<PAGE>

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 2004.

                                                           REGISTRATION NO. 333-

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------

<Table>
<S>                                      <C>                                      <C>
                                                                                   GOLFSMITH INTERNATIONAL HOLDINGS, INC.
     GOLFSMITH INTERNATIONAL, INC.                                                      As Registrant of Guarantees
    As Issuer and Registrant of Debt
               Securities
                DELAWARE                                   5940                                   DELAWARE
    (State or Other Jurisdiction of            (Primary Standard Industrial           (State or Other Jurisdiction of
     Incorporation or Organization)       Classification Code Number for each of       Incorporation or Organization)
                                                     the Registrants)
               22-1957337                                                                        16-1634897
  (I.R.S. Employer Identification No.)                                              (I.R.S. Employer Identification No.)
</Table>

               SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO
           (Exact name of registrants as specified in their charters)
                             ---------------------
                                 11000 N. IH-35
                            AUSTIN, TEXAS 78753-3195
                                 (512) 837-8810
  (Address, including zip code, and telephone number, including area code, of
                   registrants' principal executive offices)
                             ---------------------
                               JAMES D. THOMPSON
                     CHIEF EXECUTIVE OFFICER AND PRESIDENT
                         GOLFSMITH INTERNATIONAL, INC.
                                 11000 N. IH35
                            AUSTIN, TEXAS 78753-3195
                                 (512) 837-8810
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                WITH A COPY TO:

                                  TRACY KIMMEL
                                MARK E. THOMPSON
                              KING & SPALDING LLP
                          1185 AVENUE OF THE AMERICAS
                            NEW YORK, NEW YORK 10036
                                 (212) 556-2100
                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:  As soon as
practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
---------

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
---------

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
---------

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                     PROPOSED MAXIMUM     PROPOSED MAXIMUM
           TITLE OF EACH CLASS OF                 AMOUNT TO BE        OFFERING PRICE     AGGREGATE OFFERING       AMOUNT OF
         SECURITIES TO BE REGISTERED               REGISTERED          PER UNIT(1)            PRICE(1)         REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                  <C>                  <C>                  <C>
8.375% Senior Secured Notes Due 2009               $7,250,000              100%              $7,250,000              $919
---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 8.375% Senior Secured Notes              --                   --                   --                  (2)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</Table>

(1) Estimated solely for the purpose of computing the registration fee pursuant
    to Rule 457(o) under the Securities Act of 1933.

(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no additional
    registration fee is payable with respect to the guarantees.

    THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>

                                                                      SCHEDULE A

<Table>
<Caption>
                                                        STATE OR OTHER JURISDICTION OF    I.R.S. EMPLOYER
SUBSIDIARY GUARANTORS                                   INCORPORATION OR ORGANIZATION    IDENTIFICATION NO.
---------------------                                   ------------------------------   ------------------
<S>                                                     <C>                              <C>
Golfsmith GP Holdings, Inc............................  Delaware                         74-2882421
Golfsmith Holdings, L.P. .............................  Delaware                         74-2882420
Golfsmith GP, L.L.C. .................................  Delaware                         74-2882412
Golfsmith Delaware, L.L.C. ...........................  Delaware                         74-2882419
Golfsmith Canada, L.L.C. .............................  Delaware                         74-2882407
Golfsmith Europe, L.L.C. .............................  Delaware                         74-2882408
Golfsmith USA, L.L.C. ................................  Delaware                         74-2882405
Golfsmith NU, L.L.C. .................................  Delaware                         74-2882404
Golfsmith Licensing, L.L.C. ..........................  Delaware                         74-3075499
Golfsmith International, L.P. ........................  Delaware                         74-2864257
Don Sherwood Golf Shop................................  California                       94-1746387
</Table>
<PAGE>

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                   SUBJECT TO COMPLETION, DATED JULY 7, 2004.
PROSPECTUS

                                   $7,250,000

                         GOLFSMITH INTERNATIONAL, INC.
                      8.375% SENIOR SECURED NOTES DUE 2009

    This prospectus relates to the offer and sale by Golfsmith International
Holdings, Inc., our parent company, of $7,250,000 aggregate principal amount at
maturity of our 8.375% Senior Secured Notes Due 2009. Golfsmith International
Holdings, Inc., or Holdings, intends to acquire an aggregate of $7,250,000
principal amount at maturity of notes from its majority stockholder in exchange
for shares of its common stock and cash in a private transaction. Holdings has
indicated that it intends to contribute the net proceeds of its sale of the
notes to us.

TERMS OF THE NOTES

- The notes were issued on October 15, 2002, in an aggregate principal amount at
  maturity of $93,750,000.

- We pay interest on the notes at an annual rate of 8.375%. Interest on the
  notes is payable on March 1 and September 1 of each year.

- The notes are our senior secured obligations and rank equally with all of our
  other senior indebtedness. As of April 3, 2004, we had $1.1 million of senior
  indebtedness outstanding in addition to the notes.

- The notes will mature on October 15, 2009.

- Our senior credit facility and the related guarantees are secured by a first
  priority lien on substantially all of our assets, the assets of our parent
  (including our common stock) and the assets of our subsidiaries, other than
  real property, fixtures, equipment and proceeds thereof. The notes and the
  related guarantees are secured by a first priority lien on real property,
  fixtures, equipment and the proceeds thereof and a second priority lien on
  substantially all other assets.

- We may redeem some or all of the notes at any time prior to October 15, 2006
  at a make-whole redemption price. On or after October 15, 2006, we may, at our
  option, redeem some or all of the notes at a redemption price that will
  decrease ratably from 106.50% of accreted value to 100.00% of accreted value
  on October 15, 2008, in all cases plus accrued and unpaid interest. Prior to
  October 15, 2005, we may redeem on one or more occasions notes, if any
  outstanding, in an amount equal to up to 35% in the aggregate of the principal
  amount at maturity of the notes originally issued at a redemption price equal
  to 113% of accreted value plus accrued and unpaid interest with the proceeds
  of certain equity offerings.

- On October 15, 2007 and October 15, 2008, we must make a partial pro rata
  redemption of 20% and 10% (which percentages are subject to reduction as
  described in this prospectus), respectively, of the principal amount at
  maturity of each note, plus accrued and unpaid interest to the redemption
  date. These redemption requirements may be reduced by the aggregate principal
  amount at maturity of any notes we have previously repurchased pursuant to
  excess cash flow offers.

- Within 120 days after the end of each fiscal year, we must offer to repurchase
  a portion of the notes at 100% of their accreted value with 50% of our excess
  cash flow, as defined in the indenture governing the notes.

- If we experience a change of control, we must give holders of the notes the
  opportunity to sell to us their notes at 101% of their accreted value plus
  accrued and unpaid interest.

- If we sell assets, we may have to offer to use the proceeds to repurchase
  notes at 100% of their accreted value plus accrued and unpaid interest.

- All of our existing domestic restricted subsidiaries and Holdings have fully
  and unconditionally guaranteed, and all of our future domestic restricted
  subsidiaries will fully and unconditionally guarantee, the notes, jointly and
  severally, on a senior secured basis.

- The notes are not listed and we do not intend to list the notes on any
  securities exchange or to include the notes in any automated quotation system.
  Currently, there is no public market for the notes.

- The notes will be ready for delivery in book-entry form only through The
  Depository Trust Company on or about          , 2004.

     SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF THE FACTORS
THAT YOU SHOULD CONSIDER BEFORE BUYING THE NOTES.

    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                   PRICE:   % OF PRINCIPAL AMOUNT AT MATURITY

                The date of this prospectus is           , 2004.
<PAGE>

                               TABLE OF CONTENTS

<Table>
<S>                                                           <C>
Market Share, Ranking and Other Industry Data...............    i
Summary.....................................................    1
Risk Factors................................................   10
Forward-Looking Statements..................................   25
Use of Proceeds.............................................   26
Capitalization..............................................   27
Selected Consolidated Financial Data........................   28
Management's Discussion and Analysis of Financial Condition    30
  and Results of Operations.................................
Business....................................................   45
Management..................................................   52
Security Ownership of Certain Beneficial Owners and            59
  Management................................................
Related Party Transactions..................................   61
Selling Noteholder..........................................   64
Description of Senior Credit Facility.......................   65
Description of the Notes....................................   69
Material United States Federal Income Tax Consequences......  113
Plan of Distribution........................................  118
Where You Can Find More Information.........................  119
Legal Matters...............................................  119
Experts.....................................................  119
Index to Consolidated Financial Statements..................  F-1
</Table>

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER WE NOR ANY OF THE GUARANTORS HAVE AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH ADDITIONAL OR DIFFERENT INFORMATION. HOLDINGS IS OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, NOTES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR NOTES.

                             ---------------------

     Except as the context otherwise requires, we have assumed in this
prospectus that Golfsmith International Holdings, Inc., or Holdings, will issue
1,526,109 shares of its common stock to its majority stockholder, Atlantic
Equity Partners III, L.P., in exchange for $7,250,000 aggregate principal amount
at maturity of notes in the private transaction described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder,"
which assumes that Holdings will sell the notes offered by this prospectus for
an offering price of 83.8478% of the principal amount at maturity (the book
value of such notes as of July 2, 2004). If the actual sale price of the notes
is greater than the book value of the notes at the time of sale, then Holdings
will make a cash payment to Atlantic Equity Partners III in addition to issuing
shares of its common stock, as described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder."

                 MARKET SHARE, RANKING AND OTHER INDUSTRY DATA

     The market share, ranking and other industry data contained in this
prospectus are based either on our estimates or derived from industry data or
third-party sources and, in each case, we believe these estimates are reasonable
as of the date of this prospectus. However, market share data is subject to
change and cannot always be verified due to limits on the availability and
reliability of independent sources, the voluntary nature of the data gathering
process and other limitations and uncertainties inherent in any statistical
survey of market shares. In addition, purchasing patterns and consumer
preferences can and do change. As a result, you should be aware that market
share, ranking and other similar data set forth herein, and estimates and
beliefs based on such data, may not be accurate.

                                        i
<PAGE>

                                    SUMMARY

     The following summary is qualified in its entirety by the more detailed
information included elsewhere in this prospectus. Because this is a summary, it
may not contain all of the information that may be important to you. You should
read this prospectus carefully before making an investment decision. On October
15, 2002, we were acquired by a subsidiary of Atlantic Equity Partners III, L.P.
in a merger transaction described below under "-- The Merger." Unless the
context requires otherwise, references in this prospectus to (1) "Golfsmith,"
"our company," "we," "our," "us" and similar expressions refer to Golfsmith
International, Inc., a Delaware corporation, and its consolidated subsidiaries
and (2) "Holdings" refers to Golfsmith International Holdings, Inc., a Delaware
corporation, which became our parent company upon completion of the merger and
is the selling noteholder. As a result of applying the required purchase
accounting rules, the financial statements of Golfsmith International Holdings,
Inc. are significantly affected. The application of purchase accounting rules
results in different accounting bases and hence financial information for the
periods beginning on October 16, 2002. The term "successor" refers to Golfsmith
International Holdings, Inc. and all of its subsidiaries, including Golfsmith
International, Inc. following the acquisition on October 15, 2002. The term
"predecessor" refers to Golfsmith International, Inc. prior to being acquired by
Golfsmith International Holdings, Inc.

     References to "fiscal 2002" refer to the combined financial results of our
predecessor from December 30, 2001 through October 15, 2002 and of Holdings from
October 16, 2002 through December 28, 2002. As used herein, references to any
other "fiscal" year of our company refer to the fiscal year of us or our
predecessor ended or ending on the Saturday closest to December 31 of such year.

                                  THE COMPANY

     Carl Paul founded our company in 1967 when he began providing clubmakers
with the components necessary to offer custom-made golf clubs at a time when
most golfers could only purchase ready-made, off-the-shelf equipment. In order
to capitalize on this market opportunity, we helped pioneer the golf club
components industry by designing and selling a line of components and supplies
(principally golf clubheads, shafts, grips and tools) for custom clubmakers
through our clubmakers' catalog. Over the years we have complemented and
expanded our operations by opening our first retail outlet in 1972, mailing our
first general golf product catalog in 1975, opening our first superstore in
1992, opening the Harvey Penick Golf Academy in 1993 and launching golfsmith.com
in 1997.

     We are a multi-channel retailer of golf equipment, merchandise and training
curriculum for consumers and golf clubmaking businesses. We offer equipment from
leading manufacturers, including Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). In addition, we offer our own
proprietary brands, including Golfsmith(R), Lynx(R), Snake Eyes(R), Killer
Bee(R) and Zevo(R). We market our products through 42 superstores as well as
through our direct-to-consumer channel, which includes our clubmaking and
accessory catalogs and our Internet site. We also operate the Harvey Penick Golf
Academy, an instructional school incorporating the techniques of the well-known
golf instructor, the late Harvey Penick.

     We offer a complete line of golf equipment and related accessories through
multiple distribution channels:

          Superstores.  We opened our first golf superstore in 1992 and
     currently operate 42 superstores. These stores range in size from
     approximately 8,000 to 30,000 square feet. Our superstores feature a wide
     selection of golf equipment from major name brand manufacturers.

          Direct-to-Consumer.  Our principal publications are the Golfsmith
     Accessory Catalog and the Golfsmith Clubmaking Catalog. We also sell our
     products through our website,www.golfsmith.com. Through our
     direct-to-consumer distribution channels, we provide customers our offering
     of products, including equipment, apparel, accessories and clubmaking
     components and tools.

                                        1
<PAGE>

          Harvey Penick Academy.  In 1993, we partnered with Austin native and
     well-known golf instructor, the late Harvey Penick, to form the Harvey
     Penick Golf Academy. The academy has attracted over 17,000 students since
     its inception. We believe the academy helps contribute to sales at our
     adjacent Austin superstore.

          International.  We work with a group of international distributors to
     offer golf club components and equipment to clubmakers and golfers in
     selected regions outside the United States. In the United Kingdom, we sell
     our proprietary branded equipment through a commissioned sales force
     directly to retailers. Throughout most of Europe and parts of Asia and
     other parts of the world, we sell our products through a network of
     distributors.

THE MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., or Holdings, merged with and into
Golfsmith International, Inc., or Golfsmith. Golfsmith is the surviving
corporation and is a wholly owned subsidiary of Holdings as a result of the
merger. The aggregate purchase price for the merger was approximately $121.0
million. The components of this purchase price included the payment to our
stockholders prior to the merger of $101.5 million in cash and $12.8 million of
our equity securities, and $6.7 million in fees and expenses incurred in
connection with the merger. The cash portion of the purchase price for the
merger was funded out of:

     - the net proceeds from the offering of our 8.375% senior secured notes due
       2009, of approximately $67.9 million;

     - the cash contribution of $50.0 million described below; and

     - existing cash.

     The merger agreement required Golfsmith to repay and terminate all then
existing indebtedness and also required Holdings to put in place a new revolving
credit facility as a condition to the closing of the merger. For more
information about the terms of the merger generally, you should read the
description of the merger agreement in "Related Party Transactions."

     Holdings was formed by Atlantic Equity Partners III, L.P., a limited
partnership operated by First Atlantic Capital Ltd. First Atlantic is a private
equity investment firm. Holdings was formed solely for the purpose of completing
the merger and had no operations, assets or properties prior to the merger. In
connection with the merger, Atlantic Equity Partners III contributed $50.0
million in return for approximately 79.7% of the common stock of Holdings on a
fully diluted basis. In addition, some of our stockholders prior to the merger,
including members of our current management, received shares of common stock of
Holdings and restricted common stock units, which entitle the holders thereof to
shares of common stock of Holdings. As of April 3, 2004, these stockholders
owned in the aggregate 17.3% of the common stock of Holdings on a fully diluted
basis, including outstanding stock options. In connection with the merger, we
entered into a management consulting agreement with First Atlantic, and all of
Holdings' stockholders, including members of our management, entered into a
stockholders agreement and certain other contractual arrangements with First
Atlantic as described in "Related Party Transactions."

                             ---------------------

     We were incorporated in Texas in 1973 and reincorporated in Delaware in
1998. Our principal offices are located at 11000 N. IH-35, Austin, Texas
78753-3195. Our telephone number is (512) 837-8810. Our website address is
www.golfsmith.com. Information on our website does not constitute part of this
prospectus.

                                        2
<PAGE>

                                   THE NOTES

     The following summary is not intended to be complete. For a more complete
description of the terms of the notes, see "Description of the Notes" in this
prospectus.

Issuer........................   Golfsmith International, Inc.

Securities Offered............   $7,250,000 aggregate principal amount at
                                 maturity of our 8.375% senior secured notes due
                                 2009.

Issue Price...................   The notes were issued at an issue price of $800
                                 per note. Each note has a principal amount at
                                 maturity of $1,000.

Maturity Date.................   October 15, 2009.

Interest Rate and Payment
Dates.........................   We pay interest on the notes at a rate equal to
                                 8.375% per year. Interest on the notes is
                                 payable semi-annually in cash in arrears on
                                 March 1 and September 1 of each year.

Original Issue Discount.......   The notes were issued with original issue
                                 discount (that is, the difference between the
                                 stated principal amount at maturity and the
                                 issue price of the notes) for federal income
                                 tax purposes. Thus, original issue discount
                                 accrues from the issue date and must be
                                 included as interest income periodically in a
                                 holder's gross income for federal income tax
                                 purposes in advance of receipt of the cash
                                 payments to which the income is attributable.
                                 See "Material United States Federal Income Tax
                                 Consequences."

HYDO Payments.................   On each interest payment date beginning March
                                 1, 2008, in addition to accrued interest due on
                                 that date, we will make a payment, which we
                                 call a HYDO payment, on each note in an amount
                                 equal to the excess, if any, of:

                                   - the total amount of interest and original
                                     issue discount accrued on the note through
                                     that date, over

                                   - the sum of:

                                      - all amounts of interest and original
                                        issue discount paid in cash with respect
                                        to such note through and including that
                                        date;

                                      - all HYDO payments previously made by us;
                                        and

                                      - the annual "yield to maturity"
                                        applicable for purposes of the accrual
                                        of original issue discount multiplied by
                                        the original principal amount at
                                        maturity of the note.

                                 Each HYDO payment will reduce the outstanding
                                 principal amount at maturity of the applicable
                                 note. As a result of making these HYDO
                                 payments, we will not be subject to special
                                 rules (applicable to some high-yield debt
                                 obligations with significant amounts of unpaid
                                 original issue discount after five years from
                                 their issue date), that would otherwise limit
                                 the amount of interest expense we could deduct
                                 on the notes for U.S. federal income tax
                                 purposes.

Guarantees....................   Holdings, our parent company, has guaranteed
                                 the notes on a senior secured basis. In
                                 addition, all of our domestic restricted

                                        3
<PAGE>

                                 subsidiaries have guaranteed, and all of our
                                 future domestic restricted subsidiaries will
                                 guarantee, the notes on a senior secured basis.
                                 If we are unable to make payments on the notes
                                 when they are due, Holdings and our subsidiary
                                 guarantors will be obligated to make them
                                 instead.

Security Interest.............   The notes are secured by a first priority lien
                                 on our real property, fixtures, equipment and
                                 proceeds thereof and a second priority lien on
                                 substantially all of our other assets
                                 (including stock of subsidiaries), and each
                                 guarantee is secured by a first priority lien
                                 on the real property, fixtures, equipment and
                                 proceeds thereof of the relevant guarantor and
                                 a second priority lien on substantially all of
                                 the other assets (including stock of
                                 subsidiaries) of such guarantor. Our senior
                                 credit facility is secured by a first priority
                                 lien on substantially all of the assets of the
                                 borrowers and the guarantors under the senior
                                 credit facility, including stock of their
                                 respective subsidiaries (including all of our
                                 stock) but excluding real property, fixtures,
                                 equipment and proceeds thereof.

