignol. Upon the future exercise of the Rossignol stock options, the Company will purchase the newly issued shares from the Rossignol stock option holders, retaining 100% ownership in Rossignol. These Rossignol stock options are treated as variable for accounting purposes and subsequent changes in the value of these stock options are recorded as compensation expense in the Company’s consolidated statement of income. The Company acquired a majority interest in Cleveland Golf when it acquired Rossignol, but certain former owners of Cleveland Golf retained a minority interest of 36.37%. The Company and the minority owners have entered into a put/call arrangement whereby the minority owners of Cleveland Golf can require the Company to buy all of their interest in Cleveland Golf after October 2009 and the Company can buy their interest at its option after April 2012, each at a purchase price generally determined by reference to a multiple of Cleveland Golf’s annual profits and the Company’s price-earnings ratio. As a result of the minority interest and put/call arrangement, the Company accounted for Cleveland Golf as a step acquisition. In a step acquisition, where less than 100% of an entity is acquired, only a portion of the fair value adjustments are recorded in the acquiring company’s balance sheet equal to the percentage ownership in the acquired company. Based on this step acquisition accounting, the Company has recorded 63.63% of the fair value adjustments for Cleveland Golf in its balance sheet. Goodwill arises from synergies the Company believes can be achieved by integrating Rossignol’s brands, products and operations with the Company’s, and is not expected to be deductible for income tax purposes. Amortizable intangibles consist of customer relationships, patents and athlete contracts with estimated useful lives of twenty, seven and two years, respectively. The acquired trademarks are non-amortizing as they have been determined to have indefinite lives.

13

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

	July 31,
In thousands	2005
Cash acquired	$	64,396
Accounts receivable		96,763
Inventory		232,525
Other current assets		21,548
Fixed assets		109,438
Deferred income taxes		3,572
Other assets		3,296
Amortizing intangible assets		20,400
Trademarks		94,700
Goodwill		292,168
Total assets acquired		938,806
Other liabilities		218,300
Long term debt and lines of credit		365,126
Deferred income taxes		40,657
Minority interest		10,109
Net assets acquired	$	304,614

In connection with the acquisition of Rossignol, the Company has formulated the Rossignol Integration Plan. As of April 30, 2007, the Company had recognized approximately $65.3 million of liabilities related to this plan. See Note 11 for further description of this plan.

Effective August 1, 2005, the Company acquired 11 retail stores in Australia from Surfection Pty Ltd, Manly Boardriders Pty Ltd. and Sydney Boardriders Pty Ltd. (“Surfection”). The operations of Surfection have been included in the Company’s results since August 1, 2005. The initial purchase price, excluding transaction costs, included cash of approximately $21.4 million. Transaction costs totaled approximately $1.1 million. The sellers are entitled to additional payments ranging from zero to approximately $17.1 million if certain sales and margin targets are achieved through September 30, 2008. The amount of goodwill initially recorded for the transaction would increase if such contingent payments are made. Goodwill arises from synergies the Company believes can be achieved through Surfection’s retail expertise and store presence in key locations in Australia, and is not expected to be deductible for income tax purposes. Amortizing intangibles consist of non-compete agreements with estimated useful lives of five years.

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

	August 1,
In thousands	2005
Inventory and other current assets	$	3,239
Fixed assets		4,839
Amortizing intangible assets		450
Goodwill		21,393
Total assets acquired		29,921
Other liabilities		7,419
Net assets acquired	$	22,502

The Company paid cash of approximately $34.1 million for business acquisitions during the six months ended April 30, 2007, of which $20.2 relates to a payment to the former owners of DC

14

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	Shoes, Inc. related to the achievement of certain sales and earnings targets, and the remaining $13.9 million relates primarily to acquisitions of certain other distributors and retail store locations.
10.	Litigation, Indemnities and Guarantees
	The Company has been named in a class action lawsuit that alleges willful violation of the federal Fair and Accurate Credit Transaction Act based upon certain of the Company’s retail stores’ alleged electronic printing of receipts on which appeared more than the last five digits of customers’ credit or debit card number and/or the expiration date of such customers’ credit or debit card. The Company is currently unable to assess the extent of damages, if any, that could be awarded to the plaintiff class if it were to prevail. The Company intends to vigorously defend itself against the claims asserted. No provision has been made in the Company’s financial statements for the six months ended April 30, 2007.
	The Company is also involved from time to time in legal claims involving trademark and intellectual property, licensing, employee relations and other matters incidental to its business. The Company believes the resolution of any such matter currently pending will not have a material adverse effect on its financial condition or results of operations.
	During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies and, in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.
11.	Rossignol Integration Plan and Pre-acquisition Restructuring Plan
	In connection with the acquisition of Rossignol, the Company has formulated the Rossignol Integration Plan (the “Plan”). The Plan covers the global operations of Rossignol and the Company’s existing businesses, and it includes the evaluation of facility relocations, nonstrategic business activities, redundant functions and other related items. As of April 30, 2007 the Company had recognized approximately $65.3 million of liabilities related to the Plan, including employee relocation and severance costs, moving costs, and other costs related primarily to the consolidation of Rossignol’s administrative headquarters in Europe, the consolidation of Rossignol’s European distribution, the consolidation and realignment of certain European manufacturing facilities, and the relocation of the Company’s wintersports equipment sales and distribution operations in the United States. These liabilities were included in the allocation of the purchase price for Rossignol in accordance with SFAS No. 141, “Business Combinations” and Emerging Issues Task Force (“EITF”) Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”. As of April 30, 2007, the Company also recognized approximately $1.4 million in inventory impairments relating to the realignment of its European manufacturing facilities. Costs that are not associated with the acquired company but relate to activities or employees of the Company’s existing operations are not significant and are charged to earnings. Certain land and facilities owned by the acquired company are expected to be sold during the next 12 months in connection with the Plan, while others are anticipated to be refinanced through sale-leaseback arrangements. Assets currently held for sale, primarily in France, totaled approximately $19.5 million at April 30, 2007. If the Company has overestimated these integration costs, the excess will reduce goodwill in future periods. If the Company has

15

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

underestimated these integration costs, additional liabilities recognized will be recorded in earnings.

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

				Facility
In thousands	Workforce			and Other			Total
Recorded in purchase price allocation	$	3,673		$	1,574		$	5,247
Adjustment to purchase price allocation		17,463			752			18,215
Cash payments		(17	)		(44	)		(61	)
Foreign currency translation		(83	)		(6	)		(89	)
Balance, October 31, 2005		21,036			2,276			23,312
Adjustment to purchase price allocation		36,733			5,130			41,863
Cash payments		(14,974	)		(2,555	)		(17,529	)
Foreign currency translation		2,689			90			2,779
Balance, October 31, 2006		45,484			4,941			50,425
Cash payments		(10,736	)		(2,347	)		(13,083	)
Foreign currency translation		2,904			521			3,425
Balance, April 30, 2007	$	37,652		$	3,115		$	40,767

Prior to the acquisition of Rossignol, a restructuring plan was announced related to Rossignol’s French manufacturing facilities (“Pre-acquisition Restructuring Plan”). The costs associated with the Pre-acquisition Restructuring Plan consist of termination benefits achieved through voluntary early retirement and voluntary termination of certain employees.

Activity and liability balances recorded as part of the Pre-acquisition Restructuring Plan are as follows:

In thousands	Workforce
Balance, October 31, 2006	$	1,587
Cash payments		(346	)
Foreign currency translation		101
Balance, April 30, 2007	$	1,342

12.

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, 2007 and October 31, 2006 and for the six months ended April 30, 2007 and 2006. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Due to the seasonality of the Company’s quarterly operations, management has applied the estimated consolidated annual effective income tax rate to both the guarantor and non-guarantor subsidiaries for interim reporting purposes. In the Company’s consolidated financial statements for the fiscal year ending October 31, 2007, 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 INCOME
Six Months Ended April 30, 2007

				Wholly-owned						Non-
	Quiksilver,			Guarantor			Cleveland			Guarantor
In thousands	Inc.			Subsidiaries			Golf			Subsidiaries			Elimination			Consolidated
Revenues, net	$	21		$	411,780		$	62,336		$	715,600		$	(33,414	)	$	1,156,323
Cost of goods sold		—			246,923			41,405			358,250			(19,469	)		627,109
Gross profit		21			164,857			20,931			357,350			(13,945	)		529,214
Selling, general and administrative expense		25,702			157,189			28,613			303,152			(13,355	)		501,301
Operating (loss) income		(25,681	)		7,668			(7,682	)		54,198			(590	)		27,913
Interest expense		20,967			3,046			1,553			4,777			—			30,343
Foreign currency loss		1,006			209			—			2,201			—			3,416
Minority interest and other expense		(2,106	)		(10	)		—			(32	)		—			(2,148	)
(Loss) income before (benefit) provision for income taxes		(45,548	)		4,423			(9,235	)		47,252			(590	)		(3,698	)
(Benefit) provision for income taxes		(16,903	)		1,641			(3,427	)		17,316			—			(1,373	)
Net (loss) income	$	(28,645	)	$	2,782		$	(5,808	)	$	29,936		$	(590	)	$	(2,325	)

17

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended April 30, 2006

				Wholly-owned						Non-
	Quiksilver,			Guarantor			Cleveland			Guarantor
In thousands	Inc.			Subsidiaries			Golf			Subsidiaries			Elimination			Consolidated
Revenues, net	$	197		$	390,924		$	70,355		$	631,764		$	(35,170	)	$	1,058,070
Cost of goods sold		—			238,653			38,100			321,993			(23,727	)		575,019
Gross profit		197			152,271			32,255			309,771			(11,443	)		483,051
Selling, general and administrative expense		24,871			131,190			30,356			252,084			(11,358	)		427,143
Operating (loss) income		(24,674	)		21,081			1,899			57,687			(85	)		55,908
Interest expense		18,515			2,023			1,608			2,394			—			24,540
Foreign currency gain		(683	)		(8	)		(203	)		(99	)		—			(993	)
Minority interest and other expense		112			—			—			299			—			411
(Loss) income before (benefit) provision for income taxes		(42,618	)		19,066			494			55,093			(85	)		31,950
(Benefit) provision for income taxes		(12,828	)		5,739			149			16,558			—			9,618
Net (loss) income	$	(29,790	)	$	13,327		$	345		$	38,535		$	(85	)	$	22,332

18

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

At April 30, 2007

				Wholly-owned						Non-
	Quiksilver,			Guarantor			Cleveland			Guarantor
In thousands	Inc.			Subsidiaries			Golf			Subsidiaries			Elimination			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	(581	)	$	1,450		$	1,528		$	62,058		$	—		$	64,455
Trade accounts receivable, net		—			173,627			45,647			384,376			—			603,650
Other receivables		897			12,353			371			29,264			—			42,885
Inventories		—			140,430			32,732			292,376			(2,225	)		463,313
Deferred income taxes		—			20,356			2,349			70,576			—			93,281
Prepaid expenses and other current assets		1,591			10,550			1,167			21,151			—			34,459
Total current assets		1,907			358,766			83,794			859,801			(2,225	)		1,302,043
Fixed assets, net		6,750			86,958			3,445			216,603			—			313,756
Intangible assets, net		2,553			81,820			2,998			168,158			—			255,529
Goodwill		—			163,352			2,472			381,553			—			547,377
Investment in subsidiaries		561,992			—			—			—			(561,992	)		—
Other assets		10,542			15,811			304			16,084			—			42,741
Assets held for sale		—			—			—			19,494			—			19,494
Total assets	$	583,744		$	706,707		$	93,013		$	1,661,693		$	(564,217	)	$	2,480,940
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	—		$	—		$	—		$	268,500		$	—		$	268,500
Accounts payable		1,243			49,296			14,068			162,121			—			226,728
Accrued liabilities		14,112			18,189			5,519			126,160			—			163,980
Current portion of long-term debt		—			3,690			—			22,418			—			26,108
Income taxes payable		—			(12,432	)		(2,572	)		15,752			—			748
Intercompany balances		90,930			20,946			49,772			(161,648	)		—			—
Total current liabilities		106,285			79,689			66,787			433,303			—			686,064
Long-term debt, net of current portion		436,161			179,750			—			129,946			—			745,857
Deferred income taxes and other long-term liabilities		—			27,793			(353	)		71,023			—			98,463
Total liabilities		542,446			287,232			66,434			634,272			—			1,530,384
Minority interest		—			10,072			—			—			—			10,072
Stockholders’/invested equity		41,298			409,403			26,579			1,027,421			(564,217	)		940,484
Total liabilities and stockholders’ equity	$	583,744		$	706,707		$	93,013		$	1,661,693		$	(564,217	)	$	2,480,940

19

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

At October 31, 2006

			Wholly-owned					Non-
	Quiksilver,		Guarantor		Cleveland			Guarantor
In thousands	Inc.		Subsidiaries		Golf			Subsidiaries			Elimination			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	8	$	1,537	$	1,855		$	33,434		$	—		$	36,834
Trade accounts receivable, net		—		205,853		36,987			478,722			—			721,562
Other receivables		1,190		12,593		708			20,833			—			35,324
Inventories		—		144,740		27,122			255,636			(1,634	)		425,864
Deferred income taxes		—		14,459		2,349			67,864			—			84,672
Prepaid expenses and other current assets		1,703		9,968		1,953			15,302			—			28,926
Total current assets		2,901		389,150		70,974			871,791			(1,634	)		1,333,182
Fixed assets, net		6,343		83,495		3,801			188,695			—			282,334
Intangible assets, net		2,452		79,197		3,150			163,407			—			248,206
Goodwill		—		163,910		2,472			349,328			—			515,710
Investment in subsidiaries		561,992		—		—			—			(561,992	)		—
Other assets		10,909		4,730		274			30,041			—			45,954
Assets held for sale		—		3,500		—			18,342			—			21,842
Total assets	$	584,597	$	723,982	$	80,671		$	1,621,604		$	(563,626	)	$	2,447,228
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	—	$	209	$	—		$	315,682		$	—		$	315,891
Accounts payable		2,303		89,181		3,525			125,168			—			220,177
Accrued liabilities		13,535		43,691		6,085			137,805			(29	)		201,087
Current portion of long-term debt		—		4,305		—			20,316			—			24,621
Income taxes payable		—		14,277		1,343			(12,810	)		—			2,810
Intercompany balances		72,386		17,351		37,766			(127,503	)		—			—
Total current liabilities		88,224		169,014		48,719			458,658			(29	)		764,586
Long-term debt, net of current portion		433,701		122,150		—			133,839			—			689,690
Deferred income taxes and other long-term liabilities		—		25,773		(353	)		75,212			—			100,632
Total liabilities		521,925		316,937		48,366			667,709			(29	)		1,554,908
Minority interest		—		11,193		—			—			—			11,193
Stockholders’/invested equity		62,672		395,852		32,305			953,895			(563,597	)		881,127
Total liabilities and stockholders’ equity	$	584,597	$	723,982	$	80,671		$	1,621,604		$	(563,626	)	$	2,447,228

20

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended April 30, 2007

										Non-
	Quiksilver,			Guarantor			Cleveland			Guarantor
In thousands	Inc.			Subsidiaries			Golf			Subsidiaries			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(28,645	)	$	2,782		$	(5,808	)	$	29,346		$	(2,325	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		261			9,102			952			23,801			34,116
Stock-based compensation		9,147			—			—			—			9,147
Provision for doubtful accounts		—			1,412			828			2,300			4,540
Gain on disposal of fixed assets		—			—			—			(514	)		(514	)
Foreign currency loss		390			—			—			513			903
Minority interest and equity in earnings		—			(2,254	)		—			531			(1,723	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			30,813			(9,488	)		120,064			141,389
Other receivables		293			240			338			(6,658	)		(5,787	)
Inventories		—			4,700			(5,610	)		(16,146	)		(17,056	)
Prepaid expenses and other current assets		112			(552	)		785			(5,038	)		(4,693	)
Other assets		367			1,991			(30	)		2,005			4,333
Accounts payable		(1,060	)		(40,056	)		10,543			27,377			(3,196	)
Accrued liabilities		1,007			(1,430	)		(566	)		(40,457	)		(41,446	)
Income taxes payable		—			(30,665	)		(3,915	)		33,007			(1,573	)
Net cash (used in) provided by operating activities		(18,128	)		(23,917	)		(11,971	)		170,131			116,115
Cash flows from investing activities:
Proceeds from the sale of properties and equipment		—			4,463			—			6,008			10,471
Capital expenditures		(770	)		(16,994	)		(444	)		(35,336	)		(53,544	)
Business acquisitions, net of cash acquired		(580	)		(20,206	)		—			(13,352	)		(34,138	)
Net cash used in investing activities		(1,350	)		(32,737	)		(444	)		(42,680	)		(77,211	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			4,000			41,258			45,258
Payments on lines of credit		—			(209	)		(4,000	)		(100,955	)		(105,164	)
Borrowings on long-term debt		—			96,500			—			7,762			104,262
Payments on long-term debt		—			(39,515	)		—			(20,220	)		(59,735	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		7,000			—			—			—			7,000
Intercompany		11,884			(226	)		12,088			(23,746	)		—
Net cash provided by (used in) financing activities		18,884			56,550			12,088			(95,901	)		(8,379	)
Effect of exchange rate changes on cash		5			17			—			(2,926	)		(2,904	)
Net (decrease) increase in cash and cash equivalents		(589	)		(87	)		(327	)		28,624			27,621
Cash and cash equivalents, beginning of period		8			1,537			1,855			33,434			36,834
Cash and cash equivalents, end of period	$	(581	)	$	1,450		$	1,528		$	62,058		$	64,455

21

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended April 30, 2006

										Non-
	Quiksilver,			Guarantor			Cleveland			Guarantor
In thousands	Inc.			Subsidiaries			Golf			Subsidiaries			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(29,790	)	$	13,327		$	345		$	38,450		$	22,332
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		269			9,247			1,046			20,790			31,352
Stock based compensation		11,324			—			—			—			11,324
Provision for doubtful accounts		—			(1,355	)		181			4,384			3,210
Gain on sale of fixed assets		—			—			—			(19	)		(19	)
Foreign currency gain		(33	)		—			—			(223	)		(256	)
Minority interest and equity in earnings		112			—			—			799			911
Changes in operating assets and liabilities:
Trade accounts receivable		—			45,254			(9,368	)		92,706			128,592
Other receivables		159			2,980			—			(2,136	)		1,003
Inventories		—			7,798			(7,177	)		(2,665	)		(2,044	)
Prepaid expenses and other current assets		501			(3,142	)		706			(626	)		(2,561	)
Other assets		(16	)		(452	)		(48	)		(2,861	)		(3,377	)
Accounts payable		(270	)		(28,812	)		(8	)		8,596			(20,494	)
Accrued liabilities		(4,969	)		(2,051	)		(1,384	)		(26,297	)		(34,701	)
Income taxes payable		—			(14,149	)		2,202			(9,182	)		(21,129	)
Net cash (used in) provided by operating activities		(22,713	)		28,645			(13,505	)		121,716			114,143
Cash flows from investing activities:
Capital expenditures		(1,679	)		(14,652	)		(1,228	)		(25,177	)		(42,736	)
Business acquisitions, net of cash acquired		(2,417	)		(5,000	)		—			(21,030	)		(28,447	)
Net cash used in investing activities		(4,096	)		(19,652	)		(1,228	)		(46,207	)		(71,183	)
Cash flows from financing activities:
Borrowings on lines of credit		—			157			4,000			133,775			137,932
Payments on lines of credit		—			(6,376	)		(5,000	)		(163,383	)		(174,759	)
Borrowings on long-term debt		(1,267	)		56,350			—			60,931			116,014
Payments on long-term debt		—			(16,366	)		(4,327	)		(86,674	)		(107,367	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		4,666			—			—			—			4,666
Intercompany		22,505			(48,192	)		25,063			624			—
Net cash provided by (used in) financing activities		25,904			(14,427	)		19,736			(54,727	)		(23,514	)
Effect of exchange rate changes on cash		85			(522	)		—			2,211			1,774
Net (decrease) increase in cash and cash equivalents		(820	)		(5,956	)		5,003			22,993			21,220
Cash and cash equivalents, beginning of period		1,177			20,816			986			52,619			75,598
Cash and cash equivalents, end of period	$	357		$	14,860		$	5,989		$	75,612		$	96,818