Ranking.......................   The notes are our senior secured obligations
                                 and rank equal in right of payment with all of
                                 our existing and future senior indebtedness.
                                 The guarantees are the senior secured
                                 obligations of Holdings and the subsidiary
                                 guarantors and rank equal in right of payment
                                 with all of their respective existing and
                                 future senior indebtedness. As of April 3,
                                 2004, we had $1.1 million of senior
                                 indebtedness outstanding in addition to the
                                 notes. In addition, we had $10.9 million of
                                 borrowing availability (after giving effect to
                                 required reserves of $500,000), subject to
                                 customary conditions, under our senior credit
                                 facility, which, if borrowed, would be senior
                                 indebtedness. In the event of a bankruptcy, the
                                 rights of noteholders to receive any
                                 distribution of assets or the proceeds
                                 therefrom from us, Holdings or the subsidiary
                                 guarantors with respect to the collateral on
                                 which the notes have a second priority lien
                                 will be subject to the prior claims of the
                                 lenders under our senior credit facility.

Optional Make-Whole
Redemption....................   We may, at our option, redeem some or all of
                                 the notes at any time prior to October 15, 2006
                                 by paying the greater of (1) 100% of the
                                 accreted value of the notes and (2) the sum of
                                 the present values of 106.5% of the accreted
                                 value of the notes plus scheduled interest
                                 payments on the notes through and including
                                 October 15, 2006, discounted to the redemption
                                 date on a semi-annual basis at the adjusted
                                 treasury rate plus 50 basis points, plus
                                 accrued and unpaid interest to the redemption
                                 date. In the event that we redeem less than all
                                 of the notes, the trustee will select the notes
                                 for redemption on a pro rata basis or another
                                 method it reasonably determines is fair and
                                 appropriate.

Optional Redemption...........   On or after October 15, 2006, we may redeem all
                                 or a portion of the notes at our option at the
                                 redemption prices described under "Description
                                 of the Notes -- Redemption -- Optional
                                 Redemption On or After October 15, 2006." In
                                 the event that we redeem less than all of the
                                 notes, the trustee will select the notes

                                        4
<PAGE>

                                 for redemption on a pro rata basis or another
                                 method it reasonably determines is fair and
                                 appropriate.

Equity Offering Optional
Redemption....................   Prior to October 15, 2005, we may redeem on one
                                 or more occasions notes in an amount equal to
                                 up to 35% in the aggregate of the principal
                                 amount at maturity of the notes originally
                                 issued at 113% of the accreted value of the
                                 notes being redeemed plus accrued and unpaid
                                 interest, if any, to the redemption date with
                                 the net cash proceeds realized by us from any
                                 equity offering. In the event that we redeem
                                 less than all of the notes, we will redeem such
                                 notes on a pro rata basis.

Mandatory Redemption..........   We must make a partial pro rata redemption of a
                                 portion of the original principal amount at
                                 maturity of each note according to the
                                 following schedule:

<Table>
<Caption>
                                                                                      PERCENTAGE OF
                                          DATE                                      PRINCIPAL REDEEMED
                                          ----                                      ------------------
                                          <S>                                       <C>
                                          October 15, 2007........................          20%
                                          October 15, 2008........................          10%
</Table>

                                 In addition, we must pay accrued and unpaid
                                 interest on the principal amount of notes
                                 redeemed to the redemption date.

                                 If we issue additional notes after the issue
                                 date, these percentages will be reduced by
                                 multiplying the relevant percentage by a
                                 fraction, the numerator of which is the
                                 principal amount at maturity of notes issued on
                                 the issue date and the denominator of which is
                                 the sum of the principal amount at maturity of
                                 such notes and the principal amount at maturity
                                 of any additional notes issued under the
                                 indenture.

                                 However, the principal amount at maturity of
                                 notes we must redeem on the dates set forth
                                 above will be reduced by the aggregate
                                 principal amount at maturity of notes we have
                                 previously repurchased pursuant to the excess
                                 cash flow offers, as described below.

Excess Cash Flow Offer........   Within 120 days after the end of each fiscal
                                 year, we must offer to repurchase the maximum
                                 principal amount of notes that may be purchased
                                 with 50% of our excess cash flow from our
                                 previous fiscal year at a purchase price of
                                 100% of the accreted value of the notes to be
                                 purchased. We will repurchase notes pursuant to
                                 any excess cash flow offer on a pro rata basis,
                                 or by another method if required by law. The
                                 indenture governing the notes defines excess
                                 cash flow as consolidated net income plus
                                 interest, amortization and depreciation
                                 expense, income taxes, and net non-cash
                                 charges, less certain capital expenditures,
                                 increases in working capital, cash interest
                                 expense and income taxes.

Change of Control Offer.......   If we experience a change of control, each
                                 holder of notes will have the right to sell us
                                 all or a portion of its notes at 101% of the
                                 accreted value of the notes, plus accrued and
                                 unpaid interest, if any, to the date of
                                 purchase.

Asset Sale Offers.............   If we do not reinvest the proceeds from the
                                 sale of assets in our business, we may have to
                                 use the proceeds to offer to repurchase notes
                                 at 100% of the accreted value of the notes,
                                 plus accrued and unpaid interest, if any, to
                                 the date of purchase.

                                        5
<PAGE>

Restrictive Covenants.........   The indenture governing the notes contains
                                 covenants that, among other things, limit our
                                 ability to:

                                   - incur additional indebtedness or issue
                                     disqualified capital stock;

                                   - pay dividends or make other restricted
                                     payments;

                                   - issue capital stock of certain
                                     subsidiaries;

                                   - make capital expenditures;

                                   - enter into transactions with affiliates;

                                   - enter into sale/leaseback transactions;

                                   - create or incur liens;

                                   - transfer or sell assets;

                                   - incur dividend or other payment
                                     restrictions affecting certain
                                     subsidiaries; and

                                   - consummate a merger, consolidation or sale
                                     of all or substantially all of our assets.

                                 These covenants are subject to a number of
                                 important exceptions described below in
                                 "Description of the Notes -- Certain
                                 Covenants."

Events of Default.............   The indenture governing the notes contains the
                                 following as events of default, which could
                                 result in the accreted value and all accrued
                                 and unpaid interest on the notes becoming
                                 immediately due and payable:

                                   - failure to pay premium, if any, interest or
                                     any other amount (other than principal) on
                                     any notes for a period of 30 days or more
                                     after it becomes due and payable;

                                   - failure to pay the principal on any notes
                                     when it becomes due and payable;

                                   - a default upon certain covenants that
                                     continues for a specified period;

                                   - a default under any other agreement in the
                                     indenture or any agreement contained in the
                                     documents relating to the collateral,
                                     including the security agreement described
                                     below, that continues for a specified
                                     period;

                                   - our or any guarantor's failure to pay any
                                     indebtedness when due, if the amount of
                                     such indebtedness is $5.0 million or more
                                     at any one time;

                                   - judgments in excess of $5.0 million are
                                     rendered against us or any of our
                                     restricted subsidiaries and remain unpaid
                                     for a specified period;

                                   - certain events of bankruptcy affecting us
                                     or certain of our subsidiaries;

                                   - any agreement relating to the collateral
                                     ceases to be effective;

                                        6
<PAGE>

                                   - we or any of our subsidiaries contest any
                                     agreement relating to the collateral; and

                                   - certain guarantees cease to be in effect.

                                 You should read the description of these events
                                 of default below under "Description of the
                                 Notes -- Events of Default" for a complete
                                 explanation of their terms and exceptions.

                                        7
<PAGE>

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The following summary consolidated financial data as of and for fiscal
1999, 2000, 2001 and for the period from December 30, 2001 through October 15,
2002 have been derived from the audited consolidated financial statements of
Golfsmith International, Inc., and for the period from October 16, 2002 through
December 28, 2002 and as of and for fiscal 2003 have been derived from the
audited consolidated financial statements of Golfsmith International Holdings,
Inc., all periods of which have been audited by Ernst & Young LLP. Golfsmith
International Holdings, Inc. was formed on September 4, 2002 and became the
parent company of Golfsmith International, Inc. on October 15, 2002 as a result
of the merger. Holdings is a holding company and had no material assets or
operations prior to acquiring all of the capital stock of Golfsmith
International, Inc. in the merger. The summary consolidated financial data of
Holdings as of and for the three months ended March 29, 2003 and April 3, 2004
have been derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and, in our opinion, reflect all adjustments,
consisting of normal accruals, necessary for a fair presentation of the data for
those periods. Our results of operations for the three months ended April 3,
2004 may not be indicative of results that may be expected for the full year.
You should read the information set forth below in conjunction with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.

<Table>
<Caption>
                                                 PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,
                                                                     2001           2002                      THREE MONTHS ENDED
                                         FISCAL YEAR               THROUGH        THROUGH                    --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
<S>                             <C>        <C>        <C>        <C>            <C>            <C>           <C>         <C>
RESULTS OF OPERATIONS:
Net revenues..................  $267,946   $232,080   $221,439     $180,315       $ 37,831      $257,745     $ 45,830    $ 65,782
Cost of products sold.........   175,600    153,630    143,118      117,206         25,147       171,083       30,972      42,807
                                --------   --------   --------     --------       --------      --------     --------    --------
Gross profit..................    92,346     78,450     78,321       63,109         12,684        86,662       14,858      22,975
Selling, general and
  administrative..............    78,360     76,352     64,081       48,308         13,581        73,400       14,259      20,168
Store pre-opening/closing
  expenses....................       493      1,592         --          122             93           600           --         329
Amortization of deferred
  compensation(1).............        --         --        458        6,033             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Total operating expenses......    78,853     77,944     64,539       54,463         13,674        74,000       14,259      20,497
                                --------   --------   --------     --------       --------      --------     --------    --------
Operating income..............    13,493        506     13,782        8,646           (990)       12,662          599       2,478
Interest expense..............    (5,775)    (6,905)    (6,825)      (5,206)        (2,210)      (11,157)      (2,639)     (2,795)
Interest income...............        22         82        597          331              7            40            8           1
Other income, net.............       275        449      1,031        2,365             14           164            3         (11)
Minority interest.............      (583)       454       (581)        (844)            --            --           --          --
Loss on debt
  extinguishment(1)...........        --         --         --       (8,047)            --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) before income
  tax.........................     7,432     (5,414)     8,004       (2,755)        (3,179)        1,709       (2,029)       (327)
Income tax benefit
  (expense)...................      (289)       190       (251)        (709)           633          (645)         811         124
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) from continued
  operations..................     7,143     (5,224)     7,753       (3,464)        (2,546)        1,064       (1,217)       (203)
Income (loss) from
  discontinued operations.....        52       (380)      (590)        (230)           (40)           --           --          --
Income (loss) before
  extraordinary items.........     7,195     (5,604)     7,163       (3,694)        (2,586)        1,064       (1,217)       (203)
Extraordinary items(1)........        --         --         --        4,122             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Net income (loss).............  $  7,195   $ (5,604)  $  7,163     $    428       $ (2,586)     $  1,064     $ (1,217)   $   (203)
                                ========   ========   ========     ========       ========      ========     ========    ========
</Table>

                                        8
<PAGE>

<Table>
<Caption>
                                                 PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,
                                                                     2001           2002                      THREE MONTHS ENDED
                                         FISCAL YEAR               THROUGH        THROUGH                    --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
<S>                             <C>        <C>        <C>        <C>            <C>            <C>           <C>         <C>
OTHER FINANCIAL DATA:
Depreciation and
  amortization(2).............  $  5,601   $  9,118   $  6,717     $  4,808       $  1,349      $  5,228     $  1,311    $  1,335
Capital expenditures(3).......     9,740      2,107      1,345        2,086          1,127         5,759          409       1,816
Ratio of earnings to fixed
  charges(4)..................       1.6x       0.6x       1.6x         0.7x           0.1x          1.1x         0.5x        0.9x

BALANCE SHEET DATA (AT PERIOD
  END):
Cash and cash equivalents.....  $  3,023   $ 11,149   $ 39,550     $  3,788       $ 11,412      $  2,928     $  2,775    $  4,177
Total assets..................   105,882    106,902    111,500      153,135        160,011       179,327      162,701     196,432
Long-term debt................    23,540     37,145     33,720       75,000         75,380        77,488       77,954      78,029
Total stockholders' equity....    33,004     24,921     32,519       56,011         53,473        58,976       52,246      58,811
</Table>

---------------

(1) For the period from December 31, 2001 through October 15, 2002, please refer
    to note 5 and note 14 in our consolidated financial statements included in
    this prospectus for a discussion of the extraordinary items, loss on debt
    extinguishment and amortization of deferred compensation.

(2) Excludes the amortization of the debt discount and deferred charges
    associated with our 12% senior subordinated notes which were outstanding
    prior to the merger, the deferred charges associated with our credit
    facility in effect prior to the merger, the amortization of the debt
    discount and deferred charges associated with our 8.375% senior secured
    notes and deferred charges associated with our senior credit facility in
    effect subsequent to the merger.

(3) Capital expenditures consist of total capital expenditures, including
    capital costs associated with opening new stores.

(4) The ratio of earnings to fixed charges is calculated by dividing the fixed
    charges into net income before taxes plus fixed charges. Fixed charges
    consist of interest expense, amortization of deferred debt issuance costs
    and the estimated interest component of rent expense.

                                        9
<PAGE>

                                  RISK FACTORS

     You should carefully consider the following factors and other information
included in this prospectus before deciding to buy any of the notes.

RISK FACTORS RELATING TO THE NOTES

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.

     We have a significant amount of indebtedness and we are highly leveraged.
Our total debt outstanding as of April 3, 2004 was $79.1 million (consisting of
the accreted principal amount of the notes and borrowings outstanding under our
senior credit facility), and we had the ability, subject to customary
conditions, to incur $10.9 million of additional debt under our senior credit
facility (after giving effect to required reserves of $500,000). As of April 3,
2004 we had borrowed $1.1 million under our senior credit facility. Our:

     - ratio of total debt to total capitalization was 57% at April 3, 2004;

     - ratio of earnings to fixed charges for the three months ended April 3,
       2004 was 0.9x.

     Our substantial amount of indebtedness could have important consequences
for you. For example, it could:

     - make it more difficult for us to satisfy our obligations with respect to
       the notes upon realization of the common collateral in any bankruptcy
       proceeding because all amounts so released would be required to be used
       to repay borrowings under our senior credit facility;

     - limit our ability to obtain additional financing, if needed, for working
       capital, capital expenditures, acquisitions, and general corporate
       purposes;

     - increase our vulnerability to adverse economic and industry conditions;

     - require us to dedicate a substantial portion of our cash flow from
       operations to payments on our indebtedness, thereby reducing funds
       available for working capital, capital expenditures, acquisitions and
       other purposes;

     - limit our flexibility in planning for, or reacting to, changes in our
       business and/or our industry; and

     - place us at a competitive disadvantage compared to our competitors that
       have less indebtedness.

     The terms of the indenture allow us to incur additional indebtedness,
subject to certain limitations. Any such additional debt could increase the
risks associated with our substantial leverage.

THE INDENTURE AND OUR SENIOR CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING AND
FINANCIAL RESTRICTIONS ON US. IF WE DEFAULT UNDER OUR SENIOR CREDIT FACILITY, WE
MAY NOT BE ABLE TO MAKE PAYMENTS ON THE NOTES.

     The indenture and our senior credit facility impose significant operating
and financial restrictions on us. These restrictions limit our ability and the
ability of our subsidiaries, among other things, to:

     - incur additional indebtedness or issue disqualified capital stock;

     - pay dividends or make other restricted payments;

     - issue capital stock of subsidiaries;

     - make capital expenditures;

     - enter into transactions with affiliates;

     - create or incur liens;

     - transfer or sell assets;

                                        10
<PAGE>

     - incur dividend or other payment restrictions affecting subsidiaries; and

     - consummate a merger, consolidation or sale of all or substantially all of
       our or its assets.

     In addition, our senior credit facility requires us to maintain compliance
with specified financial ratios, including fixed charge coverage and total
leverage ratios, as well as achievement of a minimum level of EBITDA. Our
ability to comply with these ratios may be affected by events beyond our
control. See "Description of Senior Credit Facility."

     A breach of any of the covenants contained in our senior credit facility,
or our inability to comply with the required financial ratios, could result in
an event of default, which would allow the lenders under the senior credit
facility to discontinue lending and/or to declare all borrowings outstanding to
be due and payable. We, the borrowers under the senior credit facility and the
guarantors of the senior credit facility have granted the lenders under our new
senior credit facility a first priority security interest in substantially all
of our respective assets (including, without limitation, our common stock, all
of the capital stock of our domestic subsidiaries and 65% of the voting capital
stock and 100% of the non-voting capital stock of our foreign subsidiaries that
are direct subsidiaries of us or any of our domestic subsidiaries), other than
real property, fixtures, equipment and proceeds thereof. All of the borrowers
and guarantors under our senior credit facility (other than us) are guarantors
of the notes.

     In the event of any default under the senior credit facility, the lenders
thereunder could elect to discontinue lending and/or to declare all amounts
outstanding to be immediately due and payable, to foreclose upon the assets
pledged to them, or to require Golfsmith, Holdings and each of their domestic
subsidiaries to apply all of their available cash to repay borrowings under the
senior credit facility. If the amounts outstanding under the senior credit
facility or the notes were to be accelerated, we cannot assure you that our
consolidated assets would be sufficient to repay in full the money owed to the
lenders or to our other debt holders, including the holders of the notes.
Although the lenders under our senior credit facility and the holders of the
notes share in the proceeds of this collateral (other than collateral consisting
of real property, fixtures, equipment and the proceeds thereof), our obligations
to the lenders under our senior credit facility are secured on a first priority
basis and our obligations under the notes are secured on a second priority
basis. As a result, the lenders under our senior credit facility are entitled to
receive proceeds from any realization of such collateral to repay their
obligations in full before the holders of the notes. Therefore, if the lenders
under the senior credit facility proceed against the collateral (whether held by
us or any guarantor) securing that indebtedness, including the collateral
pledged by the guarantors, the proceeds received upon the realization of the
collateral upon which the lenders under the senior credit facility have a first
priority lien would be applied first to amounts due under our senior credit
facility before any proceeds will be available to make payments on the notes. In
addition, under the intercreditor agreement, at any time that obligations under
our senior credit facility are outstanding, any actions that may be taken with
respect to such collateral, including the ability to cause the commencement of
enforcement proceedings against such collateral and to control the conduct of
such proceedings, will be at the direction of the lenders under our senior
credit facility, and the trustee, on behalf of the holders of the notes, does
not have the ability to control or direct such actions, even if the rights of
the holders of the notes are adversely affected.

THE LENDERS UNDER OUR SENIOR CREDIT FACILITY MAY LIMIT BORROWINGS UNDER OUR
SENIOR CREDIT FACILITY WHICH COULD LIMIT OUR LIQUIDITY AND THEREBY ADVERSELY
AFFECT OUR BUSINESS AND OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES.

     If the lenders under our credit facility limit our borrowing ability, we
may not have the liquidity we need to purchase inventory or otherwise run our
business. This could cause us to be unable to generate enough cash flow to make
payments on the notes or otherwise adversely affect our business. The amount
available to be borrowed under our senior credit facility is limited for each
borrower to 85% of the net amount of eligible receivables of such borrower plus
the lesser of 65% of the value of eligible inventory (valued on a lower of cost
or market basis) of such borrower and 60% of the net orderly liquidation value
of eligible inventory of such borrower. The lender agent under our senior credit
facility retains the right

                                        11
<PAGE>

from time to time to establish or modify advance rates, standards of eligibility
and reserves against availability. The borrowers have agreed with the lender
agent that, in addition to other reserves that the lender agent may impose, they
will maintain an availability reserve at all times of $0.5 million. As a result,
the amount of borrowings available to the borrowers under the senior credit
facility may at no time exceed $12.0 million, unless the lender agent releases
that reserve. In addition, the occurrence of an event of default under the
senior credit facility, or the occurrence of a material adverse change in our
financial condition, operations, business or prospects, or the inability of the
borrowers to make certain representations required to be made upon each
borrowing, would entitle the lenders to withhold further funding under the
senior credit facility. These limitations may result in the borrowers being able
to borrow less than the $12.0 million availability under the senior credit
facility (after giving effect to required reserves of $500,000).