22

     Following are the financial statements of Roger Cleveland Golf Company, Inc. Roger Cleveland Golf Company, Inc. is a guarantor subsidiary of Quiksilver Inc.’s publicly registered senior notes. As Roger Cleveland Golf Company, Inc. is not wholly owned by Quiksilver, Inc., these condensed financial statements are being furnished pursuant to Rule 10-01 of Regulation S-X.

Roger Cleveland Golf Company, Inc. Condensed Statement of Operations and Comprehensive Income (Unaudited) Three Months Ended April 30, 2007 and 2006	24
Roger Cleveland Golf Company, Inc. Condensed Statement of Operations and Comprehensive Income (Unaudited) Six Months Ended April 30, 2007 and 2006	25
Roger Cleveland Golf Company, Inc. Condensed Balance Sheets (Unaudited) April 30, 2007 and October 31, 2006	26
Roger Cleveland Golf Company, Inc. Condensed Statements of Cash Flows (Unaudited) Six Months Ended April 30, 2007 and 2006	27
Roger Cleveland Golf Company, Inc. Notes to Condensed Financial Statements (Unaudited)	28

23

ROGER CLEVELAND GOLF COMPANY, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Three months ended April 30,
In thousands	2007			2006
Revenues, net	$	41,527		$	46,843
Cost of goods sold		27,520			24,390
Gross profit		14,007			22,453
Selling, general, and administrative expense		14,794			15,834
Operating (loss) income		(787	)		6,619
Interest expense		805			900
Other income		—			(214	)
(Loss) income before (benefit) provision for income taxes		(1,592	)		5,933
(Benefit) provision for income taxes		(539	)		2,256
Net (loss) income and comprehensive (loss) income	$	(1,053	)	$	3,677

See notes to condensed financial statements.

24

ROGER CLEVELAND GOLF COMPANY, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Six months ended April 30,
In thousands	2007			2006
Revenues, net	$	62,336		$	70,355
Cost of goods sold		41,405			38,100
Gross profit		20,931			32,255
Selling, general, and administrative expense		28,613			30,356
Operating (loss) income		(7,682	)		1,899
Interest expense		1,553			1,608
Other income		—			(203	)
(Loss) income before (benefit) provision for income taxes		(9,235	)		494
(Benefit) provision for income taxes		(3,509	)		188
Net (loss) income and comprehensive loss	$	(5,726	)	$	306

See notes to condensed financial statements.

25

ROGER CLEVELAND GOLF COMPANY, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	April 30,		October 31,
In thousands	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	1,528	$	1,855
Accounts receivable, less allowance for bad debts of $945 (2007) and $1,000 (2006)		45,647		36,987
Income taxes receivable		2,572		—
Inventories		32,732		27,122
Deferred income taxes		2,349		2,349
Prepaid expenses and other current assets		1,538		2,661
Due from affiliates		8,973		8,591
Total current assets		95,339		79,565
Equipment and leasehold improvements, less accumulated depreciation and amortization of $6,733 (2007) and $6,036 (2006)		3,445		3,801
Other intangible assets, net		2,998		3,150
Goodwill		2,472		2,472
Deferred income taxes		353		353
Other assets		304		274
Total assets	$	104,911	$	89,615
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,068	$	3,525
Accrued payroll and benefits		2,300		2,677
Other accrued expenses		3,219		3,408
Due to affiliates		745		1,357
Income taxes payable		—		1,343
Total current liabilities		20,332		12,310
Long-term debt:
Due to affiliates		58,000		45,000
Total liabilities		78,332		57,310
Stockholders’ equity:
Common stock no par value – 500,000 shares authorized; 290,224 shares issued and outstanding		22,000		22,000
Retained earnings		4,579		10,305
Total stockholders’ equity		26,579		32,305
Total liabilities and stockholders’ equity	$	104,911	$	89,615

See notes to condensed financial statements.

26

ROGER CLEVELAND GOLF COMPANY, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended April 30,
In thousands	2007			2006
Cash flows from operating activities:
Net (loss) income	$	(5,726	)	$	306
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		952			1,046
Changes in assets and liabilities:
Accounts receivable, net		(8,660	)		(9,187	)
Inventories		(5,610	)		(7,177	)
Prepaid expenses and other current assets		1,123			706
Other assets		(30	)		(48	)
Accounts payable		10,543			(8	)
Due from affiliates and due to affiliates		(994	)		(2,898	)
Accrued expenses		(566	)		(1,384	)
Income taxes payable		(3,915	)		2,202
Net cash used in operating activities		(12,883	)		(16,442	)
Cash flows from investing activities:
Purchase of equipment and leasehold improvements		(444	)		(1,228	)
Net cash used in investing activities		(444	)		(1,228	)
Cash flows from financing activities:
Proceeds from line of credit		4,000			4,000
Payments on line of credit		(4,000	)		(5,000	)
Proceeds from affiliate loans		23,000			28,000
Payments of affiliate loans		(10,000	)		—
Payment of long-term debt		—			(4,327	)
Net cash provided by financing activities		13,000			22,673
Net (decrease) increase in cash		(327	)		5,003
Cash, beginning of period		1,855			986
Cash, end of period	$	1,528		$	5,989
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest	$	1,625		$	1,161
Taxes	$	405		$	(2,042	)

See notes to condensed financial statements.

27

ROGER CLEVELAND GOLF COMPANY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1.	Basis of Presentation The accompanying unaudited condensed 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.
	Roger Cleveland Golf Company, Inc. (the “Company”) manufactures, markets, and distributes golf clubs and related accessories. The Company is owned 64% by certain subsidiaries of Quiksilver, Inc. (the “Parent”) and 36% by a group of individuals. The Parent acquired its majority interest in the Company on July 31, 2005, and as a result, the financial statements do not include financial statements for any periods prior to July 31, 2005. The Parent’s new basis is not reflected in the accompanying financial statements as these financial statements have been prepared on the carryover basis of accounting.
	The Parent has $400 million in publicly registered senior notes. In July 2006, the Company became a guarantor subsidiary of these senior notes, fully and unconditionally guaranteeing the senior note indebtedness of the Parent. Accordingly, the accompanying financial statements are being included in the Parent’s Form 10-Q in accordance with the SEC’s Regulation S-X, Rule 3-10.
2.	New Accounting Pronouncements In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections,” (“SFAS No. 154”) which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS No. 154 applies to all voluntary changes in accounting principles and requires retrospective application (a term defined by the statement) to prior periods’ financial statements, unless it is impracticable to determine the effect of a change. It also applies to changes required by an accounting pronouncement that does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted this standard during the six months ended April 30, 2007. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.
	In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the application of SFAS No. 109, “Accounting for Income Taxes,” by defining criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in the Company’s financial statements and also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects to adopt FIN 48 on November 1, 2007. The Company is currently assessing the impact the adoption of FIN 48 will have on its financial position and results of operations.
	In September 2006, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views regarding the process of quantifying materiality of financial statement misstatements. The Company adopted this standard during the six months ended April 30, 2007. 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.

28

ROGER CLEVELAND GOLF COMPANY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company expects to adopt this standard at the beginning of the Company’s fiscal year ending October 31, 2009. The adoption of this accounting pronouncement is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
	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. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company has not determined the effect that the adoption of SFAS No. 159 will have on its consolidated financial statements.
3.	Intangible Assets The Company’s amortizing intangible assets consist of the following:

	April 30, 2007							October 31, 2006
	Gross		Amorti-							Amorti-
In thousands	Amount		zation			Net		Gross Amount		zation			Net
Tradenames and trademarks	$	3,100	$	(792	)	$	2,308	$	3,100	$	(689	)	$	2,411
Patents		1,746		(1,488	)		258		1,643		(1,371	)		272
Customer relationships		700		(268	)		432		700		(233	)		467
	$	5,546	$	(2,548	)	$	2,998	$	5,443	$	(2,293	)	$	3,150

	Amortization expense of intangible assets for the six months ended April 30, 2007 and 2006 was approximately $0.3 million and $0.4 million, respectively. Annual amortization expense for the fiscal year ending October 31, 2007 is estimated to be $0.6 million. Annual amortization expense for fiscal years ending October 31, 2008 through 2011 is estimated to be $0.3 million.
4.	Inventories
	Inventories consist of the following:

	April 30,		October 31,
In thousands	2007		2006
Raw materials	$	17,069	$	12,287
Work in process		302		41
Finished goods		15,361		14,794
	$	32,732	$	27,122

5.	Related Party Transactions
	Amounts due to affiliates consist of the following:

	April 30,			October 31,
In thousands	2007			2006
Affiliated debt due to Quiksilver Americas, Inc.	$	58,000		$	45,000
Amounts due to Parent and other Parent subsidiaries		745			1,357
Amounts due from Parent and other Parent subsidiaries		(8,973	)		(8,591	)
	$	49,772		$	37,766

29

ROGER CLEVELAND GOLF COMPANY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Interest expense on borrowings from Quiksilver Americas, Inc. was approximately $1.5 million for the six months ended April 30, 2007 and 2006. The weighted average interest rate on these borrowings was 6.25% at April 30, 2007. This interest rate corresponds to the rate at which Quiksilver Americas, Inc. borrowed these funds, on the Company’s behalf, under the shared credit facility. Sales to Quiksilver, Inc. subsidiaries amounted to $11.4 million and $8.3 million for the six months ended April 30, 2007 and 2006, respectively.