     If we are able to borrow less than the $12.0 million available under our
senior credit facility (after giving effect to required reserves of $500,000),
we may not have sufficient funds available to us for working capital, capital
expenditures, acquisitions and other purposes. As a result, we may not be able
to effectively engage in our business or to compete effectively and our
profitability, and therefore our ability to fulfill our obligations under the
notes, may be adversely affected.

WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MAKE INTEREST PAYMENTS
UNDER THE NOTES OR REQUIRED PAYMENTS UNDER OUR SENIOR CREDIT FACILITY DUE TO
EVENTS THAT ARE BEYOND OUR CONTROL WHICH COULD CAUSE US TO DEFAULT UNDER THE
CREDIT AGREEMENT AND THE INDENTURE.

     Economic, financial, competitive, regulatory and other factors beyond our
control affect our ability to generate cash flow from operations to make
payments on, or to refinance, the notes and our other indebtedness, including
indebtedness under our senior credit facility, and to fund necessary working
capital. We cannot assure you that our operations will generate sufficient cash
flow to enable us to meet our obligations. A significant reduction in operating
cash flow would likely increase the need for alternative sources of liquidity.
If we are unable to generate sufficient cash flow to make payments on the notes
or other debt, including debt under our senior credit facility, we will have to
pursue one or more alternatives, such as reducing or delaying capital
expenditures, refinancing the notes or other debt, selling assets or raising
equity. We cannot assure you that any of these alternatives could be
accomplished on satisfactory terms or that they would yield sufficient funds to
retire the notes and our other debt or to make payments on the notes or under
our senior credit facility. In the event that our cash flow and any alternative
sources of liquidity are insufficient to make the required payments under our
senior credit facility, a default may occur under our senior credit facility and
the indebtedness under our senior credit facility could be accelerated, which
may cause an event of default under the indenture.

FRAUDULENT CONVEYANCE LAWS MAY PERMIT COURTS TO VOID THE GUARANTEE OF OUR PARENT
OR THE SUBSIDIARY GUARANTEES OF THE NOTES IN SPECIFIC CIRCUMSTANCES, WHICH WOULD
INTERFERE WITH THE PAYMENT OF THESE GUARANTEES.

     U.S. federal bankruptcy law and comparable state statutes may allow courts,
upon the bankruptcy or financial difficulty of a parent or subsidiary guarantor,
to void that parent's or that subsidiary's guarantee of the notes. If a court
voids a guarantee or holds it unenforceable, the holders of the notes will cease
to be creditors of, and may be required to return payments received from, that
guarantor, and the holders of the notes will be creditors solely of us and the
other guarantors whose guarantees have not been voided. In the alternative, the
court could subordinate that guarantee (including all payments thereunder) to
all other debt of the guarantor. The court could take these actions in respect
of a guarantee if, among other things, the guarantor, at the time it incurred
the debt evidenced by its guarantee:

     - incurred the guarantee with the intent of hindering, delaying or
       defrauding current or future creditors; or

     - received less than reasonably equivalent value or fair consideration for
       incurring the guarantee, and

      - was insolvent or was rendered insolvent by reason of the incurrence; or
                                        12
<PAGE>

      - was engaged, or about to engage, in a business or transaction for which
        the assets remaining with it constituted unreasonably small capital to
        carry on such business; or

      - intended to incur, or believed that it would incur, debts beyond its
        ability to pay as those debts matured; or

     - was a defendant in an action for money damages, or had a judgment for
       money damages entered against it, if, in either case, after final
       judgment the judgment was unsatisfied.

     The tests for fraudulent conveyance, including the criteria for insolvency,
will vary depending upon the law of the jurisdiction that is being applied.
Generally, however, a debtor would be considered insolvent if, at the time the
debtor incurred the debt, either:

     - the sum of the debtor's debts and liabilities, including contingent
       liabilities, was greater than the debtor's assets at fair valuation; or

     - the present fair saleable value of the debtor's assets was less that the
       amount required to pay the probable liability on the debtor's total
       existing debts and liabilities, including contingent liabilities, as they
       became absolute and matured.

     Because certain of our subsidiaries who are guarantors of the notes are
direct borrowers under the senior credit facility, in the event that guarantees
are voided, the lenders under our senior credit facility would continue to have
recourse to the assets of these subsidiaries; in contrast, holders of the notes
would be forced to look to dividends and similar equity payments from those
subsidiaries, after payment of the senior credit facility obligations.

THE COLLATERAL WHICH SECURES BOTH THE NOTES AND BORROWINGS UNDER OUR SENIOR
CREDIT FACILITY IS SUBJECT TO CONTROL BY THE LENDERS UNDER OUR SENIOR CREDIT
FACILITY. IF THERE IS A DEFAULT, THE PROCEEDS FROM THE COLLATERAL MAY NOT BE
SUFFICIENT TO REPAY BOTH THE LENDERS UNDER OUR SENIOR CREDIT FACILITY AND THE
HOLDERS OF THE NOTES AND THE LENDERS UNDER THE SENIOR CREDIT FACILITY WILL BE
REPAID BEFORE THE HOLDERS OF THE NOTES.

     The rights of the holders of the notes with respect to the collateral
securing the notes are limited pursuant to the terms of the intercreditor
agreement. The intercreditor agreement permits borrowings of up to $12.5 million
principal amount under the senior credit facility. Borrowings under the senior
credit facility are secured by the same collateral, other than collateral
consisting of real property, fixtures, equipment and proceeds thereof, that
secures the notes. Although the lenders under our senior credit facility and the
holders of the notes share in the proceeds of this collateral (other than
collateral consisting of real property, fixtures, equipment and the proceeds
thereof), our obligations to the lenders under our senior credit facility are
secured on a first priority basis and our obligations under the notes are
secured on a second priority basis. As a result, the lenders under our senior
credit facility are entitled to receive proceeds from any realization of such
collateral to repay their obligations in full before the holders of the notes.
In addition, under the intercreditor agreement, at any time that obligations
under our senior credit facility are outstanding, any actions that may be taken
with respect to such collateral, including the ability to cause the commencement
of enforcement proceedings against such collateral and to control the conduct of
such proceedings, will be at the direction of the lenders under our senior
credit facility, and the trustee, on behalf of the holders of the notes, does
not have the ability to control or direct such actions, even if the rights of
the holders of the notes are adversely affected. See "Description of the
Notes -- Security." We cannot assure you that the value of this collateral will
be sufficient to repay in full all indebtedness outstanding under the senior
credit facility and the notes.

THE VALUE OF THE LIMITED ASSETS SECURING THE NOTES ON A FIRST PRIORITY BASIS MAY
NOT BE SUFFICIENT TO MAKE UP ANY SHORTFALL BETWEEN OUR OBLIGATIONS UNDER THE
NOTES AND THE PROCEEDS FROM THE REALIZATION OF THE COLLATERAL WHICH SECURES THE
NOTES ON A SECOND PRIORITY BASIS.

     Our obligations under the notes are secured on a first priority basis by
collateral consisting of real property, fixtures, equipment and proceeds
thereof. The lenders under our senior credit facility do not have a security
interest in such collateral. However, the proceeds from any realization of this
collateral may not
                                        13
<PAGE>

be sufficient to make up any shortfall between our obligations under the notes
and any proceeds allocable to noteholders from the realization of the collateral
which secures our obligations to the lenders under our senior credit facility on
a first priority basis.

THE ASSETS EXCLUDED FROM THE LIENS SECURING OUR OBLIGATIONS UNDER THE NOTES
AND/OR OUR SENIOR CREDIT FACILITY MAY BE SUBJECT TO LIENS IN FAVOR OF OTHER
PARTIES AND, IF NOT SUBJECT TO ANY SUCH LIENS, WILL BE AVAILABLE, ON AN EQUAL
AND PRO RATA BASIS, TO SATISFY ALL SENIOR INDEBTEDNESS OF THE ENTITY OWNING SUCH
ASSETS. THESE ASSETS MAY NOT BE SUFFICIENT TO PROVIDE FOR PAYMENT OF ALL SUCH
SENIOR INDEBTEDNESS (INCLUDING THE NOTES), ESPECIALLY IF WE ISSUE ADDITIONAL
INDEBTEDNESS OR DISPOSE OF ASSETS.

     Any claim for the remaining shortfall between the amount realized by the
holders of the notes from the sales of such collateral securing the notes (and
related guarantees) and the obligations under the notes (and related guarantees)
will rank equally in right of payment with all of our existing and future senior
indebtedness or that of the relevant guarantor, as applicable, and, in some
cases, junior to the claims of any person holding liens which are permitted
liens as described under "Description of the Notes." The indenture does not
require that we maintain the current level of collateral or maintain a specific
ratio of indebtedness to asset values. Any additional notes issued pursuant to
the indenture will rank equal to the notes and be entitled to the same rights
and priority with respect to the collateral. Thus, the issuance of additional
notes pursuant to the indenture may have the effect of significantly diluting
your ability to recover in full from the then existing pool of collateral.

THE BOOK VALUE OF OUR ASSETS IS NOT A MEASURE OF THE AMOUNT OF PROCEEDS
REALIZABLE UPON A SALE. THE PROCEEDS FROM THE SALE OF THE COLLATERAL SECURING
THE NOTES AND OUR SENIOR CREDIT FACILITY IN THE EVENT OF A LIQUIDATION MAY BE
INSUFFICIENT TO REPAY THE NOTES AND OUR SENIOR CREDIT FACILITY.

     The value of the collateral in the event of liquidation is not the book
value of the assets, but rather will depend on market and economic conditions,
the availability of buyers and other factors. We have not conducted any asset
appraisals in connection with the initial offering of the notes or this
offering. Moreover, the amount to be received upon such a sale would be
dependent upon numerous factors, including the condition, age and useful life of
the collateral at the time of such sale, as well as the timing and manner of
such sale. By its nature all or some of the collateral will be illiquid and may
have no readily ascertainable market value. Accordingly, there can be no
assurance that the collateral, if saleable, can be sold in a short period of
time or at an appropriate price. The proceeds from any sale of the collateral
will likely be insufficient to satisfy the amounts outstanding under the notes
after payment in full of all obligations under our senior credit facility. If
such proceeds are not sufficient to repay amounts outstanding under the notes,
then holders of the notes (to the extent not repaid from the proceeds of the
sale of the collateral) would have only an unsecured claim against our remaining
assets. As of April 3, 2004, we had borrowed $1.1 million under our senior
credit facility and had $10.9 million of borrowing availability (after giving
effect to required reserves of $500,000).

BANKRUPTCY LAWS MAY LIMIT YOUR ABILITY TO REALIZE VALUE FROM THE COLLATERAL.

     The right of the collateral agent to repossess and dispose of the
collateral upon the occurrence of an event of default under the indenture
governing the notes is likely to be significantly impaired by applicable
bankruptcy law if a bankruptcy case were to be commenced by or against us before
the collateral agent repossessed and disposed of the collateral. Upon the
commencement of a case for relief under Title 11 of the United States Code, a
secured creditor such as the collateral agent is prohibited from repossessing
its security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover, the
bankruptcy code permits the debtor to continue to retain and use collateral even
though the debtor is in default under the applicable debt instruments, provided
that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to circumstances, but it is
intended in general to protect the value of the secured creditor's interest in
the collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines that
the value of the secured creditor's interest in the

                                        14
<PAGE>

collateral is declining during the pendency of the bankruptcy case. A bankruptcy
court may determine that a secured creditor may not require compensation for a
diminution in the value of its collateral if the value of the collateral exceeds
the debt it secures.

     In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict:

     - how long payments under the notes could be delayed following commencement
       of a bankruptcy case;

     - whether or when the collateral agent could repossess or dispose of the
       collateral;

     - the value of the collateral at the time of the bankruptcy petition; or

     - whether or to what extent holders of the notes would be compensated for
       any delay in payment or loss of value of the collateral through the
       requirement of "adequate protection."

     Any disposition of the collateral during a bankruptcy case would also
require permission from the bankruptcy court. Furthermore, in the event a
bankruptcy court determines the value of the collateral is not sufficient to
repay all amounts due on the notes, the holders of the notes would hold secured
claims to the extent of the value of the collateral to which the holders of the
notes are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy code only permits the payment and accrual of post-petition interest,
costs and attorney's fees to a secured creditor during a debtor's bankruptcy
case to the extent the value of its collateral is determined by the bankruptcy
court to exceed the aggregate outstanding principal amount of the obligations
secured by the collateral.

     The intercreditor agreement also prohibits the holders of the notes or the
collateral agent from seeking adequate protection with respect to the collateral
which also secures the senior credit facility and prohibits the collateral agent
and holders of the notes from objecting to the lender agent or the lenders
seeking adequate protection with respect to such collateral.

AN ACTIVE TRADING MARKET FOR THE NOTES HAS NOT, AND MAY NOT, DEVELOP, WHICH
COULD MAKE IT DIFFICULT FOR YOU TO RESELL YOUR NOTES AT THEIR FAIR MARKET VALUE
OR AT ALL.

     There is currently no public market for the notes. We do not intend to list
the notes on any national securities exchange or automated quotation system.
Accordingly, no market for the notes may develop, and any market that develops
may not last. If the notes are traded, they may trade at a discount from their
initial offering price, depending on prevailing interest rates, the market for
similar securities, our performance and other factors. To the extent that an
active trading market does not develop, you may not be able to resell your notes
at their fair market value or at all.

WE MAY BE UNABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY
THE INDENTURE, WHICH COULD CONSTITUTE A DEFAULT UNDER THE INDENTURE.

     Upon the occurrence of certain specific kinds of change of control events,
we must offer to repurchase all outstanding notes. In addition, a change of
control under the indenture would also constitute a change of control, and thus
an event of default, under our senior credit facility as well. This would
entitle the lenders to cause all of our outstanding debt under our senior credit
facility to become due and payable. As of April 3, 2004, we had $1.1 million of
borrowings outstanding under our senior credit facility. It is possible that we
will not have sufficient funds at the time of the change of control to make the
required repurchase of notes or payments under our senior credit facility, or
that restrictions in our senior credit facility will not allow such repurchases
of the notes. If we are required to repurchase the notes or to make accelerated
payments under our senior credit facility, we would probably require third party
financing. We cannot be sure that we would be able to obtain third party
financing on acceptable terms, or at all. Our failure to purchase the notes
would be a default under the indenture, which would also result in a default
under our senior credit facility.

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<PAGE>

WE ARE NOT REQUIRED BY THE CHANGE OF CONTROL PROVISIONS IN THE INDENTURE TO
REPURCHASE THE NOTES IF WE SELL ASSETS THAT DO NOT CONSTITUTE "SUBSTANTIALLY
ALL" OF OUR ASSETS UNDER THE INDENTURE. WHETHER ANY GIVEN SALE OF ASSETS
CONSTITUTES A SALE OF "SUBSTANTIALLY ALL" OF OUR ASSETS IS SUBJECT TO
UNCERTAINTY, WHICH COULD MAKE IT DIFFICULT FOR NOTEHOLDERS TO DETERMINE WHETHER
A CHANGE OF CONTROL HAS OCCURRED.

     The indenture requires us to offer to repurchase all outstanding notes upon
a change of control, which includes a sale of all or substantially all of our
assets. We may sell large amounts of our assets and may not be required by the
indenture to repurchase the notes if the sale is not deemed to be "substantially
all" of our assets under the indenture. Because this term is not defined in the
indenture, we must rely on the definition established under New York law, which
governs the indenture. New York law is not clear regarding what constitutes a
sale of "substantially all" of a company's assets and we can not predict how a
court might apply New York law with respect to a particular sale of assets. As a
consequence, in cases where the law is uncertain, the noteholders may have
difficulty determining whether a change of control has occurred. This could
impede the repurchase of the notes upon a possible change of control in some
cases.

WE MAY EXPERIENCE CORPORATE EVENTS OR ENTER INTO TRANSACTIONS OTHER THAN A SALE
OF ASSETS THAT WILL NOT CONSTITUTE A CHANGE OF CONTROL AND MAY ADVERSELY AFFECT
OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES.

     Certain corporate events or transactions, such as leveraged
recapitalizations that increase the level of our indebtedness, would not
constitute a change of control under the indenture and we would not be required
to offer to repurchase the notes. These corporate events, including increases in
our indebtedness, may adversely affect our ability to fulfill our obligations
under the notes.

HOLDERS OF THE NOTES ARE REQUIRED TO INCLUDE AMOUNTS IN GROSS INCOME FOR FEDERAL
INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF CASH PAYMENTS.

     The notes were issued with original issue discount for United States
federal income tax purposes. As a result, U.S. holders, as defined under
"Material United States Federal Income Tax Consequences," are required to
include amounts in income in respect of the notes on a constant yield to
maturity basis in advance of the receipt of the cash to which such income is
attributable. See "Material United States Federal Income Tax
Consequences -- U.S. Holders -- Original Issue Discount."

RISK FACTORS RELATING TO OUR BUSINESS

OUR SUCCESS DEPENDS ON THE CONTINUED POPULARITY OF GOLF AND THE GROWTH OF THE
MARKET FOR GOLF-RELATED PRODUCTS. IF GOLF DECLINES IN POPULARITY, OUR SALES
COULD MATERIALLY DECLINE.

     We generate substantially all of our net revenues from the sale of
golf-related equipment and accessories. The demand for our golf products is
directly related to the popularity of golf, the number of golf participants and
the number of rounds of golf being played by these participants. If golf
participation decreases, sales of our products would be adversely affected. In
addition, the popularity of golf organizations, such as the Professional Golfers
Association, also affects the sales of our golf equipment and golf-related
apparel. We depend on the exposure of our brands to increase brand recognition
and reinforce the quality of our products. Any significant reduction in
television coverage of PGA or other golf tournaments, or any other significant
decreases in either attendance at golf tournaments or viewership of golf
tournaments, will reduce the visibility of our brand and could adversely affect
our sales.

     In addition, we do not believe there has been any material increase in golf
participation or the number of golf rounds played since 1999. The number of
rounds played in the U.S. dropped to 502.4 million in 2002 from 518.4 million in
2000, perhaps reflecting the general decline in the U.S. economy. Additionally,
the number of rounds played in the U.S. in 2003 dropped 2.6% from 2002 to 489.3
million rounds played. Golf Datatech reported that the number of golf rounds
played in the U.S. increased 4.0% in the first quarter of 2004 as compared to
the same quarter in 2003. However, we can not assure you that the overall dollar
volume of the worldwide market for golf-related products will grow, or that it
will not decline, in the future.
                                        16
<PAGE>

WE MAY NOT BE ABLE TO BORROW ADDITIONAL FUNDS, IF NEEDED, TO EXPAND OUR BUSINESS
OR COMPETE EFFECTIVELY AND, AS A RESULT, OUR NET REVENUES AND PROFITABILITY MAY
BE MATERIALLY ADVERSELY AFFECTED.

     The indenture governing the notes and our senior credit facility limit
almost completely our ability to borrow additional funds. We believe that the
terms of the liens securing our senior credit facility and the notes effectively
preclude us from borrowing additional funds, other than under our senior credit
facility. As a result, to the extent that we do not have borrowing availability
under our senior credit facility, we will have to fund our operations, including
new store openings and capital expenditures as well as any future acquisitions,
with cash flow from operations. If we do not generate sufficient cash flow from
our operations to fund these expenditures, we may not be able to compete
effectively and our sales and profitability would likely be materially adversely
affected.