6.

Indemnities, Commitments, and Guarantees During its normal course of business, the Company has made certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sales, and/or license of Company products; (ii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; (iii) indemnities involving the accuracy of representations and warranties in certain contracts; (iv) indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of California; and (v) certain real estate leases under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises. In addition, the Company has made a contractual commitment to an employee providing for severance payments upon the occurrence of certain prescribed events. 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. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these indemnities, commitments, and guarantees in the accompanying balance sheets.

30

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,” “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 report 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, 2006 and subsequent reports on Form 8-K which discuss our business and related risks in greater detail and should be considered carefully before deciding to purchase, hold or sell our securities.

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 July 2005, we acquired Skis Rossignol, S.A., a wintersports and golf equipment manufacturer. Rossignol offers a full range of wintersports equipment under the Rossignol, Dynastar, Lange, Look and Kerma brands, and also sells golf products under the Cleveland Golf and Never Compromise brands. Today our products are sold throughout the world, primarily in surf shops, snow shops, skate shops and specialty stores.

Since we acquired Rossignol, our business has become more seasonal. Our revenues and operating profits are generally higher in August through December, which affect our consolidated quarterly results.

Over the past 36 years, Quiksilver has been established as a leading global brand representing the casual, youth lifestyle associated with boardriding sports. With our acquisition of Rossignol, we added a collection of leading ski equipment brands to our company that we believe will be the foundation for a full range of technical ski apparel, sportswear and accessories. Also, as part of our acquisition of Rossignol, we acquired a majority interest in Roger Cleveland Golf Company, Inc., a leading producer of wedges and golf clubs in the United States.

We operate in the outdoor market of the sporting goods industry in which we design, produce and distribute branded apparel, wintersports and golf equipment, footwear, accessories and related products. We operate in three segments, the Americas, Europe and Asia/Pacific. The Americas segment includes revenues primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia.

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,

31

engineers, 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 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 the components in our statements of income and other data as a percentage of revenues:

	Three Months Ended						Six Months Ended
	April 30,						April 30,
Statement of Income data	2007			2006			2007			2006
Revenues, net		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		44.9			45.4			45.8			45.7
Selling, general and administrative expense		43.4			41.8			43.4			40.4
Operating income		1.5			3.6			2.4			5.3
Interest expense		2.4			2.3			2.6			2.3
Foreign currency, minority interest and other expense		0.3			0.2			0.1			0.0
(Loss) income before (benefit) provision for income taxes		(1.2	)		1.1			(0.3	)		3.0
(Benefit) provision for income taxes		(0.4	)		0.4			(0.1	)		0.9
Net (loss) income		(0.8	)%		0.7	%		(0.2	)%		2.1	%
Other data
EBITDA(1)		4.9	%		7.5	%		6.0	%		9.4	%

⁽¹⁾ EBITDA is defined as net income before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, and (iv) non-cash stock based compensation expense. 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 EBITDA, along with other GAAP measures, as a measure of profitability because 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 and the accounting methods used to compute depreciation and amortization, and the effect of non-cash stock based compensation expense. We believe it is useful to investors for the same reasons. 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 and the effect of non-cash compensation expense. Following is a reconciliation of net income to EBITDA:

	Three Months Ended					Six Months Ended
	April 30,					April 30,
	2007			2006		2007			2006
Net (loss) income	$	(4,800	)	$	3,729	$	(2,325	)	$	22,332
(Benefit) provision for income taxes		(2,224	)		1,833		(1,373	)		9,618
Interest expense		14,789			11,949		30,343			24,540
Depreciation and amortization		17,605			15,849		34,116			31,352
Non-cash stock compensation expense		4,309			5,564		9,147			11,324
EBITDA	$	29,679		$	38,924	$	69,908		$	99,166

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Three Months Ended April 30, 2007 Compared to Three Months Ended April 30, 2006

Our total net revenues for the three months ended April 30, 2007 increased 17% to $603.8 million from $516.9 million in the comparable period of the prior year. Revenues in the Americas increased 12% to $279.8 million for the three months ended April 30, 2007 from $250.0 million in the comparable period of the prior year, and European revenues increased 24% to $268.8 million from $217.1 million for those same periods. As measured in euros, Europe’s primary functional currency, Europe’s revenues in the current year’s quarter increased 13% compared to the prior year. Asia/Pacific revenues increased 12% to $54.0 million for the three months ended April 30, 2007 from $48.2 million for the three months ended April 30, 2006. In Australian dollars, Asia/Pacific’s primary functional currency, Asia/Pacific revenues increased 3% compared to the prior year.

Our net revenues can be categorized into two general classifications: apparel brands and equipment brands. Our apparel brand revenue classification includes Quiksilver, Roxy, DC and our other apparel brands of Hawk, Gotcha, Raisins, Leilani and Radio Fiji. Our equipment brand revenue classification includes our Rossignol and other wintersports brands, comprising Rossignol, Dynastar, Look, Lange, Kerma, Lib Technologies, Gnu and Bent Metal, along with our golf brands of Cleveland Golf, Never Compromise and Fidra.

Our apparel brand revenues for the three months ended April 30, 2007 increased 21% to $519.1 million from $428.5 million for the three months ended April 30, 2006. This increase resulted from strength in our Roxy, Quiksilver, and DC brands, partially offset by a slight decrease in our other apparel brand revenues. Roxy and Quiksilver brand revenue growth came primarily from growth in apparel and, to a lesser extent, footwear and accessories product types. DC’s growth was primarily in footwear and, to a lesser extent, its apparel and accessories product types. Our equipment brand revenues decreased 4% during the three months ended April 30, 2007 to $83.5 million from $86.9 million for the three months ended April 30, 2006. The substantial majority of this decrease came from our golf equipment brand revenues while our wintersports equipment brand revenues only slightly decreased. The decrease in golf equipment brand revenues is primarily related to lower than expected demand for certain products caused by the timing of our product releases. While our wintersports brand revenues were largely unchanged, the current period’s revenues included lower sales offset by the positive effect of foreign currency exchange rates and, to a lesser extent, increases in wintersports equipment brand apparel. Preorders of our wintersports equipment products for the upcoming 2007/2008 winter season are expected to be lower than the prior year’s season due to decreased market demand caused by the lack of snowfall in many parts of Europe and the United States in the 2006/2007 winter season.

	Three Months Ended April 30,
	2007						2006
			Equip-						Equip-
	Apparel		ment				Apparel		ment
In thousands	Brands		Brands		Total		Brands		Brands		Total
Americas	$	235,724	$	44,086	$	279,810	$	200,242	$	49,800	$	250,042
Europe		232,587		36,242		268,829		184,149		33,000		217,149
Asia/Pacific		50,821		3,136		53,957		44,147		4,100		48,247
Corporate operations		¾		¾		1,203		¾		¾		1,490
	$	519,132	$	83,464	$	603,799	$	428,538	$	86,900	$	516,928

In the Americas, our apparel brand revenues for the three months ended April 30, 2007 increased 18%, while our equipment brand revenues decreased 11% compared to the three months ended April 30, 2006. In Europe, our apparel brand revenues for the three months ended April 30, 2007 increased 26%, and our equipment brand revenues increased 10% compared to the three months ended April 30, 2006. In Asia/Pacific, our apparel brand revenues for the three months ended April 30, 2007 increased 15%, while our equipment brand revenues decreased 24% compared to the three months ended April 30, 2006.

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Our consolidated gross profit margin for the three months ended April 30, 2007 decreased to 44.9% from 45.4% in the comparable period of the prior year. The Americas’ gross profit margin decreased to 39.8% from 41.3%, and the European gross profit margin decreased to 49.5% from 50.0%, while the Asia/Pacific gross profit margin increased to 47.3% from 45.7% for those same periods. The decrease in the Americas’ gross profit margin was primarily due to lower margins in our wintersports and golf equipment businesses, paritally offset by improved margins in our apparel brands and a higher percentage of sales through company owned retail stores where we earn both the wholesale and retail margins. Our European gross profit margin decrease was primarily due to lower margins in our wintersports equipment business, partially offset by improved margins in our Quiksilver and Roxy apparel brands. In Asia/Pacific, the gross profit margin increase was primarily due to a higher percentage of sales through company-owned retail stores, partially offset by lower margins in our wintersports equipment brands.

Selling, general and administrative expense (“SG&A”) for the three months ended April 30, 2007 increased 21% to $262.1 million from $215.8 million in the comparable period of the prior year. Americas’ SG&A increased 22% to $99.4 million from $81.5 million in the comparable period of the prior year, while European SG&A increased 24% to $119.0 million from $96.2 million and Asia/Pacific SG&A increased 15% to $27.9 million from $24.3 million for those same periods. As a percentage of revenues, our SG&A increased to 43.4% for the three months ended April 30, 2007 from 41.8% for the three months ended April 30, 2006. The consolidated increase in our SG&A as a percentage of revenue was primarily caused by the cost of additional retail stores and increased distribution costs.

Interest expense for the three months ended April 30, 2007 increased to $14.8 million from $11.9 million in the comparable period of the prior year. This increase was primarily due to higher borrowing levels on our lines of credit to finance increased working capital needs and, to a lesser extent, higher interest rates on our variable-rate debt in Europe and the United States.

Our foreign currency loss amounted to $1.5 million for the three months ended April 30, 2007 compared to a gain of $0.5 million in the same period of last year. This gain and loss resulted primarily from the foreign currency contracts we used to hedge the risk of translating the results of our international subsidiaries into U.S. dollars and the foreign exchange effect of certain non-U.S. dollar denominated liabilities.

Our effective income tax rate for the three months ended April 30, 2007 was 31.7% compared to 33.0% for the three months ended April 30, 2006. The income tax rate for the three months ended April 30, 2007 was favorably impacted by certain changes in estimates relating to our foreign tax expense. Our estimated annual effective income tax rate is lower than the prior year’s annual rate primarily due to the higher impact of certain beneficial items included in our tax rate.

Our loss for the three months ended April 30, 2007 was $4.8 million or $0.04 per share on a diluted basis, compared to net income of $3.7 million, or $0.03 per share on a diluted basis, in the same period of the prior year. Basic net loss per share was $0.04 per share for the three months ended April 30, 2007 compared to net income of $0.03 per share in the same period of the prior year. EBITDA decreased 24% to $29.7 million from $38.9 million for those same periods.

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Six Months Ended April 30, 2007 Compared to Six Months Ended April 30, 2006

Our total net revenues for the six months ended April 30, 2007 increased 9% to $1,156.3 million from $1,058.1 million in the comparable period of the prior year. Revenues in the Americas increased 11% to $520.4 million for the six months ended April 30, 2007 from $470.8 million in the comparable period of the prior year, and European revenues increased 9% to $522.8 million from $478.3 million for those same periods. As measured in euros, revenues in the first six months of the current year decreased slightly compared to the prior year. Asia/Pacific revenues increased 4% to $111.2 million in the six months ended April 30, 2007 compared to $106.6 million in the comparable period of the prior year. As measured in Australian dollars, revenues decreased 2% over the comparable period of the prior year.

Our apparel brand revenues for the six months ended April 30, 2007 increased 20% to $930.6 million from $777.8 million for the six months ended April 30, 2006. This increase resulted from strength in our Roxy, Quiksilver and DC brands. Our other apparel brand revenues decreased slightly compared to the first six months of fiscal 2006. Roxy and Quiksilver brand revenue growth came primarily from apparel and, to a lesser extent, footwear and accessories product types. DC’s growth was primarily in footwear and, to a lesser extent, its apparel and accessories product types. Our equipment brand revenues decreased 19% during the six months ended April 30, 2007 to $223.7 million from $277.9 million for the six months ended April 30, 2006. The substantial majority of this decrease came from Rossignol and our other wintersports brands. We shipped earlier during the current winter season compared to the year before, which resulted in higher revenues in the fourth quarter of our last full fiscal year ended October 31, 2006 compared to the comparable period of the prior year and lower revenues in the three months ended January 31, 2007 compared to the comparable period of the prior year. During the three months ended April 30, 2007, our wintersports equipment brand revenues only slightly decreased. For the combined six months, our wintersports brand revenues also decreased compared to the previous year as market demand was significantly lower this winter due to the lack of snowfall in many parts of Europe and the United States. The decrease in golf equipment brand revenue is primarily related to lower than expected demand for certain of its products caused by the timing of product releases.

	Six Months Ended April 30,
	2007						2006
			Equip-						Equip-
	Apparel		ment				Apparel		ment
In thousands	Brands		Brands		Total		Brands		Brands		Total
Americas	$	433,340	$	87,028	$	520,368	$	368,912	$	101,848	$	470,760
Europe		395,086		127,740		522,826		318,780		159,521		478,301
Asia/Pacific		102,203		8,949		111,152		90,065		16,524		106,589
Corporate operations		¾		¾		1,977		¾		¾		2,420
	$	930,629	$	223,717	$	1,156,323	$	777,757	$	277,893	$	1,058,070

In the Americas, our apparel brand revenues for the six months ended April 30, 2007 increased 17%, while our equipment brand revenues decreased 15% compared to the six months ended April 30, 2006. In Europe, our apparel brand revenues for the six months ended April 30, 2007 increased 24%, while our equipment brand revenues decreased 20% compared to the six months ended April 30, 2006. In Asia/Pacific, our apparel brand revenues for the six months ended April 30, 2007 increased 13%, while our equipment brand revenues decreased 46% compared to the six months ended April 30, 2006.

Our consolidated gross profit margin for the six months ended April 30, 2007 increased slightly to 45.8% from 45.7% in the comparable period of the prior year. The Americas’ gross profit margin decreased to 40.0% from 40.6%, while the European gross profit margin increased to 51.3% from 50.9%, and the Asia/Pacific gross profit margin increased to 46.1% from 44.9% for those same periods. The decrease in our Americas’ gross profit margin was primarily due to lower margins in our wintersports and golf equipment businesses, paritally offset by improved margins in our apparel brands and a higher percentage of sales through company owned retail stores where we earn both the wholesale and retail

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margins. Our European gross profit margin increase was primarily due to improved margins in our Quiksilver and Roxy apparel brands, which were partially offset by lower margins in our wintersports equipment brands. In Asia/Pacific, the gross profit margin increase was primarily due to a higher percentage of sales through company-owned retail stores, partially offset by lower margins in our wintersports equipment brands.

SG&A for the six months ended April 30, 2007 increased 17% to $501.3 million from $427.1 million in the comparable period of the prior year. Americas’ SG&A increased 20% to $198.1 million from $165.3 million in the comparable period of the prior year, European SG&A increased 18% to $220.5 million from $187.6 million, and Asia/Pacific SG&A increased 15% to $54.3 million from $47.2 million for those same periods. As a percentage of revenues, our SG&A increased to 43.4% for the six months ended April 30, 2007 from 40.4% for the six months ended April 30, 2006. The consolidated increase in our SG&A as a percentage of revenue was primarily caused by the cost of additional retail stores and increased distribution costs.

Interest expense for the six months ended April 30, 2007 increased to $30.3 million from $24.5 million in the comparable period of the prior year. This increase was primarily due to higher borrowing levels on our lines of credit to finance increased working capital needs and, to a lesser extent, higher interest rates on our variable-rate debt in Europe and the United States.

Our foreign currency loss amounted to $3.4 million for the six months ended April 30, 2007 compared to a gain of $1.0 million in the comparable period of the prior year. This gain and loss resulted primarily from the foreign currency contracts we used to hedge the risk of translating the results of our international subsidiaries into U.S. dollars and the foreign exchange effect of certain non-U.S. dollar denominated liabilities.

Our effective income tax rate for the six months ended April 30, 2007 was 37.1% compared to 30.1% for the six months ended April 30, 2006. The income tax rate for the six months ended April 30, 2007 was favorably impacted by certain changes in estimates relating to our foreign tax expense. Our estimated annual effective income tax rate is lower than the prior year’s annual rate primarily due to the higher impact of certain beneficial items included in our tax rate.

Our loss for the six months ended April 30, 2007 was $2.3 million or $0.02 per share on a diluted basis, compared to net income of $22.3 million, or $0.18 per share on a diluted basis, in the same period of the prior year. Basic net loss per share was $0.02 per share for the six months ended April 30, 2007 compared to net income per share of $0.18 per share in the same period of the prior year. EBITDA decreased 30% to $69.9 million from $99.2 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.

In April 2007, we exercised our option to expand the Americas credit facility from $250 million to $300 million (with a continuing option to expand the facility to $350 million under certain conditions).

The net increase in cash and cash equivalents for the six months ended April 30, 2007 was $27.6 million compared to $21.2 million in the comparable period of the prior year. Cash and cash equivalents totaled $64.5 million at April 30, 2007 compared to $36.8 million at October 31, 2006, while working capital was $616.0 million at April 30, 2007 compared to $568.6 million at October 31, 2006. We believe our current cash balance and current lines of credit are adequate to cover our seasonal working capital and other requirements for the foreseeable future, and that increases in our lines of credit can be obtained as needed to fund future growth.

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Cash Flows
We generated $116.1 million of cash from operating activities in the six months ended April 30, 2007 compared to $114.1 million for the same period of the prior year. This $2.0 million increase in cash provided was due to changes in accounts receivable, inventories and accounts payable offset by changes in net (loss) income, non-cash items and other operating assets and liabilities. During the six months ended April 30, 2007, the decrease in accounts receivable provided cash of $141.4 million compared to cash provided of $128.6 million during the six months ended April 30, 2006, an increase in cash provided of $12.8 million. The change in inventories, net of the change in accounts payable, used cash of $20.3 million during the six months ended April 30, 2007 compared to cash used of $22.5 million for the same period of the prior year, a net decrease in cash used of $2.2 million. The change in net (loss) income, non-cash items and other operating assets and liabilities resulted in a decrease in cash provided of $13.0 million during the six months ended April 30, 2007 compared to the comparable period of the prior year.

Capital expenditures totaled $53.5 million for the six months ended April 30, 2007, compared to $42.7 million in the comparable period of the prior year. These investments included company-owned retail stores and ongoing investments in manufacturing, computer and warehouse equipment. We also used $34.1 million of cash for acquisitions for the six months ended April 30, 2007, of which $20.2 million relates to a payment to the former owners of DC Shoes, Inc., and the remaining $13.9 million relates primarily to acquisitions of certain distributors and retail store locations.