A REDUCTION IN DISCRETIONARY CONSUMER SPENDING COULD REDUCE SALES OF OUR
PRODUCTS.

     Our products are recreational in nature and are therefore discretionary
purchases for consumers. Consumers are generally more willing to make
discretionary purchases of golf products during favorable economic conditions.
Discretionary spending is affected by many factors, including, among others,
general business conditions, interest rates, the availability of consumer
credit, taxation, and consumer confidence in future economic conditions. Our
customers' purchases of discretionary items, including our products, could
decline during periods when disposable income is lower, or periods of actual or
perceived unfavorable economic conditions. Any significant decline in these
general economic conditions or uncertainties regarding future economic prospects
that adversely affect discretionary consumer spending could lead to reduced
sales of our products. In addition, our sales could be adversely affected by a
downturn in the economic conditions in the markets in which our superstores
operate. The general slowdown in the United States economy and the uncertain
economic outlook have adversely affected consumer spending habits, which has
adversely affected our net revenues. A prolonged economic downturn could have a
material adverse effect on our business, financial condition, and results of
operations.

OUR SALES AND PROFITS MAY BE ADVERSELY AFFECTED IF WE AND OUR SUPPLIERS FAIL TO
SUCCESSFULLY DEVELOP AND INTRODUCE NEW PRODUCTS.

     Our future success will depend, in part, upon our and our suppliers'
continued ability to develop and introduce innovative products in the golf
equipment market. The success of new products depends in part upon the various
subjective preferences of golfers, including a golf club's look and "feel," and
the level of acceptance that a golf club has among professional and recreational
golfers. The subjective preferences of golf club purchasers are difficult to
predict and may be subject to rapid and unanticipated changes. If we or our
suppliers fail to successfully develop and introduce innovative products on a
timely basis, then our sales and profits may suffer.

     In addition, if we or our suppliers introduce new golf clubs too rapidly,
it could result in close-outs of existing inventories. Close-outs can result in
reduced margins on the sale of older products, as well as reduced sales of new
products given the availability of older products at lower prices. These reduced
margins and sales may adversely affect our results of operations.

OUR SALES AND PROFITABILITY MAY BE ADVERSELY AFFECTED IF NEW COMPETITORS ENTER
THE GOLF PRODUCTS INDUSTRY.

     Increased competition in our markets due to the entry of new competitors,
including companies which currently supply us with products that we sell, could
reduce our net revenues. Our competitors currently include other specialty
retailers, mass merchandise retailers, conventional sporting goods retailers,
on-course pro shops, and online retailers of golf equipment. These businesses
compete with us in one or more product categories. In addition, traditional and
specialty golf retailers are expanding more aggressively in marketing brand-name
golf equipment, thereby competing directly with us for products, customers and
locations. Some of these potential competitors have been in business longer than
us and/or have greater financial or marketing resources than we do and may be
able to devote greater resources to sourcing, promoting and selling their
products. Several of our key vendors have begun to operate retail stores or

                                        17
<PAGE>

websites that sell directly to consumers and may compete with us and reduce our
sales. As a result of this competition, we may experience lower sales or greater
operating costs, such as marketing costs, which would have an adverse effect on
our profitability.

NEW SUPERSTORES THAT WE MAY OPEN MAY DIVERT OUR LIMITED CAPITAL RESOURCES AWAY
FROM OTHER AREAS OF OUR BUSINESS AND MAY NOT BE PROFITABLE WHICH COULD ADVERSELY
AFFECT THE PROFITABILITY OF OUR COMPANY AS A WHOLE.

     Our strategy involves opening additional superstores in new and existing
markets. During the year ended January 3, 2004, not including stores that we
acquired through our acquisition of Don Sherwood Golf Shop, we opened six new
stores, incurring $0.6 million in pre-opening expenses and $3.9 million in
capital expenditures. During the three months ended April 3, 2004, we opened
four new stores, incurring $0.3 million in pre-opening expenses and $0.9 million
in capital expenditures. We plan to open two to four additional stores during
the remaining three quarters of fiscal 2004. Based on our experience, we expect
to spend $1.3 million to open each additional superstore, which includes
pre-opening expenses, capital expenditures and inventory costs. This amount is
an estimate and actual store opening costs may vary. We intend to fund new store
openings through cash flow from operations. Our senior credit facility and the
indenture governing our senior secured notes significantly restrict our ability
to incur indebtedness and to make capital expenditures. We may not have or be
able to obtain sufficient funds to fund our planned expansion.

     Our ability to open new stores on a timely and profitable basis is subject
to various contingencies, some of which are beyond our control. These
contingencies include our ability to locate suitable store sites, negotiate
acceptable lease terms, build-out or refurbish sites on a timely and
cost-effective basis, hire, train and retain skilled managers and personnel,
obtain adequate capital resources and successfully integrate new stores into
existing operations. We can not assure you that our new stores will be a
profitable deployment of our limited capital resources. If any of our new stores
are not profitable, then the profitability of our company as a whole may be
adversely affected.

OUR EXPANSION IN NEW AND EXISTING MARKETS, IF UNSUCCESSFUL, COULD CAUSE OUR
OPERATING INCOME TO DECREASE.

     Our expansion in new and existing markets may present competitive,
distribution, and merchandising challenges that differ from our current
challenges, including competition among our stores clustered in a single market,
diminished novelty of our store design and concept, added strain on our
distribution center and management information systems and diversion of
management attention from existing operations. To the extent that we are not
able to meet these new challenges, our operating income could decrease.

IF WE DO NOT ACCURATELY PREDICT OUR SALES DURING OUR PEAK SEASONS AND THEY ARE
LOWER THAN WE EXPECT, OUR PROFITABILITY MAY BE MATERIALLY ADVERSELY AFFECTED.

     Our business is highly seasonal. Our sales during our second fiscal quarter
of each year, which includes the Father's Day selling season, and during the
fourth fiscal quarter, which includes the Christmas holiday selling season, have
historically contributed a disproportionate percentage of our net revenues and
most of our net income for the entire year. We make decisions regarding
merchandise well in advance of the season in which it will be sold, particularly
for the Father's Day and Christmas holiday selling seasons. We incur significant
additional expenses leading up to and during our second fiscal quarter and the
month of December in anticipation of higher sales in those periods, including
acquiring additional inventory, preparing and mailing our catalogs, advertising,
creating in-store promotions and hiring additional employees. If our sales
during our peak seasons are lower than we expect for any reason, we may not be
able to adjust our expenses in a timely fashion. As a result, our profitability
may be materially adversely affected.

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<PAGE>

IF THE PRODUCTS WE SELL DO NOT SATISFY THE STANDARDS OF THE UNITED STATES GOLF
ASSOCIATION AND THE ROYAL AND ANCIENT GOLF CLUB OF ST. ANDREWS IN THE FUTURE,
OUR NET REVENUES ATTRIBUTABLE TO THOSE PRODUCTS AND OUR PROFITABILITY MAY BE
REDUCED.

     We and our suppliers generally seek to satisfy the standards established by
the United States Golf Association and the Royal and Ancient Golf Club of St.
Andrews in the design of golf clubs because these standards are generally
followed by golfers within their respective geographic areas. We believe that
all of the products we sell conform to these standards, except where expressly
marketed as non-conforming. However, we cannot assure you that our products will
satisfy these standards in the future or that the standards of these
organizations will not be changed in a way that makes our products
non-conforming. If our products that are intended to conform are determined to
be non-conforming, our net revenues attributable to those products and, as a
result, our profitability may be reduced.

WE LEASE MOST OF OUR SUPERSTORE LOCATIONS. IF WE ARE UNABLE TO MAINTAIN THOSE
LEASES OR LOCATE ALTERNATIVE SITES FOR OUR SUPERSTORES ON TERMS THAT ARE
ACCEPTABLE US, OUR NET REVENUES AND PROFITABILITY COULD BE REDUCED.

     We lease 41 of our 42 current superstores. As of April 3, 2004, two of our
superstores operated under a lease with a term that expires in less than one
year. We cannot assure you that we will be able to maintain our existing store
locations as leases expire, or that we will be able to locate alternative sites
on favorable terms. If we cannot maintain our existing store locations or locate
alternative sites on favorable or acceptable terms, our net revenues and
profitability could be reduced.

OUR COMPARABLE STORE SALES MAY FLUCTUATE, WHICH COULD NEGATIVELY IMPACT OUR
FUTURE OPERATING PERFORMANCE.

     Our comparable store sales are affected by a variety of factors, including,
among others:

     - customer demand in different geographic regions;

     - our ability to efficiently source and distribute products;

     - changes in our product mix;

     - promotional events;

     - effects of competition;

     - our ability to effectively execute our business strategy; and

     - general economic conditions.

     Our comparable store sales have fluctuated significantly in the past and we
believe that such fluctuations may continue. Our historic results are not
necessarily indicative of our future results, and we cannot assure you that our
comparable store sales will not decrease again in the future. Any reduction in
or failure to increase our comparable store sales could negatively impact our
future operating performance.

IF WE FAIL TO ACCURATELY TARGET THE APPROPRIATE SEGMENT OF THE CONSUMER CATALOG
MARKET OR IF WE FAIL TO ACHIEVE ADEQUATE RESPONSE RATES TO OUR CATALOGS, OUR
RESULTS OF OPERATIONS MAY SUFFER.

     Our results of operations depend in part on the success of our catalog
operations. We believe that the success of our catalog operations depends on our
ability to:

     - achieve adequate response rates to our mailings;

     - continue to offer a merchandise mix that is attractive to our mail order
       customers;

     - cost-effectively add new customers;

     - cost-effectively design and produce appealing catalogs; and

     - timely deliver products ordered through our catalogs to our customers.

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<PAGE>

     We have historically experienced fluctuations in the response rates to our
catalog mailings. If we fail to achieve adequate response rates, we could
experience lower sales, significant markdowns or write-offs of inventory and
lower margins, which would adversely affect our results of operations, perhaps
materially.

IF WE ARE UNABLE TO MEET OUR LABOR NEEDS, OUR PERFORMANCE WILL SUFFER.

     Many of our employees are in entry-level or part-time positions that
historically have high rates of turnover. We may be unable to meet our labor
needs and control our costs due to external factors such as unemployment levels,
minimum wage legislation, and wage inflation. If we cannot attract and retain
quality employees, our performance will suffer and we may not be able to
successfully execute our strategy to open new superstores.

IF WE LOSE THE SERVICES OF KEY MEMBERS OF OUR MANAGEMENT, WE MAY NOT BE ABLE TO
MANAGE OUR OPERATIONS AND IMPLEMENT OUR GROWTH STRATEGY EFFECTIVELY.

     Our future success depends, in large part, on the continued service of
James Thompson, our chief executive officer, and some of our other key executive
officers and managers who possess significant expertise and knowledge of our
business and markets. We do not maintain key person insurance on any of our
officers or managers. Any loss or interruption of the services of these
individuals could significantly reduce our ability to effectively manage our
operations and implement our growth strategy because we cannot assure you that
we would be able to find appropriate replacements for our key executives and
managers should the need arise.

WE ARE CONTROLLED BY ONE STOCKHOLDER, WHICH MAY GIVE RISE TO A CONFLICT OF
INTEREST.

     As of April 3, 2004, after giving effect to the exchange by Atlantic Equity
Partners III, L.P. of all of the notes beneficially owned by it for additional
shares of common stock of Holdings and cash in a private transaction, Atlantic
Equity Partners III would have owned approximately 76.6% of Holdings' common
stock on a fully diluted basis (including outstanding stock options). All of
Holdings' stockholders are parties to a stockholders agreement that contains
voting arrangements that give Atlantic Equity Partners III voting control over
the election of all but one of its directors. As a result, Atlantic Equity
Partners III controls Holdings and us and effectively has the power to approve
any action requiring the approval of the holders of our and Holdings' stock,
including adopting certain amendments to our and Holdings' certificate of
incorporation and approving mergers or sales of all of our assets. In addition,
as a result of Atlantic Equity Partners III's ownership interest, conflicts of
interest could arise with respect to transactions involving business dealings
between us and Atlantic Equity Partners III or First Atlantic Capital Ltd.,
which operates Atlantic Equity Partners III, potential acquisitions of
businesses or properties, the issuance of additional securities, the payment of
dividends by us and other matters.

IF WE ARE UNABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, OR IF WE ARE
ACCUSED OF INFRINGING ON A THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS, OUR NET
REVENUES AND PROFITS MAY DECLINE.

     We currently hold a substantial number of industrial designs and
trademarks. The exclusive right to use these designs and trademarks has helped
establish our market share. The loss or reduction of any of our significant
proprietary rights could hurt our ability to distinguish our products from
competitors' products and retain our market share. In addition, our proprietary
products generate substantially higher margins than products we sell that are
produced by other manufacturers. If we are unable to effectively protect our
proprietary rights and less of our sales come from our proprietary products, our
net revenues and profits may decline.

     Additionally, third parties may assert claims against us alleging
infringement, misappropriation or other violations of patent, trademark or other
proprietary rights, whether or not such claims have merit. Such claims can be
time consuming and expensive to defend and could require us to cease using and
selling the allegedly infringing products, which may have a significant impact
on our net revenues and cause us to incur significant litigation costs and
expenses.

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<PAGE>

SELF-INSURED BENEFITS PLAN CLAIMS COULD MATERIALLY IMPACT OUR RESULTS OF
OPERATIONS.

     We administer self-insured, voluntary employee benefits plans that provide,
among other benefits, health care benefits to participating employees. The plans
are designed to provide specified levels of coverage up to $75,000 per covered
employee, with excess insurance coverage provided by a commercial insurer. Costs
of health care have risen significantly in recent years, and we expect this
trend to continue. Our expenses and, consequently, our results of operations,
could be materially impacted by claims and other expenses related to such plans.

WE RELY ON OUR MANAGEMENT INFORMATION SYSTEMS FOR INVENTORY MANAGEMENT,
DISTRIBUTION AND OTHER FUNCTIONS. IF OUR INFORMATION SYSTEMS FAIL TO ADEQUATELY
PERFORM THESE FUNCTIONS OR IF WE EXPERIENCE AN INTERRUPTION IN THEIR OPERATION,
OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.

     The efficient operation of our business is dependent on our management
information systems. We rely on our management information systems to
effectively manage order entry, order fulfillment, point-of-sale, and inventory
replenishment processes. The failure of our management information systems to
perform as we anticipate, as we experienced when we implemented our current
system in 2000, could disrupt our business and could result in decreased sales,
increased overhead costs, excess inventory and product shortages, causing our
business and results of operations to suffer.

     In addition, our management information systems are vulnerable to damage or
interruption from:

     - earthquake, fire, flood and other natural disasters; and

     - power loss, computer systems failure, Internet and telecommunications or
       data network failure.

     Any such interruption could have a material adverse effect on our business.

OUR PROFITABILITY WOULD BE ADVERSELY AFFECTED IF THE OPERATION OF OUR AUSTIN
CALL CENTER OR DISTRIBUTION CENTER WERE INTERRUPTED OR SHUT DOWN.

     We operate a centralized call center and distribution center in Austin,
Texas. We receive most of our catalog orders and receive and ship a substantial
portion of our merchandise at our Austin facility. Any natural disaster or other
serious disruption to this facility due to fire, tornado or any other cause
would substantially disrupt our sales and would damage a portion of our
inventory, impairing our ability to adequately stock our stores. In addition, we
could incur significantly higher costs and longer lead times associated with
fulfilling our direct-to-consumer orders and distributing our products to our
stores during the time it takes for us to reopen or replace our Austin facility.
As a result, disruption at our Austin facility would adversely affect our
profitability.

IF OUR SUPPLIERS FAIL TO DELIVER PRODUCTS ON A TIMELY BASIS AND IN SUFFICIENT
QUANTITIES, SUCH FAILURE COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.

     We depend on a limited number of suppliers for our clubheads and shafts. In
addition, some of our products require specifically developed manufacturing
techniques and processes which make it difficult to identify and utilize
alternative suppliers quickly. Any significant production delay or inability of
current suppliers to timely deliver products including clubheads and shafts in
sufficient quantities, or the transition to other suppliers, could have a
material adverse effect on our results of operations.

     We import substantially all of our proprietary products from Asia, and a
significant amount of the products we buy from vendors to resell through our
distribution channels is shipped to us from Asia. If a disruption occurs in the
operations of ports through which our products are imported, we may begin to
ship some of our products from Asia by air freight, and many of our suppliers
may also begin to ship their products by air freight. Shipping by air freight is
more expensive than shipping by boat, and if we cannot pass these increased
shipping costs on to our customers, our profitability will be reduced. A
disruption at ports through which our products are imported would have a
material adverse effect on our results of operations.

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<PAGE>

WE MAY BE SUBJECT TO PRODUCT WARRANTY CLAIMS OR PRODUCT RECALLS WHICH COULD HARM
OUR BUSINESS, RESULTS OF OPERATIONS, AND REPUTATION.

     We may be subject to risks associated with our products, including product
liability. Our existing or future products may contain design or materials
defects, which could subject us to product liability claims and product recalls.
Although we maintain limited product liability insurance, if any successful
product liability claim or product recall is not covered by or exceeds our
insurance coverage, our business, results of operation and financial condition
would be harmed. In addition, product recalls could adversely affect our
reputation in the marketplace. In May 2002, we learned that some of our private
label products sold in the prior two years were not manufactured in accordance
with their design specifications. Upon discovery of this discrepancy, we offered
our customers refunds, replacements or gift certificates. As a result, in fiscal
2002, we recognized $0.3 million in product return and replacement expenses. In
fiscal 2003 and the three months ended April 3, 2004, we did not recognize any
product-return and replacement expenses.

AN INCREASE IN THE COSTS OF MAILING, PAPER, AND PRINTING OUR CATALOGS WOULD
DECREASE OUR NET INCOME.

     Postal rate increases and paper and printing costs affect the cost of our
catalog mailings. We rely on discounts from the basic postal rate structure such
as discounts for bulk mailings and sorting by zip code and carrier routes for
our catalogs. We are not a party to any long-term contracts for the supply of
paper. Our cost of paper has fluctuated significantly during the past three
fiscal years, and our future paper costs are subject to supply and demand forces
external to our business. A material increase in postal rates or printing or
paper costs for our catalogs could materially decrease our net income.

A DISRUPTION IN THE SERVICE OF OUR PRIMARY DELIVERY SERVICE FOR OUR
DIRECT-TO-CONSUMER SALES MAY DECREASE OUR PROFITABILITY.

     During fiscal 2003 and the three months ended April 3, 2004, we generated
approximately 34.5% and 33.6% of our net revenues through our direct-to-consumer
sales, respectively. We use the United Parcel Service, or UPS, for substantially
all of our ground shipments of products sold through our catalogs and Internet
site to our customers in the United States. Any significant interruption in
UPS's services would impede our ability to deliver our products to our
direct-to-consumer channel, which could cause us to lose sales and/or customers.
In the event of an interruption in UPS's services, we may not be able to engage
alternative carriers to deliver our products in a timely manner on equally
favorable terms. If we incur higher shipping costs, we may be unable to pass
these costs on to our customers, which could decrease our profitability.

CURRENT AND FUTURE TAX REGULATIONS MAY ADVERSELY AFFECT OUR DIRECT-TO-CONSUMER
BUSINESS AND NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS.

     Our direct-to-consumer business may be adversely affected by state sales
and use taxes as well as the regulation of Internet commerce. We currently must
collect taxes for approximately half of our catalog and Internet sales. An
unfavorable change in state sales and use taxes could adversely affect our
business and results of operations. In addition, future regulation of the
Internet, including the imposition of taxes on Internet commerce, could affect
the development of our Internet business and negatively affect our ability to
increase our net revenues.

IF WE DO NOT ANTICIPATE AND RESPOND TO THE CHANGING PREFERENCES OF OUR
CUSTOMERS, OUR REVENUES COULD SIGNIFICANTLY DECLINE AND WE COULD BE REQUIRED TO
TAKE SIGNIFICANT MARKDOWNS IN INVENTORY.