During the six months ended April 30, 2007, net cash used in financing activities totaled $8.4 million, compared to $23.5 million used in financing activities in the comparable period of the prior year. Borrowings decreased as we generated increased cash from our operating activities.

Trade Accounts Receivable and Inventories
Our trade accounts receivable decreased 16% to $603.7 million at April 30, 2007 from $721.6 million at October 31, 2006. Accounts receivable in the Americas decreased 15% to $254.6 million at April 30, 2007 from $298.5 million at October 31, 2006, while European accounts receivable decreased 11% to $297.2 million from $335.5 million, and Asia/Pacific accounts receivable decreased 41% to $51.8 million from $87.6 million for those same periods. Compared to April 30, 2006, accounts receivable increased 18% in the Americas, 33% in Europe and 21% in Asia/Pacific. Included in accounts receivable are approximately $40.6 million of value added tax and goods and services tax related to foreign accounts receivable. Such taxes are not reported as net revenues and as such, must be deducted from accounts receivable to accurately compute days sales outstanding. Overall average days sales outstanding increased by approximately 7 days at April 30, 2007 compared to April 30, 2006. This increase is primarily related to our wintersports and golf equipment brands. Our apparel brands days sales outstanding decreased by 2 days at April 30, 2007 compared to the same period of the prior year.

Consolidated inventories increased 9% to $463.3 million at April 30, 2007 from $425.9 million at October 31, 2006. Inventories in the Americas decreased 3% to $188.8 million from $194.1 million at October 31, 2006, while European inventories increased 17% to $205.9 million from $176.3 million, and Asia/Pacific inventories increased 24% to $68.6 million from $55.5 million for those same periods. Compared to April 30, 2006, inventories increased 20% in the Americas, 6% in Europe and 37% in Asia/Pacific. Consolidated average annual inventory turnover remained constant at approximately 3.1 at April 30, 2007 compared to April 30, 2006.

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Commitments
We paid $20.2 million related to the achievement of certain sales and earnings targets to the former owners of DC Shoes, Inc. during the six months ended April 30, 2007.

In connection with our acquisition of Rossignol, we formulated the Rossignol Integration Plan (the “Plan”). The Plan covers the global operations of Rossignol and our existing businesses, and it includes the evaluation of facility relocations, nonstrategic business activities, redundant functions and other related items. As of April 30, 2007, we had recognized $65.3 million of liabilities related to the Plan, including employee relocation and severance costs, moving costs, and other costs related primarily to the consolidation of Rossignol’s administrative headquarters in Europe, the consolidation of Rossignol’s European distribution operations, the consolidation and realignment of certain European manufacturing facilities, and the relocation of our wintersports equipment sales and distribution operations in the United States. As of April 30, 2007, we have paid approximately $30.7 million related to these integration activities. If we have overestimated our integration costs, the excess will reduce goodwill in future periods. Conversely, if we have underestimated these costs, additional liabilities recognized will be recorded in earnings. Costs that are not associated with Rossignol but relate to activities or employees of our existing operations are not significant and are charged to earnings. Certain facilities owned by Rossignol are expected to be sold in connection with the Plan, while others are anticipated to be refinanced through sale-leaseback arrangements. Assets currently held for sale, primarily in France, totaled approximately $19.5 million at April 30, 2007.

Critical Accounting Policies

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

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

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

Inventories
We value inventories at the cost to purchase and/or manufacture the product or the current estimated market value of the inventory, whichever is lower. We regularly review our inventory quantities on hand, and adjust inventory values for excess and obsolete inventory based primarily on estimated forecasts of

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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 would be recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. Impairments, if any, would be recognized in operating earnings. We continually use judgment when applying these impairment rules to determine the timing of the impairment tests, the undiscounted cash flows used to assess impairments, and the fair value of a potentially impaired asset. The reasonableness of our judgment could significantly affect the carrying value of our long-lived assets.

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

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

Stock-Based Compensation Expense
Effective November 1, 2005, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R) “Share-Based Payment” (“SFAS 123(R)”) using the modified prospective transition method, and therefore have not restated prior periods’ results. Under this method we recognize compensation expense for all stock-based payments granted after November 1, 2005 and prior to but not yet vested as of November 1, 2005, in accordance with SFAS 123(R). Under the fair value recognition provisions of SFAS 123(R), we recognize stock-based compensation net of an

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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. Determining the appropriate fair value model and calculating the fair value of stock-based payment awards require the input of highly subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. We use the Black-Scholes option-pricing model to value compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. See Note 3 to the Consolidated Condensed Financial Statements for a further discussion on stock-based compensation.

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

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

New Accounting Pronouncements

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

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Forward-Looking Statements

Certain information included in this Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Words or phrases such as “believe,” “plan,” “anticipate,” “intend,” “expect,” “may,” “will,” “would,” “could,” “should” and similar expressions are intended to identify forward-looking statements. These statements, as well as any other statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characterizations of future events or circumstances, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

We have identified and disclosed important factors, risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in forward-looking statements made by us, or on our behalf, or otherwise affect our business, results of operations and financial condition (see Part I, Item 1A, “Risk Factors” included in our most recent Form 10-K). These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission. Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Although we believe that the assumptions underlying forward-looking statements are reasonable, any of the assumptions could be incorrect, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless required to do so by securities laws.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency

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

European revenues increased only slightly in euros during the six months ended April 30, 2007 compared to the six months ended April 30, 2006. As measured in U.S. dollars and reported in our consolidated statements of income, European revenues increased 9% as a result of a stronger euro versus the U.S. dollar in comparison to the prior year.

Asia/Pacific revenues decreased 2% in Australian dollars during the six months ended April 30, 2007 compared to the six months ended April 30, 2006 As measured in U.S. dollars and reported in our consolidated statements of income, Asia/Pacific revenues increased 4% as a result of a stronger Australian dollar versus the U.S. dollar in comparison to the prior year.

Our foreign currency and interest rate risks are discussed in our Annual Report on Form 10-K for the year ended October 31, 2006 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, 2007, 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, 2007.

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, 2007 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

42

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On February 27, 2007, a class action captioned Burnis L. Simon, Jr. v. Quicksilver, Inc. (sic), Case No. CV07-01326, was filed against us in the United States District Court for the Central District of California. The complaint alleges willful violation of the federal Fair and Accurate Credit Transactions Act (“FACTA”) based upon certain of our retail stores’ alleged electronic printing of receipts on which appeared more than the last five digits of customers’ credit or debit card numbers and/or the expiration of such customers’ credit or debit cards. The complaint seeks statutory damages of not less than $100 and not more than $1,000 for each violation, as well as unspecified punitive damages, attorneys’ fees and a permanent injunction from further engaging in violations of FACTA. The complaint does not allege that any class member has suffered actual damages. Similar complaints have been filed against a number of other retailers. We intend to vigorously defend against the claims asserted. However, the results of any litigation are inherently uncertain and we cannot assure that we will be able to successfully defend against such claims. We are currently unable to assess the extent of damages and/or other relief, if any, that could be awarded to the plaintiff class if it were to prevail.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table details the repurchases of our common stock that we made during the three months ended April 30, 2007:

	Total				Total Number of	Approximate Dollar
	Number of		Average		Shares Purchased as	Value of Shares That
	Shares		Price per		Part of Publicly	May Yet be Purchased
Period	Purchased		Share		Announced Plan	Under the Plan
February 1 – February 28	—			—	—	—
March 1 – March 31	—			—	—	—
April 1 – April 30	40,000	(1)	$	0.01	—	—

⁽¹⁾ In April 2007, we repurchased and cancelled 40,000 unvested shares of restricted common stock from a terminating executive, for a price per share of $0.01 (i.e., the par value of such shares of restricted common stock), in accordance with the terms of our 2006 Restricted Stock Plan.

43

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

Our Annual Meeting of Stockholders was held on March 16, 2007. A total of 108,835,330 shares of our common stock were present or represented by proxy at the meeting, representing more than 87.56% of our shares outstanding as of the January 31, 2007 record date. The matters submitted for a vote and the related results are as follows:

Election of ten 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		92,334,240		16,501,090
William M. Barnum, Jr.		105,499,790		3,335,540
Laurent Boix-Vives		51,972,125		56,863,205
Charles E. Crowe		105,448,869		3,386,461
Charles S. Exon		101,712,091		7,123,239
Michael H. Gray		105,500,234		3,335,096
Timothy M. Harmon		106,903,395		1,931,935
Bernard Mariette		103,601,297		5,234,033
Robert B. McKnight, Jr.		102,191,909		6,643,421
Heidi J. Ueberroth		107,400,075		1,435,255

	Votes		Votes		Votes		Broker
	For		Against		Abstained		Non-Votes
Amendment of the Quiksilver, Inc. 2000 Stock Incentive Plan		84,827,527		7,147,211		764,089		16,096,503
Amendment of the Quiksilver, Inc. 2000 Employee Stock Purchase Plan Plan		90,497,282		1,476,864		764,681		16,096,503

44

Item 6. Exhibits

Exhibits
2.1	English Translation of the Acquisition Agreement, dated April 12, 2005, between the Company and Mr. Laurent Boix-Vives, Ms. Jeannine Boix-Vives, Ms. Christine Simon, Ms. Sylvie Bernard and SDI Société de Services et Développement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on April 18, 2005).
2.2	Stock Purchase Agreement between the Company and the Sellers of DC Shoes, Inc. dated March 8, 2004 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on May 18, 2004).
2.3	First Amendment to the Stock Purchase Agreement between the Company and the Sellers of DC Shoes, Inc. dated May 3, 2004 (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed on May 18, 2004).
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 3.2 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2003).
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	Quiksilver, Inc. 2000 Stock Incentive Plan, as amended and restated on March 16, 2007. (1)
10.2	Quiksilver, Inc. 2000 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on March 16, 2007). (1)
10.3	Employment Agreement between Joseph Scirocco and Quiksilver, Inc. dated April 12, 2007 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 17, 2007). (1)
10.4	Separation Agreement between Steven L. Brink and Quiksilver, Inc. dated April 13, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on April 17, 2007). (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

45

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 11, 2007	/s/ Brad L. Holman
	Brad L. Holman
	Vice President of Accounting and Financial Reporting (Principal Accounting Officer and Authorized Signatory)

46

EX-10.1

                                                                    EXHIBIT 10.1

                                QUIKSILVER, INC.
                          2000 STOCK INCENTIVE PLAN(1)

               (As Amended and Restated through February 6, 2007)

                                   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 shall be 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


                                        2



          (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 purchase price, if any, 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, respectively.

     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.


                                        3



     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 (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.


                                        4



                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

2.1. OPTION TERMS

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

     A. EXERCISE PRICE.

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

          2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the forms specified below:

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

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

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

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

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


                                        5



     C. EFFECT OF TERMINATION OF SERVICE.

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

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

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

               (iii) Should the Optionee's Service be terminated for Misconduct
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 vested 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.

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


                                        6



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

     F. 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 restriction 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 to one or more
Family Members or to a trust established exclusively for Optionee and/or one or
more such Family Members or to Optionee's former spouse, to the extent such
assignment is in connection with Optionee's estate plan or pursuant to a
domestic relations order. 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. 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.


                                        7



     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.

     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


                                        8



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 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.


                                        9



     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.

          (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


                                       10



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 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.


                                       11



     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.

          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-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) 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,


                                       12



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 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


                                       13



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. 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. 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 in the event of the Participant's Involuntary Termination or 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, 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.


                                       14



     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 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


                                       15



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.

          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-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


                                       16



purposes of items (ii), (iii) 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.

          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


                                       17


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. 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 in the event of the Participant's Involuntary Termination or 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 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


                                       18



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 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
admitted, 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.

                                  ARTICLE FIVE

                        DIRECTOR AUTOMATIC GRANT PROGRAM

5.1. TERMS

     This Article Five of the Plan has been amended and restated effective as of
February 6, 2007, subject to stockholder approval at the 2007 Annual Meeting of
Stockholders. All options outstanding under the Automatic Option Grant Program
on February 6, 2007 shall continue in full force and effect in accordance with
the existing terms of the agreements evidencing those options, and no change in
this amended and restated Article Five shall affect those options. In the event
the stockholders do not approve the amended and restated provisions of this
Article Five at the 2007 Annual Meeting of Stockholders, the provisions of the
Automatic Option Grant Program as in effect immediately prior to this amendment
and restatement shall remain in full force and effect.


                                       19



     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 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.


                                       20



     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 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 or
to Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion 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.

          (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


                                       21



               (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 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.


                                       22



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 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.


                                       23



     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 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 amount of the minimum Withholding Taxes required to be
withheld by law (using the minimum statutory withholding rates).

          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 amount of the minimum
Withholding Taxes required to be withheld by law (using the minimum statutory
withholding rates). The shares of Common Stock so delivered shall not be added
to the shares of Common Stock authorized for issuance under the Plan.


                                       24



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 6, 2007 (the
"2007 Restatement"), subject to stockholder approval at the 2007 Annual Meeting
of Stockholders, to (i) increase the number of shares of Common Stock reserved
for issuance under the Plan; (ii) authorize the Restricted Stock and Restricted
Stock Unit Programs; (iii) designate a series of performance criteria that may
be utilized in the future as a condition to the vesting of one or more
restricted stock and restricted stock unit awards under the Plan to qualify the
compensation attributable to those awards as performance-based compensation for
Code Section 162(m) purposes; (iv) eliminate the Salary Investment Option Grant
and Director Fee Option Grant Programs currently authorized under the Plan; (v)
eliminate the financing provisions previously available under the Plan; (vi)
restructure the Director Automatic Grant Program in effect for new and
continuing Eligible Directors to reduce the number of shares of Common Stock
subject to automatic stock option grants and add restricted stock awards to be
made to each new and continuing Eligible Director; and (vii) effect various
technical and clarifying revisions to facilitate Plan administration. Such
revisions shall not become effective unless the stockholders approve the 2007
Restatement at the 2007 Annual Meeting of Stockholders. Should the Corporation's
stockholders not approve the 2007 Restatement at the 2007 Annual Meeting of
Stockholders, then none of the changes and revisions effected to the Plan by the
2007 Restatement shall become effective. The Plan will, however, continue in
effect as it existed immediately prior to February 6, 2007, 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 Automatic Option Grant Program will continue in effect in
accordance with the provisions of that program as they existed immediately prior
to February 6, 2007.


                                       25



     E. The Plan shall terminate upon the earliest to occur of (i) March 31,
2010, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding Awards in connection with a Corporate Transaction. Should the Plan
terminate on March 31, 2010, 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 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 (or over-the-counter market, if applicable) on which
Common Stock is then listed for trading.


                                       26



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.


                                       27



                                    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.


                                       28



     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 listed on any established stock
exchange or over-the-counter market, then the Fair Market Value shall be the
closing selling price per share of Common Stock (or closing bid, if no sales
were reported) as quoted on such exchange or market, determined by the Plan
Administrator to be the primary market for the Common Stock, at the close of
regular hours trading (i.e., before after-hours trading begins) on the date in
question as reported in the Wall Street Journal or such other source as the Plan
Administrator deems reliable. If there is no closing selling price (or closing
bid, if no sales were reported) for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price (or closing bid if
no sales were reported) on the last preceding date for which such quotation
exists.

          (ii) If the Common Stock is at the time not listed on any established
stock exchange or over-the-counter market, 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 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.


                                       29



     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.

     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 expected to
result in death or to be of


                                       30



continuous duration of twelve (12) months or more. 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.

     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.


                                       31



     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 liabilities 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. 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.

     NN. 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. However, if the surrendered
option is an Incentive Option, the Take-Over Price shall not exceed the clause
(i) price per share.

     OO. 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).

     PP. 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.


                                       32



                                (QUIKSILVER LOGO)

                         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: ______ Incentive Stock       Expiration Date: ________
                                 Option
                          ______ 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 B - Plan Summary and Prospectus


                                    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 to one or more Family Members or to a trust established
for the exclusive benefit of Optionee and/or one or more such Family Members or
to Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary 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

                                 (Employee Form)


                                      A-1



option, and this option shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding this option. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and conditions of
this Agreement, including (without limitation) the limited time period during
which this option may, pursuant to Paragraph 5, be exercised following
Optionee's death.

          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.

                                 (Employee Form)


                                      A-2



               (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

                                 (Employee Form)


                                      A-3



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 held by Optionee (or any
other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

                         (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.

                                 (Employee Form)


                                      A-4



               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 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.

                                 (Employee Form)


                                      A-5



          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

                                 (Employee Form)


                                      A-6



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.

                                 (Employee Form)


                                      A-7



                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

          I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 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:
                                        ----------------------------------------

                                 (Employee Form)


                                      A-8



                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. AGREEMENT shall mean this Stock Option Agreement.

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

          C. 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 listed on any established
          stock exchange or over-the-counter market, then the Fair Market Value
          shall be the closing selling price per share of

                                 (Employee Form)


                                      A-9



          Common Stock (or closing bid, if no sales were reported) as quoted on
          such exchange or market, determined by the Plan Administrator to be
          the primary market for the Common Stock, at the close of regular hours
          trading (i.e., before after-hours trading begins) on the date in
          question as reported in the Wall Street Journal or such other source
          as the Plan Administrator deems reliable. If there is no closing
          selling price (or closing bid, if no sales were reported) for the
          Common Stock on the date in question, then the Fair Market Value shall
          be the closing selling price (or closing bid if no sales were
          reported) on the last preceding date for which such quotation exists.

               (ii) If the Common Stock is at the time not listed on any
          established stock exchange or over-the-counter market, 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.

          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.

                                 (Employee Form)


                                      A-10



          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 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.

          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. 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.

                                 (Employee Form)


                                      A-11



                                (QUIKSILVER LOGO)

                         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: [ ] Incentive Stock          Expiration Date: ________
                              Option
                          [ ] 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
  (Installment)    Exercise (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 B - Plan Summary and Prospectus


                                    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 to one or more Family Members or to a trust established
for the exclusive benefit of Optionee and/or one or more such Family Members or
to Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary 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

                             (Selected Officer Form)


                                       A-1



option, and this option shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding this option. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and conditions of
this Agreement, including (without limitation) the limited time period during
which this option may, pursuant to Paragraph 5, be exercised following
Optionee's death.

          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

                             (Selected Officer Form)


                                       A-2



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.

               (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 (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.

                             (Selected Officer Form)


                                       A-3



               (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.

                             (Selected Officer Form)


                                       A-4



          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 held by Optionee (or any
other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

                         (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.

                             (Selected Officer Form)


                                       A-5




          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.

          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

                             (Selected Officer Form)


                                       A-6



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.

                             (Selected Officer Form)


                                       A-7



                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

          I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 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:                 ----------------------------------------

                             (Selected Officer Form)


                                      A-8




                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. AGREEMENT shall mean this Stock Option Agreement.