     Our success depends, in large part, on our ability to identify and
anticipate the changing preferences of our customers and stock our stores with a
wide selection of quality merchandise that appeals to their preferences. Our
customers' preferences for merchandise and particular brands vary from location
to location, and may vary significantly over time. We cannot guarantee that we
will accurately identify or anticipate the changing preferences of our customers
or stock our stores with merchandise that appeals to them. If we do not
accurately identify and anticipate our customers' preferences, we may lose sales
or we

                                        22
<PAGE>

may overstock merchandise, which may require us to take significant markdowns on
our inventory. In either case, our revenues could significantly decline and our
business and financial results may suffer.

WE MAY INCUR MATERIAL COSTS OR LIABILITIES UNDER ENVIRONMENTAL LAWS, WHICH MAY
MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

     We are subject to various foreign, federal, state, and local environmental
protection, chemical control, and health and safety laws and regulations. We own
and lease real property, and some environmental laws hold current or previous
owners or operators of businesses and real property liable for contamination on
or originating from that property, even if they did not know of and were not
responsible for the contamination. The presence of hazardous substances on any
of our properties or the failure to meet environmental regulatory requirements
may materially adversely affect our ability to use or to sell the property or to
use the property as collateral for borrowing, and may cause us to incur
substantial remediation or compliance costs. If hazardous substances are
released from or located on any of our properties, we could incur substantial
liabilities through a private party personal injury or property damage claim or
a claim by a governmental entity for other damages.

     In addition, some of the products we sell contain hazardous or regulated
substances, such as solvents and lead. Environmental laws may impose liability
on any person who disposes of hazardous substances, regardless of whether the
disposal site is owned or operated by such person.

     If we incur material costs or liabilities in the future under environmental
laws for any reason, our results of operations may be materially adversely
affected.

OUR SALES COULD DECLINE IF WE ARE UNABLE TO PROCESS INCREASED TRAFFIC TO OUR
WEBSITE OR TO PREVENT UNAUTHORIZED SECURITY BREACHES.

     A key element of our strategy is to generate a high volume of traffic on,
and use of, our website. Accordingly, the satisfactory performance, reliability
and availability of our website, transaction processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers, as well as maintain adequate customer service levels. Our
Internet revenues will depend on the number of visitors who shop on our website
and the volume of orders we can fill on a timely basis. Problems with our
website or order fulfillment performance would reduce the volume of goods sold
and the attractiveness of our merchandise and could also adversely affect
consumer perception of our brand name. We may experience periodic system
interruptions from time to time. If there is a substantial increase in the
volume of traffic on our website or the number of orders placed by customers, we
may be required to expand and upgrade further our technology, transaction
processing systems and network infrastructure. There can be no assurance that we
will be able to accurately project the rate or timing of increases, if any, in
the use of our website, or that we will be able to expand and upgrade our
systems and infrastructure to accommodate such increases on a timely basis.

     The success of our website depends on the secure transmission of
confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. In addition, we maintain an
extensive confidential database of customer profiles and transaction
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms we use to protect
customer transaction and personal data contained in our customer database. If
any such compromise of our security were to occur, it could have a material
adverse effect on our reputation, business, operating results and financial
condition. A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such breaches.

                                        23
<PAGE>

OUR ACQUISITION OF DON SHERWOOD GOLF SHOP, AND ANY FUTURE ACQUISITIONS, COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS IF UNANTICIPATED LIABILITIES ARE
DISCOVERED OR IF WE FAIL TO SUCCESSFULLY INTEGRATE THE ACQUIRED BUSINESSES INTO
OUR EXISTING OPERATIONS.

     We completed our acquisition of Don Sherwood Golf Shop in July 2003. Our
failure to successfully address the risks associated with this acquisition could
harm our ability to fully integrate and market products. We may discover
liabilities and risks associated with this acquisition that were not discovered
in our due diligence prior to completing the acquisition. Additionally, we may
acquire other businesses in the future, which would complicate our management
tasks. We may need to integrate widely dispersed operations that have different
and unfamiliar corporate cultures. These integration efforts may not succeed or
may distract management's attention from existing business operations. Our
failure to successfully integrate Don Sherwood Golf Shop and future acquisitions
into our existing operations could materially harm our business.

                                        24
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements within the meaning of
the federal securities laws. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
Forward-looking statements include statements preceded by, followed by or that
include the words "may," "could," "would," "should," "believe," "expect,"
"anticipate," "plan," "estimate," "target," "project," "intend," or similar
expressions. These statements include, among others, statements regarding our
expected business outlook, anticipated financial and operating results, our
business strategy and means to implement the strategy, our objectives, the
amount and timing of future store openings, store retrofits and capital
expenditures, the likelihood of our success in expanding our business, financing
plans, working capital needs and sources of liquidity.

     Forward-looking statements are only predictions and are not guarantees of
performance. These statements are based on our management's beliefs and
assumptions, which in turn are based on currently available information.
Important assumptions relating to the forward-looking statements include, among
others, assumptions regarding demand for our products, the introduction of new
product offerings, store opening costs, our ability to lease new sites on a
timely basis, expected pricing levels, the timing and cost of planned capital
expenditures, competitive conditions and general economic conditions. These
assumptions could prove inaccurate. Forward-looking statements also involve
risks and uncertainties, which could cause actual results that differ materially
from those contained in any forward-looking statement. Many of these factors are
beyond our ability to control or predict. Such factors include, but are not
limited to, the risk factors set forth in "Risk Factors."

     We believe our forward-looking statements are reasonable; however, undue
reliance should not be placed on any forward-looking statements, which are based
on current expectations. Further, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.

                                        25
<PAGE>

                                USE OF PROCEEDS

     The notes are being offered solely for the account of Holdings. Holdings
will receive the net proceeds of the sale of the notes offered by this
prospectus, which are estimated to be approximately $5.9 million (assuming an
offering price of 83.8478% of the principal amount at maturity, which was the
book value of the notes as of July 2, 2004), after deducting the estimated
expenses related to this offering. Holdings has indicated that it intends to
contribute the net proceeds of its sale of the notes to us. We intend to use
these amounts to fund possible acquisitions and for working capital and other
general corporate purposes.

                                        26
<PAGE>

                                 CAPITALIZATION

     We estimate that the net proceeds to Holdings from the sale of the notes
offered by this prospectus will be approximately $5.9 million (assuming an
offering price of 83.8478% of the principal amount at maturity, which was the
book value of the notes as of July 2, 2004), after deducting the estimated
expenses related to this offering.

     The following table sets forth the capitalization of Holdings as of April
3, 2004:

     - on an actual basis; and

     - on a pro forma as adjusted basis to give effect to the exchange of
       Atlantic Equity Partners III's notes for shares of common stock of
       Holdings, the sale of the notes by Holdings in this offering (after
       deducting the estimated expenses related to this offering), and the use
       of the proceeds as described in "Use of Proceeds."

     You should read the table below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our unaudited consolidated financial statements and related notes included
elsewhere in this prospectus.

<Table>
<Caption>
                                                               AS OF APRIL 3, 2004
                                                              ----------------------
                                                                          PRO FORMA
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>        <C>
Cash and cash equivalents...................................  $  4,177    $ 10,056
                                                              ========    ========
Total debt:
  Senior credit facility(1).................................  $  1,075    $  1,075
  Senior secured notes due 2009.............................    78,029      78,029
                                                              --------    --------
     Total debt.............................................  $ 79,104    $ 79,104
Stockholders' equity........................................    58,811      64,690
                                                              --------    --------
     Total capitalization...................................  $137,915    $143,794
                                                              ========    ========
</Table>

---------------

(1) As of April 3, 2004, we had $10.9 million of borrowing availability, subject
    to customary conditions, under our senior credit facility (after giving
    effect to required reserves of $500,000).

                                        27
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data as of and for fiscal
1999, 2000, 2001 and for the period from December 30, 2001 through October 15,
2002 have been derived from the audited consolidated financial statements of
Golfsmith International, Inc., and for the period from October 16, 2002 through
December 28, 2002 and as of and for fiscal 2003 have been derived from the
audited consolidated financial statements of Golfsmith International Holdings,
Inc., all periods of which have been audited by Ernst & Young LLP. Golfsmith
International Holdings, Inc. was formed on September 4, 2002 and became the
parent company of Golfsmith International, Inc. on October 15, 2002 as a result
of the merger. Holdings is a holding company and had no material assets or
operations prior to acquiring all of the capital stock of Golfsmith
International, Inc. in the merger. The selected consolidated financial data of
Holdings as of and for the three months ended March 29, 2003 and April 3, 2004
have been derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and, in our opinion, reflect all adjustments,
consisting of normal accruals, necessary for a fair presentation of the data for
those periods. Our results of operations for the three months ended April 3,
2004 may not be indicative of results that may be expected for the full year.
You should read the information set forth below in conjunction with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.

<Table>
<Caption>
                                                 PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,                   THREE MONTHS ENDED
                                         FISCAL YEAR             2001 THROUGH   2002 THROUGH                 --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
<S>                             <C>        <C>        <C>        <C>            <C>            <C>           <C>         <C>
RESULTS OF OPERATIONS:
Net revenues..................  $267,946   $232,080   $221,439     $180,315       $ 37,831      $257,745     $ 45,830    $ 65,782
Cost of products sold.........   175,600    153,630    143,118      117,206         25,147       171,083       30,972      42,807
                                --------   --------   --------     --------       --------      --------     --------    --------
Gross profit..................    92,346     78,450     78,321       63,109         12,684        86,662       14,858      22,975
Selling, general and
  administrative..............    78,360     76,352     64,081       48,308         13,581        73,400       14,259      20,168
Store pre-opening/closing
  expenses....................       493      1,592         --          122             93           600           --         329
Amortization of deferred
  compensation(1).............        --         --        458        6,033             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Total operating expenses......    78,853     77,944     64,539       54,463         13,674        74,000       14,259      20,497
                                --------   --------   --------     --------       --------      --------     --------    --------
Operating income..............    13,493        506     13,782        8,646           (990)       12,662          599       2,478
Interest expense..............    (5,775)    (6,905)    (6,825)      (5,206)        (2,210)      (11,157)      (2,639)     (2,795)
Interest income...............        22         82        597          331              7            40            8           1
Other income, net.............       275        449      1,031        2,365             14           164            3         (11)
Minority interest.............      (583)       454       (581)        (844)            --            --           --          --
Loss on debt
  extinguishment(1)...........        --         --         --       (8,047)            --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) before income
  tax.........................     7,432     (5,414)     8,004       (2,755)        (3,179)        1,709       (2,029)       (327)
Income tax benefit
  (expense)...................      (289)       190       (251)        (709)           633          (645)         811         124
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) from continued
  operations..................     7,143     (5,224)     7,753       (3,464)        (2,546)        1,064       (1,217)       (203)
Income (loss) from
  discontinued operations.....        52       (380)      (590)        (230)           (40)           --           --          --
Income (loss) before
  extraordinary items.........     7,195     (5,604)     7,163       (3,694)        (2,586)        1,064       (1,217)       (203)
Extraordinary items(1)........        --         --         --        4,122             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Net income (loss).............  $  7,195   $ (5,604)  $  7,163     $    428       $ (2,586)     $  1,064     $ (1,217)   $   (203)
                                ========   ========   ========     ========       ========      ========     ========    ========
</Table>

                                        28
<PAGE>

<Table>
<Caption>
                                                 PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,                   THREE MONTHS ENDED
                                         FISCAL YEAR             2001 THROUGH   2002 THROUGH                 --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
<S>                             <C>        <C>        <C>        <C>            <C>            <C>           <C>         <C>
OTHER FINANCIAL DATA:
Depreciation and
  amortization(2).............  $  5,601   $  9,118   $  6,717     $  4,808       $  1,349      $  5,228     $  1,311    $  1,335
Capital expenditures(3).......     9,740      2,107      1,345        2,086          1,127         5,759          409       1,816
Ratio of earnings to fixed
  charges(4)..................       1.6x       0.6x       1.6x         0.7x           0.1x          1.1x         0.5x       0.9x

BALANCE SHEET DATA (AT PERIOD
  END):
Cash and cash equivalents.....  $  3,023   $ 11,149   $ 39,550     $  3,788       $ 11,412      $  2,928     $  2,775    $  4,177
Total assets..................   105,882    106,902    111,500      153,135        160,011       179,327      162,701     196,432
Long-term debt................    23,540     37,145     33,720       75,000         75,380        77,488       77,954      78,029
Total stockholders' equity....    33,004     24,921     32,519       56,011         53,473        58,976       52,246      58,811
</Table>

---------------

(1) For the period from December 31, 2001 through October 15, 2002, please refer
    to note 5 and note 14 in our consolidated financial statements included in
    this prospectus for a discussion of the extraordinary items, loss on debt
    extinguishment and amortization of deferred compensation.

(2) Excludes the amortization of the debt discount and deferred charges
    associated with our 12% senior subordinated notes which were outstanding
    prior to the merger, the deferred charges associated with our credit
    facility in effect prior to the merger, the amortization of the debt
    discount and deferred charges associated with our 8.375% senior secured
    notes and deferred charges associated with our senior credit facility in
    effect subsequent to the merger.

(3) Capital expenditures consist of total capital expenditures, including
    capital costs associated with opening new stores.

(4) The ratio of earnings to fixed charges is calculated by dividing the fixed
    charges into net income before taxes plus fixed charges. Fixed charges
    consist of interest expense, amortization of deferred debt issuance costs
    and the estimated interest component of rent expense.

                                        29
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes included elsewhere in this prospectus.

OVERVIEW

     Golfsmith International Holdings, Inc., or Holdings, became the parent
company of Golfsmith International, Inc., or Golfsmith, on October 15, 2002 as a
result of a purchase business combination, which we refer to as the merger.
Holdings has no assets or liabilities other than its investment in its wholly
owned subsidiary Golfsmith and did not have assets or operations prior to its
acquisition of Golfsmith. The following discussion and analysis of historical
financial condition and results of operations is therefore based on the
financial condition and results of operations of Golfsmith International, Inc.
with respect to periods prior to the merger. The discussion for periods
following the merger is based on the financial condition and results of
operations of Golfsmith International Holdings, Inc.

     We sell brand name golf equipment from the industry's leading manufacturers
including Callaway(R), FootJoy(R), Ping(R), Nike(R), Taylor Made(R) and
Titleist(R) as well as our own proprietary brands, Golfsmith(R), Lynx(R), Snake
Eyes(R), Killer Bee(R) and Zevo(R). We sell through multiple distribution
channels consisting of:

     - 42 golf superstores;

     - regular mailings of our clubmakers' catalogs, which offer golf club
       components, and our accessory catalogs, which offer golf accessories,
       clothing and equipment; and

     - golfsmith.com, our online e-commerce website.

     We also operate a clubmaker training program and are the exclusive operator
of the Harvey Penick Golf Academy, an instructional school incorporating the
techniques of the well-known golf instructor, the late Harvey Penick.

     Over the past few years we have implemented a number of initiatives to
improve our competitive position and financial performance, including closing
under-performing stores, updating and remodeling existing stores, narrowing
product assortments and upgrading our technology and infrastructure. While some
of these initiatives have reduced sales, we believe that these actions have
contributed to improved cash flow, earnings and asset management. We continue to
implement new initiatives surrounding product offerings such as our "Playability
Guarantee" program designed to insure complete customer satisfaction with our
customers' purchase of golf clubs; our "Club Vantage" program that provides the
customer with separately-priced repair service on any club purchase; the
Golfsmith credit card which offers flexible payment options on any purchase; and
the availability of in-store golf lessons through a partnership with GolfTEC
Learning Centers. In April 2004, we formed a partnership with The Golf Digest
Companies in which we will serve as the order fulfillment, distribution and call
center partner for The Golf Digest Pro Shop, the catalog and online store of The
Golf Digest Companies. We opened four stores during the three months ended April
3, 2004 and we plan to open two to four additional superstores during the
remaining three quarters of fiscal 2004. We believe our continued market
expansion combined with these new initiatives have contributed to increased
market presence and brand recognition, as evidenced by our increased comparable
store sales in the three months ended April 3, 2004 compared to the three months
ended March 29, 2003 and in fiscal 2003 compared to fiscal 2002 (see discussion
of comparable store sales below in "-- Results of Operations").

     We recognize revenue for retail sales at the time the customer takes
possession of the merchandise and purchases are paid for, primarily with either
cash or credit card. Catalog and e-commerce sales are recorded upon shipment of
merchandise. Revenue from the Harvey Penick Golf Academy instructional school is
recognized at the time the services are performed. Revenues from the sale of
gift certificates are

                                        30
<PAGE>

recorded upon the redemption of the gift certificate for the purchase of
tangible products at the time the customer takes possession of the merchandise.

     Sales of our products are affected by increases and declines in the golf
industry as a whole. According to national publications, the golf industry is a
greater than $62 billion industry, has a base of over 26 million participants in
the United States and is characterized by favorable demographic trends. During
2002, total consumer golf equipment spending grew by a moderate 1% according to
a national publication. We believe that since 1997, the overall worldwide
premium golf club market has experienced only moderate growth in dollar volume
from year to year and that from 1999 to 2003 there was no material increase in
the number of rounds played. Golf Datatech has reported that during 2003, the
number of golf rounds played in the United States declined 2.6% as compared to
the same period in 2002. Declines in the number of rounds played in 2003 have
been attributed to bad weather, the uncertainty in the U.S. economy, and golfers
spending more time at work and with their families. However, during the first
quarter of 2004, the golf industry exhibited signs of growth. Golf Datatech has
reported that the number of rounds played during the three months ended March
31, 2004 increased by 4.0% over the comparable three-month period in 2003. While
we are optimistic about the potential for increased rounds during the remainder
of 2004 that could spur increased consumer spending, we cannot assure you that
declines in the U.S. economy or a reduction in discretionary consumer spending
will not impede growth in the worldwide market for golf-related products,
including our products.

     Our business is highly seasonal, with sales and earnings peaks during the
Father's Day and Christmas Holiday seasons. A substantial portion of our net
revenues and an even larger portion of our operating income occur in our second
fiscal quarter. You should read the information set forth in "Risk Factors" for
a discussion of the effects and risks of the seasonality of our business.

     We capitalize inbound freight and vendor discounts into inventory upon
receipt of inventory. These costs are then subsequently included in cost of
goods sold upon the sale of that inventory. Because some retailers exclude their
costs from cost of goods sold, and instead include them in a line item like
selling and administrative expenses, our gross margins may not be comparable to
those of these other retailers.

     Our fiscal year ends on the last Saturday in December and generally
consists of 52 weeks, though occasionally our fiscal years will consist of 53
weeks. This occurred in fiscal 2003. Fiscal year 2002 consisted of 52 weeks.
Each quarter of each fiscal year generally consists of 13 weeks. The three month
periods ended April 3, 2004 and March 29, 2003 both consisted of 13 weeks. The
fourth fiscal quarter of 2003 consisted of 14 weeks.

IMPACT OF MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. We accounted for the merger under the purchase method of
accounting for business combinations. In accordance with the purchase method of
accounting, in connection with the merger, we allocated the excess purchase
price over the fair value of our net assets between a write-up of certain of our
assets, which reflect an adjustment to the fair values of these assets, and
goodwill. The assets that have had their fair values adjusted include inventory,
property and equipment, and certain intangible assets.

     As a result of applying the required purchase accounting rules, our
financial statements are significantly affected. The application of purchase
accounting rules results in different accounting bases and hence financial
information for the periods beginning on October 16, 2002. The term "successor"
refers to Golfsmith International Holdings, Inc. and all of its subsidiaries,
including Golfsmith International, Inc. following the acquisition on October 15,
2002. The term "predecessor" refers to Golfsmith International, Inc. prior to
being acquired by Holdings.