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

          C. 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 listed on any established
          stock exchange or over-the-counter market, then the Fair Market Value
          shall be the closing selling price per share of

                             (Selected Officer Form)


                                       A-9




          Common Stock (or closing bid, if no sales were reported) as quoted on
          such exchange or market, determined by the Plan Administrator to be
          the primary market for the Common Stock, at the close of regular hours
          trading (i.e., before after-hours trading begins) on the date in
          question as reported in the Wall Street Journal or such other source
          as the Plan Administrator deems reliable. If there is no closing
          selling price (or closing bid, if no sales were reported) for the
          Common Stock on the date in question, then the Fair Market Value shall
          be the closing selling price (or closing bid if no sales were
          reported) on the last preceding date for which such quotation exists.

               (ii) If the Common Stock is at the time not listed on any
          established stock exchange or over-the-counter market, 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.

          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.

                             (Selected Officer Form)


                                       A-10




          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 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.

          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. 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.

                             (Selected Officer Form)


                                       A-11




                               (QUIKSILVER LOGO)

                               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: [ ] Incentive Stock          Expiration Date: ________
                              Option
                          [X] 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 B - Plan Summary and Prospectus


                                    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 to one or more Family Members or to a trust established
for the exclusive benefit of Optionee and/or one or more such Family Members or
to Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary 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

                          (Non-Employee Director Form)


                                       A-1



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 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

                          (Non-Employee Director Form)


                                       A-2



Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

               (c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

               (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.

                          (Non-Employee Director Form)


                                       A-3



          8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

          9. MANNER OF EXERCISING OPTION.

               (a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                    (i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                    (ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

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

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

                         (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.

                          (Non-Employee Director Form)


                                       A-4



               (b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.

               (c) In no event may this option be exercised for any fractional
shares.

          10. COMPLIANCE WITH LAWS AND REGULATIONS.

               (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or 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.

                          (Non-Employee Director Form)


                                       A-5



          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.

                          (Non-Employee Director Form)


                                       A-6



                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

          I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 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:                 ----------------------------------------

                               (Non-Employee Director Form)


                                       A-7



                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. AGREEMENT shall mean this Stock Option Agreement.

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

          C. 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 listed on any established
          stock exchange or over-the-counter market, then the Fair Market Value
          shall be the closing selling price per share of Common Stock (or
          closing bid, if no sales were reported) as quoted on such exchange or
          market, determined by the Plan Administrator to be the primary market
          for the Common Stock, at the close of regular hours trading (i.e.,
          before after-hours trading

                          (Non-Employee Director Form)


                                       A-8



          begins) on the date in question as reported in the Wall Street Journal
          or such other source as the Plan Administrator deems reliable. If
          there is no closing selling price (or closing bid, if no sales were
          reported) for the Common Stock on the date in question, then the Fair
          Market Value shall be the closing selling price (or closing bid if no
          sales were reported) on the last preceding date for which such
          quotation exists.

               (ii) If the Common Stock is at the time not listed on any
          established stock exchange or over-the-counter market, 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.

          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

                          (Non-Employee Director Form)


                                       A-9



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

          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. 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.

          Y. 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.

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

                          (Non-Employee Director Form)


                                      A-10


                                    EXHIBIT B

                           PLAN SUMMARY AND PROSPECTUS

                             (Non-Employee Director)


                                       B-1



                                (QUIKSILVER LOGO)

                     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: [ ] Incentive Stock          Expiration Date: ________
                              Option
                          [X] 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 B - Plan Summary and Prospectus



                                    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 to one or more Family Members or to a trust established
for the exclusive benefit of Optionee and/or one or more such Family Members or
to Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary 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

                                 (Athlete Form)


                                       A-1



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

                                 (Athlete Form)


                                       A-2



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

                                 (Athlete Form)


                                       A-3



          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 held by Optionee (or any
other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

                         (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.

                                 (Athlete Form)


                                       A-4



                    (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.

                                 (Athlete Form)


                                       A-5



          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.

                                 (Athlete Form)


                                       A-6


                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

          I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 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:                 ----------------------------------------

                                 (Athlete Form)


                                      A-7





                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

          A. AGREEMENT shall mean this Stock Option Agreement.

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

          C. 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 listed on any established
          stock exchange or over-the-counter market, then the Fair Market Value
          shall be the closing selling price per share of Common Stock (or
          closing bid, if no sales were reported) as quoted on such exchange or
          market, determined by the Plan

                                 (Athlete Form)


                                      A-8




          Administrator to be the primary market for the Common Stock, at the
          close of regular hours trading (i.e., before after-hours trading
          begins) on the date in question as reported in the Wall Street Journal
          or such other source as the Plan Administrator deems reliable. If
          there is no closing selling price (or closing bid, if no sales were
          reported) for the Common Stock on the date in question, then the Fair
          Market Value shall be the closing selling price (or closing bid if no
          sales were reported) on the last preceding date for which such
          quotation exists.

               (ii) If the Common Stock is at the time not listed on any
          established stock exchange or over-the-counter market, 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.

          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.

                                 (Athlete Form)


                                      A-9







          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 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.

          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. 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.

                                 (Athlete Form)


                                      A-10




                                QUIKSILVER, INC.

                           RESTRICTED STOCK AGREEMENT

          (NON-EMPLOYEE DIRECTOR AUTOMATIC GRANT - ANNUAL MEETING 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 earlier of
(x) the first anniversary of the Grant Date or (y) the day immediately preceding
the date of the first annual meeting of stockholders of the Corporation
following the Grant Date;

               (ii) 1,666 shares of Restricted Stock shall vest on the earlier
of (x) the second anniversary of the Grant Date or (y) the day immediately
preceding the date of the second annual meeting of stockholders of the
Corporation following the Grant Date;

               (iii) 1,667 shares of Restricted Stock shall vest on the earlier
of (x) the third anniversary of the Grant Date or (y) the day immediately
preceding the date of the third annual meeting of stockholders of the
Corporation following the Grant Date.

                  (Non-Employee Director - Annual Meeting Form)


                                       1





          (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 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:

                  (Non-Employee Director - Annual Meeting Form)


                                       2





          "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. 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.

                  (Non-Employee Director - Annual Meeting Form)


                                       3





     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 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.

                  (Non-Employee Director - Annual Meeting Form)


                                       4



     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]

                  (Non-Employee Director - Annual Meeting Form)


                                       5




          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

                  (Non-Employee Director - Annual Meeting Form)


                                       6




                                    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 listed on any established
stock exchange or over-the-counter market, then the Fair Market Value shall be
the closing selling price per share of Common Stock (or closing bid, if no sales
were reported) as quoted on such exchange or market, determined by the Plan
Administrator to be the primary market for the Common Stock, at the close of
regular hours trading (i.e., before after-hours trading begins) on the date in
question as reported in the Wall Street Journal or such other source as the Plan
Administrator deems reliable. If there is no closing selling price (or closing
bid, if no sales were reported) for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price (or closing bid if
no sales were reported) on the last preceding date for which such quotation
exists.

                  (Non-Employee Director - Annual Meeting Form)


                                        7



               (ii) If the Common Stock is at the time not listed on any
established stock exchange or over-the-counter market, 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. "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.

                  (Non-Employee Director - Annual Meeting Form)


                                        8



                                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

                  (Non-Employee Director - Annual Meeting Form)


                                        9



                                   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.)

                  (Non-Employee Director - Annual Meeting Form)


                                       10



                                QUIKSILVER, INC.

                           RESTRICTED STOCK AGREEMENT

          (NON-EMPLOYEE DIRECTOR AUTOMATIC GRANT - 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:

     16. 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").

     17. 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;

               (ii) 1,666 shares of Restricted Stock shall vest on the second
anniversary of the Grant Date;

               (iii) 1,667 shares of Restricted Stock shall vest on the third
anniversary of the Grant Date.

          (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.

                  (Non-Employee Director - Initial Grant Form)


                                        1



          (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.

     18. 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.

     19. 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.

     20. 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.

     21. 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 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:

                  (Non-Employee Director - Initial Grant Form)


                                        2



          "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.

     22. 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. 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.

                  (Non-Employee Director - Initial Grant Form)


                                        3



     23. 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.

     24. 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.

     25. 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 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.

                  (Non-Employee Director - Initial Grant Form)


                                        4



     26. 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.

     27. 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.

     28. 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.

     29. 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.

     30. 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]

                  (Non-Employee Director - Initial Grant Form)


                                        5



          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

                  (Non-Employee Director - Initial Grant Form)


                                        6



                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

          I. "BOARD" shall mean the Corporation's Board of Directors.

          J. "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.

          K. "COMMON STOCK" shall mean the Corporation's common stock.

          L. "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.

          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 listed on any established
stock exchange or over-the-counter market, then the Fair Market Value shall be
the closing selling price per share of Common Stock (or closing bid, if no sales
were reported) as quoted on such exchange or market, determined by the Plan
Administrator to be the primary market for the Common Stock, at the close of
regular hours trading (i.e., before after-hours trading begins) on the date in
question as reported in the Wall Street Journal or such other source as the Plan
Administrator deems reliable. If there is no closing selling price (or closing
bid, if no sales were reported) for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price (or closing bid if
no sales were reported) on the last preceding date for which such quotation
exists.

                  (Non-Employee Director - Initial Grant Form)


                                        7



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

          N. "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.

          O. "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.

          P. "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.

                  (Non-Employee Director - Initial Grant Form)


                                        8



                                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

                  (Non-Employee Director - Initial Grant Form)


                                        9



                                   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.)

                  (Non-Employee Director - Initial Grant Form)


                                       10

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 11, 2007	/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 11, 2007	/s/ Joseph Scirocco
	Joseph Scirocco
	Executive Vice President and 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, 2007 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 11, 2007

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, 2007 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
Executive Vice President and Chief Financial Officer
June 11, 2007