     Immediately prior to the merger, we repaid in full our 12% senior
subordinated notes for $34.4 million and terminated our then existing revolving
credit facility. Deferred debt financing costs of $1.6 million were written-off
in connection with the termination of these agreements. We sold 8.375% senior
secured

                                        31
<PAGE>

notes due 2009 with an aggregate principal amount at maturity of $93.75 million
for gross proceeds of $75.0 million in a private placement offering to finance
part of the cash portion of the merger consideration, and entered into a new
senior credit facility to fund our future working capital requirements and for
general corporate purposes as described below in "-- Liquidity and Capital
Resources -- Credit Facility".

     As a result of the merger and the offering of the notes, we currently have
total debt in amounts substantially greater than our historical levels. This
amount of debt and associated debt service costs will lower our net income and
cash provided by operating activities and will limit our ability to obtain
additional debt financing, fund capital expenditures or operating requirements,
open new or retrofit existing stores, and make acquisitions.

     Historically, we operated as a Subchapter S corporation under the Internal
Revenue Code. Consequently, we were not generally subject to federal income
taxes because our stockholders included our income in their personal income tax
returns. Simultaneously with the completion of the merger, we converted from a
Subchapter S corporation to a Subchapter C corporation and consequently became
subject to federal income taxes from that date. This conversion will lower our
future net income and cash provided by operating activities.

     In connection with the merger, all stock options held by our employees
vested and were either canceled in exchange for the right to receive cash or
surrendered in exchange for stock units. As a result, we incurred a non-cash
compensation charge of $4.6 million which was equal to the difference between
the market value of its common stock and the exercise price of these options at
that vesting date. Total non-cash compensation expense for fiscal 2002 and
fiscal 2003 was $6.0 million and $0, respectively. As all options were either
canceled in exchange for the right to receive cash or surrendered in exchange
for stock units concurrent with the merger, there is no future amortization
expense associated with these pre-merger options. For further information about
our stock-based compensation, see Note 1 and Note 14 to our audited consolidated
financial statements included in the prospectus.

BUSINESS COMBINATIONS -- DON SHERWOOD GOLF SHOP

     On July 24, 2003, we acquired all of the issued and outstanding shares of
Don Sherwood Golf Shop, which we refer to as Sherwood, for a total purchase
price of $9.2 million, including related acquisition costs of $0.4 million. We
believe that the Sherwood acquisition supports our goal of expanding our
national presence while gaining exposure to one of the country's top golf
markets in San Francisco, California. We acquired all six Sherwood retail stores
as part of the acquisition. The operations of Sherwood stores are included in
our statements of operations and cash flows as of July 25, 2003 and do not
result in any new segments for us.

     In conjunction with the acquisition of Sherwood, Holdings issued 1,433,333
shares of its common stock to existing stockholders, including its majority
stockholder, for consideration of $4.3 million. The proceeds from the issuance
of common stock were used to fund a portion of the purchase price of the
acquisition of Sherwood. The issuance of these additional shares increased
Holdings' majority stockholder's 79.7% controlling interest to an 80.9%
controlling interest, including issued restricted common stock units, which
entitle the holders to shares of common stock of Holdings, and excluding
outstanding stock options. As of April 3, 2004, after giving effect to the
exchange by Atlantic Equity Partners III, L.P. of all of the notes beneficially
owned by it for additional shares of common stock of Holdings and cash in a
private transaction, Atlantic Equity Partners III, L.P. would have owned
approximately 76.6% of Holdings' common stock on a fully diluted basis
(including outstanding stock options).

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. This allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

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     Contingent consideration of $1.3 million was placed in an escrow account by
us to secure certain indemnification obligations of the selling shareholder.
Pursuant to the terms and conditions of the escrow agreement, these funds were
released from the escrow account and disbursed to the selling shareholder on
June 17, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosures of contingent assets and
liabilities. The estimates and assumptions are evaluated on an ongoing basis and
are based on historical experience and other various factors that are believed
to be reasonable under the circumstances. Actual results may differ from these
estimates.

     We believe the following critical accounting policies, as have been
discussed with our audit committee, affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.

  INVENTORY VALUATION

     Inventory value is presented as a current asset on our balance sheet and is
a component of cost of products sold in our statement of operations. It
therefore has a significant impact on the amount of net income reported in any
period. Merchandise inventories are carried at the lower of cost or market. Cost
is the sum of expenditures, both direct and indirect, incurred to bring
inventory to its existing condition and location. Cost is determined using the
weighted-average method. We estimate a reserve for damaged, obsolete, excess and
slow-moving inventory and for inventory shrinkage due to anticipated
book-to-physical adjustments. We periodically review these reserves by comparing
them to on-hand quantities, historical and projected rates of sale, changes in
selling price and inventory cycle counts. Based on our historical results, using
various methods of disposition, we estimate the price at which we expect to sell
this inventory to determine the potential loss if those items are later sold
below cost. The carrying value for inventories that are not expected to be sold
at or above costs are then written down. A significant adjustment in these
estimates or in actual sales may have a material adverse impact on our net
income. Reserves are booked on a monthly basis at 0.4% to 0.75% of net revenues
depending on the distribution channel (direct-to-consumer channel or retail
channel) in which the sales occur. Inventory shrink expense recorded in the
statements of operations in fiscal 2002 and 2003 was 0.55% and 0.66% of net
sales, respectively, and during the three months ended March 29, 2003 and April
3, 2004 was 0.8% and 0.6% of net sales, respectively. Inventory shrink expense
recorded is a result of physical inventory counts made during these respective
periods and reserve amounts recorded for periods outside of the physical
inventory count dates. These reserve amounts are based on management's estimates
of shrink expense using historical experience.

  LONG-LIVED ASSETS, INCLUDING GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

     We evaluate the impairment of the book value of our indefinite lived
intangibles and related goodwill in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. We
evaluate impairment annually, as well as whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be
recoverable based on a combination of our projection of estimated future
discounted cash flows and other valuation methodologies. We evaluate the
impairment of the book value of our long-lived assets including intangible
assets subject to amortization in accordance with SFAS No. 144, Impairment of
Long-Lived Assets, based on our projection of estimated future undiscounted cash
flows whenever events or changes in circumstances indicate that the carrying
amounts of these assets may not be recoverable. Factors that are considered by
management in performing this assessment include, but are not limited to, our
performance relative to our projected or historical results, our intended use of
acquired assets and our strategy for our overall business, as well as industry
and economic trends. In the event that the book value of intangibles, long-lived
assets
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and related goodwill is determined to be impaired, such impairments are measured
using a combination of a discounted cash flow valuation, with a discount rate
determined to be commensurate with the risk inherent in our current business
model, and other valuation methodologies. To the extent these future projections
or our strategies change, our estimates regarding impairment may differ from our
current estimates. In accordance with SFAS No. 142, we determined that our
recorded tradename and trademarks have indefinite useful lives and therefore are
not amortized. Based on our analyses, no impairment of long-lived assets,
including goodwill and identifiable intangible assets, was recorded in either
fiscal 2002 or fiscal 2003.

  PRODUCT RETURN RESERVES

     We reserve for product returns based on estimates of future sales returns
related to our current period sales. We analyze historical returns, current
economic trends and changes in customer acceptance of our products when
evaluating the adequacy of the reserve for sales returns. Any significant
increase in merchandise returns that exceeds our estimates could adversely
affect our operating results. In addition, we may be subject to risks associated
with defective products, including product liability. Our current and future
products may contain defects, which could subject us to higher defective product
returns, product liability claims and product recalls. Because our allowances
are based on historical return rates, we cannot assure you that the introduction
of new merchandise in our stores or catalogs, the opening of new stores, the
introduction of new catalogs, increased sales over the Internet, changes in the
merchandise mix or other factors will not cause actual returns to exceed return
allowances. We book reserves on a monthly basis at 2% to 10% of net revenues
depending on the distribution channel in which the sales occur. We routinely
compare actual experience to current reserves and make any necessary
adjustments.

  STORE CLOSURE COSTS

     When we decide to close a store and meet the applicable accounting guidance
criteria, we recognize an expense related to the future net lease obligation,
non-recoverable investments in related fixed assets and other expenses directly
related to the discontinuance of operations in accordance with SFAS No. 146,
Accounting For Costs Associated With Exit or Disposal Activities. These charges
require us to make judgments about exit costs to be incurred for employee
severance, lease terminations, inventory to be disposed of, and other
liabilities. The ability to obtain agreements with lessors, to terminate leases
or to assign leases to third parties can materially affect the accuracy of these
estimates.

     We closed two stores in fiscal 2000, one store in fiscal 2001 and two
stores in fiscal 2002. These stores were selected for closure by evaluating the
historical and projected financial performance of all of our stores in
accordance with our store strategy. In each case, the stores that have been
closed were our only store in that market and were substantially larger in size
than our current store prototype. We did not close any stores in fiscal 2003 or
in the three month period ended April 3, 2004. We do not currently have any
plans to close any additional stores, although we regularly evaluate our stores.

  DEFERRED TAX ASSETS

     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 resulting from temporary
differences in the financial reporting and tax bases of assets and liabilities.
We provide a valuation allowance for our deferred tax assets when, in the
opinion of management, it is more likely than not that such assets will not be
realized. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to realize
our deferred tax assets in the future in excess of our net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise, should we determine that we would not be able
to realize all or part of our net deferred tax asset in the future as a result
of net losses, an adjustment to the deferred tax asset would be charged to
income in the period such determination was made.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46),
which was revised in December 2003 (FIN 46(R)). FIN 46(R) requires that
companies consolidate a variable interest entity if they are subject to a
majority of the risk of loss from the variable interest entity's activities or
are entitled to receive a majority of the entity's residual returns, or both.
The provisions of FIN 46(R) currently are required to be applied no later than
the first reporting period ending after March 15, 2004 for variable interest
entities. We have no special purpose entities, nor have we acquired a variable
interest in an entity where we are the primary beneficiary. The adoption of FIN
46(R) did not have a material impact on the our financial condition, results of
operations or cash flows.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS No. 150 did not have a material impact on our results of
operations or financial position.

RESULTS OF OPERATIONS

  THREE MONTHS ENDED APRIL 3, 2004 COMPARED TO THREE MONTHS ENDED MARCH 29, 2003

     We had net revenues of $65.8 million, operating income of $2.5 million and
a net loss of $0.2 million in the three months ended April 3, 2004 compared to
net revenues of $45.8 million, operating income of $0.6 million and a net loss
of $1.2 million in the three months ended March 29, 2003.

     The $20.0 million increase in net revenues from the three months ended
March 29, 2003 to the three months ended April 3, 2004 was mostly comprised of a
$6.0 million increase, or 23.9%, in comparable store revenues and a $10.9
million increase in non-comparable store revenues (including six stores acquired
in the acquisition of Don Sherwood Golf Shop on July 24, 2003). In comparison,
comparable store revenues for the three months ended March 29, 2003 declined
2.2%. We believe increased comparable store sales from the three months ended
March 29, 2003 to the three months ended April 3, 2004 are correlated with the
4.0% increase in the number of golf rounds played in the U.S. during the first
quarter of 2004 as compared to the same quarter in 2003, as reported by Golf
Datatech, as well as the cross-marketing benefits of our multi-channel retail
model combined with activity related to our new and existing specialty retail
services. We consider sales of a store to be comparable commencing in the
fourteenth month after the store was opened or acquired. Direct to consumer
channel revenues increased $2.4 million, or 12.2%, from the three months ended
March 29, 2003 to the three months ended April 3, 2004. International revenues
increased $0.7 million from the three months ended March 29, 2003 to the three
months ended April 3, 2004.

     For the three months ended April 3, 2004, gross profit was $23.0 million,
or 34.9% of net revenues, compared to $14.9 million, or 32.4% of net revenues,
for the three months ended March 29, 2003. Increased net revenues for the three
months ended April 3, 2004 compared to the three months ended March 29, 2003 led
to higher gross profit for the three months ended April 3, 2004. The increase in
gross margin percentage resulted from increased sales in higher margin
merchandise categories combined with improved selling and merchandising
practices.

     Selling, general and administrative expenses increased $5.9 million to
$20.2 million for the three months ended April 3, 2004 from $14.3 million for
the three months ended March 29, 2003. Increased selling, general and
administrative expenses for the three months ended April 3, 2004 compared to the
three months ended March 29, 2003 resulted from an increase in expenses of $4.3
million related to sixteen additional retail stores in operation for the three
months ended April 3, 2004 (including six stores acquired in the acquisition of
Don Sherwood Golf Shop on July 24, 2003) compared to the three months

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ended March 29, 2003 and an increase of $1.6 million related to general
operations for existing retail stores and corporate expenses.

     Pre-opening costs include costs associated with hiring and training
personnel, supplies and certain occupancy and miscellaneous costs related to new
store openings and are expensed as incurred. Pre-opening costs are incurred
primarily in the 30 days prior to the grand opening of a new store. During the
three months ended April 3, 2004, we incurred approximately $0.3 million in
pre-opening expenses related to the opening of four new retail locations. We did
not incur any pre-opening costs in the three months ended March 29, 2003.

     Interest expense consists of costs related to our 8.375% senior secured
notes and our senior credit facility. Interest expense increased $0.2 million to
$2.8 million for the three months ended April 3, 2004 from $2.6 million for the
three months ended March 29, 2003. The increase was primarily the result of an
increase in our average outstanding daily balance under our revolving senior
credit facility. For further discussion see "-- Liquidity and Capital
Resources -- Senior Secured Notes" and "-- Liquidity and Capital
Resources -- Credit Facility" below.

     We record income taxes, consisting of federal, state and foreign taxes,
based on the effective rate expected for the fiscal year. Actual results may
differ from these estimates. The benefit from income taxes was $0.1 million, or
38.0% of pre-tax net loss, for the three months ended April 3, 2004. The benefit
from income taxes was $0.8 million, or 40.0% of pre-tax net loss, for the three
months ended March 29, 2003. The decrease in our effective tax rate was
attributable to lower than projected effective state income tax rates.

  SUCCESSOR FISCAL 2003 COMPARED TO COMBINED FISCAL 2002

     For comparison purposes, references to "fiscal 2002" refer to the combined
financial results of our predecessor from December 30, 2001 through October 15,
2002 and of Holdings from October 16, 2002 through December 28, 2002. In
conjunction with the acquisition of Golfsmith, Golfsmith, being the surviving
wholly owned subsidiary of Holdings, issued the 8.375% senior secured notes at a
20% discount off of face value for gross proceeds of $75.0 million.

     We had net revenues of $257.7 million, operating income of $12.7 million
and net income of $1.1 million in fiscal 2003 compared to net revenues of $218.1
million, operating income of $7.7 million and a net loss of $2.2 million in
fiscal 2002.

     The $39.6 million increase in net revenues from fiscal 2002 to fiscal 2003
was mostly comprised of a $9.1 million increase, or 7.4%, in comparable store
revenues, a $18.2 million increase in revenue generated by twelve retail stores
that were opened or acquired subsequent to December 28, 2002 (including six
stores acquired in the acquisition of Don Sherwood Golf Shop on July 24, 2003),
and a $11.2 million increase in other non-comparable stores. Direct to consumer
channel revenues increased $0.9 million, or 1.0%, from fiscal 2002 to fiscal
2003. International revenues increased $0.2 million, or 4.0%, from fiscal 2002
to fiscal 2003.

     For fiscal 2003, gross profit was $86.7 million, or 33.7% of net revenues,
compared to $75.8 million, or 34.8% of net revenues, for fiscal 2002. Increased
net revenues in fiscal 2003 compared to fiscal 2002 led to higher gross profits
for fiscal 2003. The decline in gross profit percentage resulted principally
from higher sales in lower margin merchandise categories such as equipment. We
realized additional declines in gross profit percentage as a result of multiple
sales promotions during fiscal 2003 which were designed to drive revenues.
Additionally, in fiscal 2003, we incurred approximately $0.7 million of
non-recurring costs included in cost of goods sold resulting from the fair value
adjustment made to inventory as part of the merger transaction in October 2002.

     Selling, general and administrative expenses increased $11.5 million to
$73.4 million for fiscal 2003 from $61.9 million for fiscal 2002. We had twelve
additional retail stores in operation during fiscal 2003 compared to fiscal 2002
(including six stores acquired in the acquisition of Don Sherwood Golf Shop on
July 24, 2003), resulting in an increase in selling, general and administrative
expenses of $7.3 million. In
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<PAGE>

fiscal 2003, we also incurred increased costs relating to and resulting from the
merger transaction on October 15, 2002, including a $0.6 million increase in
depreciation and amortization resulting from the fair value adjustments made as
part of the merger transaction. Additionally, in fiscal 2003 we incurred
increased expenses of $0.9 million related to professional fees associated with
our filings with the Securities and Exchange Commission and other company
initiatives, $0.5 million related to management fees paid to our majority
stockholder, $2.2 million related to salaries and benefits, $1.5 million related
to occupancy costs such as rent and utilities, and $0.3 million related to
advertising expenses. These increases were offset by a $1.8 million decrease in
depreciation expense in fiscal 2003 compared to fiscal 2002.

     During fiscal 2003, we incurred approximately $0.6 million in pre-opening
expenses related to the opening of six new retail locations fiscal 2003. During
fiscal 2002, we closed two stores and opened three stores. The two closed stores
accounted for $2.0 million in net revenues and $0.3 million in operating losses
in fiscal 2002. Store closure expenses were $0.3 million in fiscal 2002. Store
closure expenses for stores closed in 2002 are reflected in discontinued
operations in accordance with SFAS No. 144, Impairment of Long-Lived Assets. We
incurred approximately $0.2 million in store pre-opening expenses in fiscal
2002.

     Amortization of deferred compensation was approximately $6.0 million for
fiscal 2002. Deferred compensation is related to the accounting for stock
options under variable plan accounting guidance. These non-cash charges did not
exist in fiscal 2003 due to all remaining outstanding options becoming vested
and being either canceled in exchange for the right to receive cash or
surrendered in exchange for stock units on the merger date of October 15, 2002.
See "-- Impact of Merger" above for further discussion.

     For fiscal 2002, interest expense consisted of costs related to our 12%
senior subordinated notes, a mortgage note and a bank line of credit.
Immediately prior to the merger in October 2002, we repaid the senior
subordinated notes and other pre-existing debt and a new line of credit was put
in place. Interest expense was $11.2 million and $7.4 million in fiscal 2003 and
2002, respectively. Interest expense increased as debt balances during fiscal
2003 were almost three times higher than during most of fiscal 2002.
Approximately $0.9 million of amortization of debt issuance costs resulting from
the new senior secured notes and senior credit facility during fiscal 2003 as
compared to approximately $0.6 million of amortization of debt issuance costs
related to the senior subordinated notes and prior credit facility during fiscal
2002 also contributed to the increase in interest expense. For further
discussion, see "-- Liquidity and Capital Resources -- Senior Secured Notes" and
"-- Liquidity and Capital Resources -- Credit Facility" below. Interest income
was approximately $40,000 and $0.3 million in fiscal 2003 and 2002,
respectively. The decrease in interest income was the result of overall lower
cash and cash equivalent balances combined with lower interest rates.

     Other income, net of other expenses was approximately $164,000 for fiscal
2003, compared to other income, net of other expenses of $2.4 million for fiscal
2002. In March 2002, the rights to certain intellectual property were sold for
gross proceeds of $3.3 million, resulting in a $2.2 million gain which accounts
for most of the difference.

     On October 15, 2002, immediately prior to the merger, we repaid in full our
12% senior subordinated notes. We recorded a loss of $8.0 million on the
extinguishment of this debt, as reported in continuing operations.

     We recognized a loss of $0.3 million in fiscal 2002 from discontinued
operations related to the operations and final closing costs associated with
closing two retail locations during fiscal 2002 due to poor operating
performance and the lack of market penetration being derived from these
single-store markets. Store closure costs include writedowns of remaining
leasehold improvements and store equipment to estimated fair values and lease
termination costs. We recorded a loss on the disposal of these assets in fiscal
2002 of $0.3 million, which is reported in discontinued operations under the
accounting guidance of SFAS No. 144, Impairment of Long-Lived Assets. All
related assets and liabilities for this location have been eliminated from each
of the consolidated balance sheets included in this prospectus. We did not close
or determine any stores to be discontinued during fiscal 2003.

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     Minority interest expense during fiscal 2002 of $0.8 million relates to an
obligation that was associated with partnership interests issued in 1998.
Immediately prior to the merger, we repurchased this minority interest
obligation. The minority interest obligation had a carrying value of $13.1
million and was repurchased for $9.0 million, resulting in the recording of
negative goodwill during the fourth quarter of fiscal 2002.

     Historically, we elected to be treated as a Subchapter S Corporation under
the Internal Revenue Code. Consequently, we were not generally subject to
federal income taxes because our stockholders included our income in their
personal income tax returns. Concurrently with the completion of the merger, we
converted from a Subchapter S corporation to a Subchapter C corporation and
consequently became subject to federal income taxes from that date. For fiscal
2003, our income tax expense was $0.6 million, which consisted of federal, state
and foreign taxes for a consolidated 38% tax rate, compared to income tax
expense of $0.1 million for fiscal 2002 which related to our European and
Canadian operations as well as certain state income taxes.

  COMBINED FISCAL 2002 COMPARED TO PREDECESSOR FISCAL 2001

     For comparison purposes, references to "fiscal 2002" refer to the combined
financial results of our predecessor from December 30, 2001 through October 15,
2002 and of Holdings from October 16, 2002 through December 28, 2002.

     We had net revenues of $218.1 million, operating income of $7.7 million and
a net loss of $2.2 million in fiscal 2002 compared to net revenues of $221.4
million, operating income of $13.8 million and net income of $7.2 million in
fiscal 2001.

     The $3.3 million decline in net revenues from fiscal 2002 to fiscal 2001
was due to one store that closed in 2001 and one store that closed in January
2002 and therefore did not contribute to 2002 revenues, accounting for a
reduction in revenues of $1.3 million combined with a $4.7 million reduction in
revenues in our direct to consumer channel. These revenue declines were
partially offset by the opening of three new stores in fiscal 2002, resulting in
$2.2 million in revenues, as well as an increase in international revenues of
$0.5 million. Revenues from comparable stores remained consistent with a 0.1%
increase from fiscal 2001 to fiscal 2002.

     In fiscal 2002, gross profit was $75.8 million, or 34.8% of net revenues,
compared to $78.3 million, or 35.4% of net revenues, in fiscal 2001. Gross
profit declined due to the lower net revenues and lower gross profit margins
resulting principally from higher sales in lower margin merchandise categories
such as equipment.

     Selling, general and administrative expenses, excluding store
pre-opening/closing expenses, decreased $2.2 million to $61.9 million in fiscal
2002 from $64.1 million in fiscal 2001. The decrease was the result of
improvements in management of administrative expenses, which decreased by $2.6
million, as well as a reduction in store payroll, which decreased by $0.2
million. Those reductions were partially offset by a $0.6 million increase in
advertising expense.

     During fiscal 2002, we closed two stores, opened one store in June and
opened two stores in November. The two closed stores accounted for $2.0 million
and $7.8 million in net revenues and $0.3 million and $0.6 million in operating
loses in fiscal 2002 and 2001, respectively. Store closure expenses were $0.3
million and $0.7 million in fiscal 2002 and 2001, respectively. Store closure
expenses for stores closed in 2002 are reflected in discontinued operations in
accordance with SFAS No. 144, Impairment of Long-Lived Assets. We incurred
approximately $0.2 million in store pre-opening expenses in fiscal 2002.

     Amortization of deferred compensation increased $5.5 million to $6.0
million in fiscal 2002 compared to $0.5 million in 2001. Deferred compensation
is related to the accounting for stock options under variable plan accounting
guidance. These non-cash charges increased over the prior year due to all
remaining outstanding options becoming vested on the merger date of October 15,
2002. See "-- Impact of Merger" above for further discussion.
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     For all of fiscal 2001 and a majority of fiscal 2002, interest expense
consisted of costs related to our 12% senior subordinated notes, a mortgage note
and our prior credit facility. Immediately prior to the merger in October 2002,
we repaid our senior subordinated notes and other pre-existing debt with the net
proceeds from our senior secured notes, which were $67.9 million. Interest
expense was $7.4 million and $6.8 million for fiscal 2002 and fiscal 2001,
respectively. Interest expense increased as a result of increased borrowings in
fiscal 2002 compared to fiscal 2001. The senior subordinated notes and
borrowings under our prior credit facility were repaid in connection with the
merger in October 2002 and a new line of credit and the senior secured notes
were put in place. For further discussion, see "-- Liquidity and Capital
Resources -- Senior Secured Notes" and "-- Liquidity and Capital
Resources -- Credit Facility" below. In fiscal 2002 and fiscal 2001, interest
income was $0.3 million and $0.6 million, respectively.

     Other income, net of other expenses was $2.4 million in fiscal 2002,
compared to other income, net of other expenses of $1.0 million for fiscal 2001.
The increase is due primarily to a gain on the sale of assets. In March 2002,
the rights to certain intellectual property were sold for gross proceeds of $3.3
million, resulting in a $2.2 million gain. In March 2001, unutilized real estate
adjacent to our Austin facilities was sold, which resulted in a $1.1 million
gain.

     On October 15, 2002, immediately prior to the merger, we repaid in full our
12% senior subordinated notes. We recorded a loss of $8.0 million on the
extinguishment of this debt, as reported in continuing operations.

     We recognized a loss of $0.3 million and $0.6 million in fiscal 2002 and
2001, respectively, from discontinued operations related to the operations and
final closing costs associated with closing two retail locations in fiscal 2002
due to poor operating performance and the lack of market penetration being
derived from these single-market stores. We recorded a loss on the disposal of
these assets in fiscal 2002 of $0.3 million, which is reported in discontinued
operations under the accounting guidance of SFAS No. 144, Impairment of
Long-Lived Assets. All related assets and liabilities for these two locations
have been eliminated from the consolidated balance sheets included in this
prospectus.

     Minority interest expense during fiscal 2002 of $0.8 million and during
fiscal 2001 of $0.6 million relates to an obligation that was associated with
partnership interests issued in 1998. Immediately prior to the merger, we
repurchased this minority interest obligation. The minority interest obligation
had a carrying value of $13.1 million and was repurchased for $9.0 million,
resulting in the recording of negative goodwill during the fourth quarter of
fiscal 2002. In accordance with SFAS No. 141, Business Combinations, this gain
was recorded on the statement of operations as an extraordinary item in fiscal
2002.

     Historically, we elected to be treated as a Subchapter S Corporation under
the Internal Revenue Code. Consequently, we were not generally subject to
federal income taxes because our stockholders included our income in their
personal income tax returns. For fiscal 2002, income tax expense was $0.1
million compared to income tax expense of $0.3 million for fiscal 2001, related
to our European and Canadian operations as well as certain state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

     As of April 3, 2004, we had $4.2 million in cash and cash equivalents,
working capital of $18.6 million and outstanding debt obligations of $79.1
million. We had $10.9 million in borrowing availability under our credit
facility as of April 3, 2004.

  OPERATING ACTIVITIES

     Net cash provided by operating activities was $3.4 million for the three
months ended April 3, 2004, compared to $10.3 million in net cash used in
operating activities for the three months ended March 29, 2003. The increase in
net cash provided by operating activities of $13.7 is attributable to three main
causes. First, our net loss decreased by $1.0 million, from a $1.2 million net
loss for the three months
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ended March 29, 2003 to a $0.2 million net loss for the three months ended April
3, 2004. Second, we were able to increase our net revenues during the three
months ended April 3, 2004, including a 23.9% increase in comparable store
revenues, without experiencing a comparable outflow of cash for the purchases of
the related inventory due to more favorably negotiated vendor terms. As a
result, for the three months ended April 3, 2004, the increase in accounts
payable in excess of cash used to purchase and maintain inventory provided cash
of $6.2 million. For the three months ended March 29, 2003, the increase in
accounts payable was less than the related increase in inventory, resulting in
cash used in operating activities of $5.2 million. Third, changes in other
working capital accounts associated with ongoing operations contributed $1.3
million to cash provided by operating activities.

     Net cash provided by operating activities was $1.1 million for fiscal 2003,
compared to $20.2 million in net cash provided by operating activities for
fiscal 2002. This decrease in net cash provided by operations during fiscal 2003
as compared to fiscal 2002 is primarily attributable to additional cash of $13.4
million used to fund working capital requirements during fiscal 2003 as compared
to fiscal 2002 as we utilized cash to grow and expand operations. Additional
cash of approximately $16.5 million was used during fiscal 2003 as compared to
fiscal 2002 to fund normal inventory requirements. These requirements were
primarily the result of having twelve additional retail stores in operation
subsequent to fiscal 2002 combined with an increased effort to be better stocked
in all retail stores during fiscal 2003. The cash used to fund inventory
requirements was offset by an increase of $3.1 million in cash generated from
working capital accounts during fiscal 2003 as compared to fiscal 2002. In
addition, in fiscal 2002 we recognized certain non-recurring non-cash expenses,
net of gains, totaling $8.6 million that were additive to the fiscal 2002 net
loss in determining fiscal 2002 net cash provided by operating activities. These
combined decreases in net cash provided by operating activities in fiscal 2003
compared to fiscal 2002 were offset by the fact that we generated net income of
$1.1 million in fiscal 2003 compared to a net loss of $2.1 million in fiscal
2002.

  INVESTING ACTIVITIES

     Net cash used in investing activities was $1.8 million for the three months
ended April 3, 2004, compared to net cash used in investing activities of $0.4
million for the three months ended March 29, 2003. Net cash used in investing
activities for the three months ended April 3, 2004 of $1.8 million was almost
entirely the result of capital expenditures. For the three months ended April 3,
2004, capital expenditures were comprised of $1.3 million for new and existing
stores and $0.5 million for corporate projects. Net cash used in investing
activities for the three months ended March 29, 2003 of $0.4 million was almost
entirely the result of capital expenditures. For the three months ended March
29,2003, capital expenditures were comprised of $0.2 million for new and
existing stores and $0.2 million for corporate projects.

     Net cash used in investing activities was $15.3 million for fiscal 2003,
compared to net cash provided by investing activities of $0.1 million for fiscal
2002. Net cash used in investing activities for fiscal 2003 of $15.3 million was
the result of capital expenditures of $5.8 million, $0.9 million related to
asset purchases, and $8.6 million related to our acquisition of Don Sherwood
Golf Shop. In fiscal 2003, capital expenditures were comprised of $5.2 million
for new and existing stores and $0.6 million for corporate projects. Net cash
provided by investing activities for fiscal 2002 of $0.1 million was the result
of proceeds from the sale of certain intellectual property of $3.3 million,
which was partially offset by $3.2 million in capital expenditures. In fiscal
2002, capital expenditures were comprised of $2.7 million for new and existing
stores and $0.5 million for corporate projects.

  FINANCING ACTIVITIES

     Net cash used in financing activities was $0.3 million for the three months
ended April 3, 2004, compared to net cash provided by financing activities of
$2.1 million for the three months ended March 29, 2003. Net cash used in
financing activities for the three months ended April 3, 2004 of $0.3 million
was comprised primarily of payments on our senior credit facility of $0.3
million, net of proceeds from borrowings. Net cash provided by financing
activities for the three months ended March 29,
                                        40
<PAGE>

2003 of $2.1 million was comprised primarily of proceeds from borrowings under
our senior credit facility of $2.1 million, net of payments.

     Net cash provided by financing activities was $5.6 million for fiscal 2003,
compared to net cash used in financing activities of $48.5 million for fiscal
2002. Net cash provided by financing activities for fiscal 2003 of $5.6 million
was comprised of proceeds from a line of credit of $1.4 million, net of
payments, $4.3 million in proceeds from the issuance of common stock primarily
related to the purchase of Don Sherwood Golf Shop, offset by $0.1 million
relating to payments of debt issuance costs and notes payable. Net cash used in
financing activities in fiscal 2002 of $48.5 million was comprised of principal
payments on long-term debt of $41.7 million, payments to satisfy debt and
minority interest obligations of $10.6 million, distributions to stockholders of
$35.9 million as a result of the merger in October 2002 discussed above and
dividends paid to stockholders of $3.5 million. We received proceeds of $43.2
million from the issuance of common stock associated with the merger.

SENIOR SECURED NOTES

     On October 15, 2002, we completed a private placement of $93.75 million
aggregate principal amount at maturity of our 8.375% senior secured notes due
2009 for gross proceeds of $75.0 million. In July 2003, we conducted an exchange
offer in which we offered to exchange new senior secured notes registered under
the Securities Act of 1933 for all of our eligible existing senior secured
notes. The terms of the new notes are substantially identical as those issued in
the private placement, except the new notes are freely tradable. Holdings fully
and unconditionally guarantees the notes. As a result of the covenants in the
indenture governing the notes, our ability to borrow under the credit facility
described below is restricted to a maximum of $12.5 million and the payment of
dividends or repurchases of stock are limited. The proceeds from the sale of the
notes were used to pay part of the cash portion of the merger consideration and
for fees and expenses of the offering and merger.

     As a result of the merger and the offering of the notes, we currently have
total debt in amounts substantially greater than historical levels. This amount
of debt and associated debt service costs could lower our net income and cash
provided by operating activities and will limit our ability to obtain additional
debt financing, fund capital expenditures or operating requirements, open new or
retrofit existing stores, and make acquisitions.

CREDIT FACILITY

     Historically, our principal sources of liquidity consisted of cash from
operations and financing sources. In fiscal 1998, we issued in a private
placement $30.0 million of our 12% senior subordinated notes and partnership
interests that could have been converted into warrants to purchase shares of our
common stock under certain circumstances. We repaid in full the 12% senior
subordinated notes in connection with the merger.

     Concurrently with the merger, we entered into a revolving senior credit
facility with $9.5 million availability (after giving effect to required
reserves of $500,000), subject to customary conditions, to fund our working
capital requirements and for general corporate purposes. Three of our
subsidiaries are borrowers under the senior credit facility and we, our other
subsidiaries and Holdings fully and unconditionally guarantee the senior credit
facility. The credit agreement is secured by a pledge of our inventory,
receivables, and certain other assets. The credit agreement provides for
same-day funding of the revolver, as well as letters of credit up to a maximum
of $1 million. The credit agreement contains various covenants restricting our
activities, such as payment of dividends on our capital stock, as well as
covenants regarding maximum indebtedness, minimum interest coverage ratios,
maximum capital expenditures and minimum earnings levels. Borrowings under the
credit facility may be made, at our option, as either an index rate loan or a
LIBOR rate loan. Index rate loans bear interest at the higher of (1) the Wall
Street Journal posted base rate on corporate loans or (2) the federal funds
rate, in each case plus 1%. LIBOR rate loans bear interest at a rate based on
LIBOR plus 2.5%. A fee of 2.5% per annum of the amount available under
outstanding letters of credit is due and payable monthly. We are also required
to pay a

                                        41
<PAGE>

monthly commitment fee equal to 0.5% of the undrawn availability, as calculated
under the agreement. As of April 3, 2004, we had $1.1 million in borrowings
outstanding under the credit agreement and were in compliance with the
covenants.

     In January 2003, the senior credit facility was amended to extend the
period of time permitted to obtain certain waivers from landlords of leased
premises in connection with collateral under the senior credit facility. In
September 2003, the senior credit facility was amended to clarify certain
definitions contained in the agreement relating to minimum levels of EBITDA (as
defined in the senior credit facility) for each of the three fiscal quarters
ending on or about December 31, 2002, March 31, 2003, and June 30, 2003. In
February 2004, the senior credit facility was amended in order to increase the
borrowing availability from $10 million to $12.5 million, in each case subject
to required reserved of $500,000. In March 2004, the senior credit facility was
amended to decrease the minimum levels of EBITDA (as defined in the senior
credit facility) for the fiscal quarters ending on or about March 31, 2004 and
June 30, 2004 and to decrease the minimum interest coverage ratios for the first
three fiscal quarters of 2004. Due to a higher retail store base than was in
existence at the origination of the facility as well as accelerated growth
plans, we believe the increased availability and the modification of certain
short-term financial covenants better matches our currently projected cash
needs.

     For a detailed description of our senior credit facility, see "Description
of Senior Credit Facility."

     Borrowings under the credit agreement are expected to increase as working
capital increases in anticipation of the important selling periods in late
spring and in advance of the Christmas holiday, and then decline following these
periods. In the event sales results are less than anticipated and our working
capital requirements remain constant, the amount available under the credit
facility may not be adequate to satisfy our needs. If this occurs, we may not
succeed in obtaining additional financing in sufficient amounts and on
acceptable terms. Our ability to borrow under the credit agreement is limited in
some circumstances.

CAPITAL EXPENDITURES

     Subject to our ability to generate sufficient cash flow, in fiscal 2004 we
currently plan to spend $6.0 million to $8.0 million on corporate projects, to
open additional stores and/or to retrofit existing stores, of which $1.8 million
was expended during the three months ended April 3, 2004. However, to the extent
that we use capital for acquisitions, our store openings and retrofittings will
be reduced.

CONTRACTUAL OBLIGATIONS

     Our future contractual obligations related to long-term debt and
noncancellable operating leases at April 3, 2004 are as follows:

<Table>
<Caption>
                                                      PAYMENTS DUE BY PERIOD
                                   ------------------------------------------------------------
                                              LESS THAN
CONTRACTUAL OBLIGATIONS             TOTAL      1 YEAR     1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
-----------------------            --------   ---------   ---------   ---------   -------------
                                                          (IN THOUSANDS)
<S>                                <C>        <C>         <C>         <C>         <C>
Long-term debt...................  $ 93,750    $    --     $    --     $18,750      $ 75,000
Operating leases.................  $ 94,059    $12,137     $23,163     $20,698      $ 38,061
                                   --------    -------     -------     -------      --------
  Total..........................  $187,809    $12,137     $23,163     $39,448      $113,061
                                   ========    =======     =======     =======      ========
</Table>

     We issue purchase orders for merchandise which may be cancelled prior to
the vendor's scheduled shipment under certain circumstances, such as the
vendor's breach of its obligations to us.

     We expect that our principal uses of cash for the next several years will
be interest payments on the notes and our senior credit facility, capital
expenditures, primarily for new store openings, possible acquisitions (to the
extent permitted by the lenders under our senior credit facility and under the
indenture

                                        42
<PAGE>

governing the notes), working capital requirements and our contractually
obligated operating lease payments. Additionally, subsequent to fiscal 2003, we
are required to (1) offer to repurchase a portion of the notes at 100% of their
accreted value within 120 days after the end of each fiscal year with 50% of our
excess cash flow, as defined in the indenture governing the notes, and (2) under
certain circumstances, purchase senior secured notes at 101% of their accreted
value plus accrued and unpaid interest, if any, to the date of purchase.
Subsequent to the end of fiscal 2003, we determined that we did not have any
excess cash flow, as defined in the indenture, in fiscal 2003 and we were thus
not required to offer to repurchase any of the notes. We believe that cash from
operations combined with borrowing availability under our senior credit facility
will be sufficient to meet our expected debt service requirements, planned
capital expenditures and operating needs. However, we have limited ability to
obtain additional debt financing to fund working capital needs and capital
expenditures should cash from operations and from our senior credit facility be
insufficient. At April 3, 2004, there was $10.9 million of borrowing
availability under the senior credit facility. We believe that the financial
support of Holdings' principal stockholder and the use of our senior credit
facility offer us potential funding avenues to meet working capital
requirements. Further, we believe discretionary cash outflows related to new
store openings, advertising and capital expenditures can be adjusted accordingly
if needed to meet working capital requirements. If cash from operations is not
sufficient, we cannot assure you that we will be able to obtain additional
financing in sufficient amounts and on acceptable terms. You should read the
information set forth under "Risk Factors" for a discussion of the risks
affecting our operations.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements, as defined by the rules
and regulations of the Securities and Exchange Commission.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risks, which include changes in U.S. interest
rates and, to a lesser extent, foreign exchange rates. We do not engage in
financial transactions for trading or speculative purposes.

  INTEREST RATE RISK

     The interest payable on our senior credit facility is based on variable
interest rates and therefore affected by changes in market interest rates. If
the maximum available under the credit facility of $12.5 million is drawn and
interest rates on existing variable rate debt rose to greater than 15.25%, our
results from operations and cash flows may be materially affected. Our interest
rate risk objectives are to limit the impact of interest rate fluctuations on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, we manage our exposure to fluctuations in market interest rate
for a portion of our borrowings through the use of fixed rate debt instruments
to the extent that reasonably favorable rates are obtainable with such
arrangements. We may enter into derivative financial instruments such as
interest rate swaps or caps and treasury options or locks to mitigate our
interest rate risk on a related financial instrument or to effectively fix the
interest rate on a portion of our variable rate debt. Currently, we are not a
party to any derivative financial instruments. We do not enter into derivative
or interest rate transactions for speculative purposes. We regularly review
interest rate exposure on our outstanding borrowings in an effort to minimize
the risk of interest rate fluctuations.

  FOREIGN CURRENCY RISKS

     We purchase a significant amount of products from outside of the U.S.
However, these purchases are primarily made in U.S. dollars and only a small
percentage of our international purchase transactions are in currencies other
than the U.S. dollar. Any currency risks related to these transactions are
deemed to be immaterial to us as a whole.

                                        43
<PAGE>

     We operate a fulfillment center in Toronto, Canada and a sales, marketing
and fulfillment center near London, England, which exposes us to market risk
associated with foreign currency exchange rate fluctuations. At this time, we do
not manage the risk through the use of derivative instruments. A 10% adverse
change in foreign currency exchange rates would not have a significant impact on
our results of operations or financial position.

                                        44
<PAGE>

                                    BUSINESS

OVERVIEW

     Carl Paul founded our company in 1967 when he began providing clubmakers
with the components necessary to offer custom-made golf clubs at a time when
most golfers could only purchase ready-made, off-the-shelf equipment. In order
to capitalize on this market opportunity, we helped pioneer the golf club
components industry by designing and selling a line of components and supplies
(principally golf clubheads, shafts, grips and tools) for custom clubmakers
through our clubmakers' catalog. Over the years we have complemented and
expanded our operations by opening our first retail outlet in 1972, mailing our
first general golf product catalog in 1975, opening our first superstore in
1992, opening the Harvey Penick Golf Academy in 1993 and launching golfsmith.com
in 1997.

     We are a multi-channel retailer of golf equipment, merchandise and training
curriculum for consumers and golf clubmaking businesses. We offer equipment from
leading manufacturers, including Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). In addition, we offer our own
proprietary brands, including Golfsmith(R), Lynx(R), Snake Eyes(R), Killer
Bee(R) and Zevo(R). We market our products through 42 superstores as well as
through our direct-to-consumer channel, which includes our clubmaking and
accessory catalogs and our Internet site. We also operate the Harvey Penick Golf
Academy, an instructional school incorporating the techniques of the well-known
golf instructor, the late Harvey Penick.

     We offer a complete line of golf equipment and related accessories through
multiple distribution channels:

          Superstores.  We opened our first golf superstore in 1992 and
     currently operate 42 superstores. These stores range in size from
     approximately 8,000 to 30,000 square feet. Our superstores feature a wide
     selection of golf equipment from major name brand manufacturers.

          Direct-to-Consumer.  Our principal publications are the Golfsmith
     Accessory Catalog and the Golfsmith Clubmaking Catalog. We also sell our
     products through our website,www.golfsmith.com. Through our
     direct-to-consumer distribution channels, we provide customers our offering
     of products, including equipment, apparel, accessories and clubmaking
     components and tools.

          Harvey Penick Academy.  In 1993, we partnered with Austin native and
     well-known golf instructor, the late Harvey Penick, to form the Harvey
     Penick Golf Academy. The academy has attracted over 17,000 students since
     its inception. We believe the academy helps contribute to sales at our
     adjacent Austin superstore.

          International.  We work with a group of international distributors to
     offer golf club components and equipment to clubmakers and golfers in
     selected regions outside the United States. In the United Kingdom, we sell
     our proprietary branded equipment through a commissioned sales force
     directly to retailers. Throughout most of Europe and parts of Asia and
     other parts of the world, we sell our products through a network of
     distributors.

THE MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. Golfsmith is the surviving corporation and is a wholly owned
subsidiary of Holdings as a result of the merger. The aggregate purchase price
for the merger was approximately $121.0 million. The components of this purchase
price included the payment to our stockholders prior to the merger of $101.5
million in cash and $12.8 million of our equity securities, and $6.7 million in
fees and expenses incurred in connection with the merger. The cash portion of
the purchase price for the merger was funded out of:

     - the net proceeds from the offering of our 8.375% senior secured notes due
       2009, of approximately $67.9 million;

                                        45
<PAGE>

     - the cash contribution of $50.0 million described below; and

     - existing cash.

     The merger agreement required Golfsmith to repay and terminate all then
existing indebtedness and also required Holdings to put in place a new revolving
credit facility as a condition to the closing of the merger. For more
information about the terms of the merger generally, you should read the
description of the merger agreement in "Related Party Transactions".

     Holdings was formed by Atlantic Equity Partners III, L.P., a limited
partnership operated by First Atlantic Capital Ltd. First Atlantic is a private
equity investment firm. Holdings was formed solely for the purpose of completing
the merger and had no operations, assets or properties prior to the merger. In
connection with the merger, Atlantic Equity Partners III contributed $50.0
million in return for approximately 79.7% of the common stock of Holdings on a
fully diluted basis. In addition, some of our stockholders prior to the merger,
including members of our current management, received shares of common stock of
Holdings and restricted common stock units, which entitle the holders thereof to
shares of common stock of Holdings. As of April 3, 2004, these stockholders
owned in the aggregate 17.3% of the common stock of Holdings on a fully diluted
basis, including outstanding stock options. In connection with the merger, we
entered into a management consulting agreement with First Atlantic, and all of
Holdings' stockholders, including members of our management, entered into a
stockholders agreement and certain other contractual arrangements with First
Atlantic as described in "Related Party Transactions."

PRODUCTS AND SUPPLIERS

     We currently derive over 60% of our net revenues from clubs and components
and a large portion of our club sales are of our own proprietary brands. Our
products include golf clubs and club components, club bags, golf gloves, golf
shoes, and golfing apparel.

  ORIGINAL EQUIPMENT MANUFACTURERS

     We offer a large selection of golf equipment from leading manufacturers,
including, but not limited to, Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). We believe that we enjoy strong
relationships with many of the major equipment vendors in the industry.

     In fiscal 2002 and 2003, Callaway Golf supplied 12% and 11% of our
consolidated purchases, respectively. No other single supplier accounted for
more than 10% of our consolidated purchases during fiscal 2002 or 2003. Our top
ten suppliers for fiscal 2003 were as follows:

                                TOP 10 SUPPLIERS
--------------------------------------------------------------------------------

<Table>
<S>                                            <C>
                Calloway Golf                              Roger Cleveland Golf
              Eaton Corporation                           Taylor Made/Adidas Golf
    Fortune Brands (Titleist/Cobra Golf)                        True Temper
                    Nike                                    Twin Lakes Co. Ltd.
                    Ping                                           Winn
</Table>

  PROPRIETARY BRANDS

     We are the registrant of over 80 trademarks and service marks in more than
25 countries including Golfsmith(R), Lynx(R), Snake Eyes(R), Black Cat(R),
Killer Bee(R), Predator(R), Tigress(R) and Zevo(R). Our trademarks are generally
valid as long as they are properly in use in commerce. The registrations are
valid as long as they are properly maintained and the registered marks have not
become generic, abandoned or the registrations obtained fraudulently. Our
trademarks may cease to be valid, for example, if we:

     - license our trademarks without quality control or fail to enforce quality
       control provisions in any licenses;

                                        46
<PAGE>

     - fail to contest infringing uses;

     - fail to use a U.S. trademark for three consecutive years;

     - fail to use a foreign registered trademark within the time required after
       registration; and

     - fail to maintain foreign registrations, in which case we may lose the
       presumption of ownership in the foreign country.

     Our trademarks and domain names are considered to be indefinite lived
assets under SFAS No. 142, Goodwill and Other Intangible Assets, and therefore
are not amortized. Other definite lived intellectual property is amortized on a
straight-line basis over nine years.

     We focus on developing products that are high-quality and designed to
increase the penetration of our private label offerings, fill a niche or gap in
the premium brand product offerings, and appeal to custom clubmakers and enhance
our status in equipment design. Three of these private labels were added in
fiscal 1998 when we purchased assets of three golf companies: Lynx Golf Inc.,
Snake Eyes Golf Clubs Inc. and Black Rock Golf Corp., the manufacturer of the
Killer Bee(R) line. We purchased an additional brand -- Zevo(R) -- in 2003.
These companies' equipment lines are now proprietary brands included in all of
our retail channels. We source over 70% of our proprietary products from
contract manufacturers in Asia, and these suppliers manufacture our equipment
according to our specifications.

SALES AND DISTRIBUTION

  SUPERSTORES

     We opened our first golf superstore in 1992 and currently operate 42
superstores. The locations of our superstores are more fully described below in
"-- Properties."

     Our superstores range in size from approximately 8,000 to 30,000 square
feet. Our superstores feature a wide selection of golf equipment from major name
brand manufacturers and also serve as the primary retail outlet in the United
States for our proprietary branded products. Our superstores also cater to golf
and sports enthusiasts by providing golf simulators, indoor driving nets,
computerized swing analyzers, putting greens, indoor lesson capabilities in
certain locations and television monitors that display golf and major sporting
events. In addition, the majority of our superstores offer components,
clubmaking tools, supplies and on-site custom clubfitting and technical support.

     We plan to modify selected larger superstores into a smaller, more
productive layout that we believe will lower our operating costs and capital
requirements and increase our profitability while providing customers with a
superior shopping environment. In fiscal 2003, all six of the new stores opened
were built in this mold of the smaller store layout.

     We opened three stores during fiscal 2002, six stores during fiscal 2003
and four stores in the three months ended April 3, 2004, and acquired six stores
with our acquisition of Don Sherwood Golf Shop in July 2003.

     We intend to selectively expand our existing store base in existing as well
as new markets that fit our selection criteria. We plan to open two to four
superstores during the remaining three quarters of fiscal 2004. The criteria for
the selection of new superstore locations include:

     - demographic characteristics with a high number of avid golfers and above
       average annual household incomes;

     - visibility from and access to highways or other major roadways;

     - the ability to obtain favorable lease terms; and

     - co-tenants that are likely to draw customers whom we would otherwise
       target within the site's relevant market.

                                        47
<PAGE>

     After we have identified a potential site, we assess the cost of the site
and carefully examine the projected profitability and returns generated from
opening the additional store.

     Our superstores accounted for approximately 55.4%, 56.7%, 62.9% and 63.7%
of our net revenues for fiscal 2001, fiscal 2002, fiscal 2003 and the three
months ended April 3, 2004, respectively. The increase in the percentage of our
net revenues derived from superstores correlates with our increased number of
superstores from 26 superstores at December 29, 2001 to 42 superstores at April
3, 2004.

  DIRECT-TO-CONSUMER

     Through our direct-to-consumer distribution channels, we provide customers
our offering of products, including equipment, apparel, accessories, and
clubmaking components and tools. Our direct-to-consumer channels accounted for
approximately 34.5% and 33.6% of our net revenues for fiscal 2003 and the three
months ended April 3, 2004, respectively.

     Catalogs.  Our principal publications are the Golfsmith Accessory Catalog
and the Golfsmith Clubmaking Catalog. We have developed a proprietary customer
database largely through our catalog and online website order processing and to
a lesser extent through contests and point-of-sale registers in our superstores.
The names and associated sales information are merged periodically into our
customer master file. This merge process provides a source of current
information to help assess the effectiveness of the catalog and identifies new
customers that can be added to our in-house mailing lists. We use statistical
evaluation and selection techniques to determine which customer segments are
likely to contribute the greatest revenue per mailing.

     Our two catalog titles are designed and produced by our in-house staff of
writers, photographers and graphic artists. The monthly production and
distribution schedule of our accessory catalog permits frequent changes in the
product selection and price.

     Internet.  We also sell our products through our e-commerce site,
www.golfsmith.com. We have an additional website, www.Lynxgolf.com, which links
to www.golfsmith.com.

     Our Internet business complements our superstore business by building
customer awareness of our brand and acting as an effective advertising vehicle
for new product introductions, unique product offerings, and our proprietary
brands.

  INTERNATIONAL

     We work with a group of international distributors to offer golf club
components and equipment to clubmakers and golfers in selected regions outside
the United States. In the United Kingdom, we sell our proprietary branded
equipment through a commissioned sales force directly to retailers. Throughout
most of Europe and parts of Asia and other parts of the world, we sell our
products through a network of distributors. Approximately 2.3%, 2.5%, 2.3% and
2.4% of our net revenues were derived from sales made through our international
distributors and our distribution center near London in fiscal 2001, fiscal
2002, fiscal 2003 and the three months ended April 3, 2004, respectively.

  HARVEY PENICK ACADEMY

     In 1993, we partnered with Austin native and well-known golf instructor,
the late Harvey Penick, to form the Harvey Penick Golf Academy. The academy has
attracted over 17,000 students since its inception. We believe the academy helps
contribute to sales at our adjacent Austin superstore. The academy accounted for
approximately 0.3% of our net revenues for both fiscal 2003 and the three months
ended April 3, 2004.

MARKETING

     We have a multi-faceted marketing strategy that combines direct marketing,
local advertising and supplier marketing.

                                        48
<PAGE>

     On the local level, we run newspaper ads to promote superstores and store
events. Additional marketing activity occurs during key shopping periods, such
as Father's Day and Christmas, and on specific sales and promotional events. On
the national level, we participate in cooperative advertising arrangements with
our vendors. Along with "vendor buy-ins" to sponsor events, these arrangements
have reduced our advertising costs. Also, on the national level, we run printed
advertisements in national magazines. We have a strategic alliance with The Golf
Digest Companies that establishes us as a national golf retail advertiser in
Golf Digest publications. Historically, we have run national ads on the Golf
Channel and local television ads in select markets to complement our direct
marketing campaign. To contain costs and increase effectiveness, we have
expanded the use of e-mail for direct marketing.

     The catalogs that we distribute annually are also an important marketing
tool. The Golfsmith Clubmaking Catalog is distributed to many of our clubmaking
catalog customers and reinforces our place in the component market. In addition,
we believe the magazine extends the Golfsmith(R) brand and encourages additional
sales through the publicity of new product and promotional offerings.

INFRASTRUCTURE

     Our order fulfillment infrastructure includes:

     - a 100,000 square foot, direct-to-consumer shipping facility and
       associated warehouse which can handle over one million packages annually;

     - a 140,000 square foot distribution center with available capacity to
       handle all store inventory and order fulfillment requirements; and

     - management information systems that fully integrate all aspects of our
       business and enable us to quickly obtain key operating data.

     We also have two smaller distribution facilities in Toronto, Canada and
near London, England from which we service our Canadian and European customers.

MANAGEMENT INFORMATION SYSTEMS

     Our management information systems provide us with a network and
applications that are scalable and easy to use, maintain, and modify. These
systems provide us with the infrastructure necessary to support continued
growth. This infrastructure integrates all major aspects of our business,
improves our back-office capabilities, enhances management reporting and
analysis capabilities through rapid access to data, lowers operating costs and
improves and expands our direct marketing capabilities.

     The in-store, point-of-sale system tracks all sales by category, style and
item and allows us to routinely compare current performance with historical and
planned performance. The information gathered by this system supports automatic
replenishment of inventory and is integrated into product buying decisions.

     The majority of our hardware resides at our corporate headquarters. We have
implemented redundant servers and communication lines to limit downtime in the
event of power outages or other potential problems. System administrators and
network managers monitor and operate our network operations and
transactions-processing systems to ensure the continued uninterrupted operation
of our website and transaction-processing systems.

SEASONALITY

     Based on our experience, we believe that retailers in the golf industry
experience a high degree of seasonality in their businesses during the spring
and Christmas holiday selling seasons. As a consequence, retailers, including
us, incur higher expenses related to building inventory in order to meet the
higher demand during these seasons. In keeping with this trend, a substantial
portion of our sales and earnings occur in our second fiscal quarter each year.

                                        49
<PAGE>

EMPLOYEES

     As of April 3, 2004, we employed 1,281 people. We believe we have strong
relationships with our employees. None of our work force is unionized.

COMPETITION

     Our competitors currently include other specialty retailers, mass
merchandise retailers, conventional sporting goods retailers, on-course pro
shops, and online retailers of golf equipment. These businesses compete with us
in one or more product categories. In addition, traditional and specialty golf
retailers are expanding more aggressively in marketing brand-name golf
equipment, thereby competing directly with us for products, customers and
locations. Some of these potential competitors have been in business longer than
us or have greater financial or marketing resources than we do and may be able
to devote greater resources to sourcing, promoting and selling their products.
Several of our key vendors have begun to operate retail stores or websites that
sell directly to consumers and may compete with us and reduce our sales. In the
specialty off-course segment, our primary competitors include retail chains such
as Edwin Watts, Golf Galaxy, Pro Golf Discount, Dick's Sporting Goods, Galyan's
and Nevada Bobs. Other competitors include on-course pro shops, direct marketers
and sporting goods retailers. We compete on the basis of brand image,
technology, quality and performance of our products, method of distribution,
price, style and intellectual property protection.

ENVIRONMENTAL MATTERS

     We are subject to various foreign, federal, state, and local environmental
protection, chemical control, and health and safety laws and regulations, and we
incur costs to comply with those laws. We own and lease real property, and some
environmental laws hold current or previous owners or operators of businesses
and real property liable for contamination on or originating from that property,
even if they did not know of and were not responsible for the contamination. The
presence of hazardous substances on any of our properties or the failure to meet
environmental regulatory requirements may have a material adverse affect on our
ability to use or to sell the property or to use the property as collateral for
borrowing, and may cause us to incur substantial remediation or compliance
costs. If hazardous substances are released from or located on any of our
properties, we could incur substantial liabilities through a private party
personal injury or property damage claim or a claim by a governmental entity for
other damages. The liability may be imposed on us under environmental laws or
common law principles. In addition, some of the products we sell contain
regulated substances, such as solvents and lead. Environmental laws may impose
liability on any person who disposes of hazardous substances, regardless of
whether the disposal site is owned or operated by such person.

     Although we do not currently anticipate that the costs of complying with
environmental laws or otherwise satisfying any current liabilities under
environmental laws will materially adversely affect us, we cannot assure you
that we will not incur material costs or liabilities in the future, due to the
discovery of new facts or conditions, acquisition of new properties, the
occurrence of releases of hazardous substances, the filing of new claims,
changes in operations, a change in existing environmental laws, adoption of new
environmental laws, or new interpretations of existing environmental laws.

                                        50
<PAGE>

PROPERTIES

     At April 3, 2004, we operated 42 stores in 12 states. We own our 41-acre
Austin, Texas campus, which is home to our general offices, distribution center,
call center, clubmaker training facility and Harvey Penick Golf Academy. The
Austin campus also includes a golf testing and practice area. With the exception
of the Austin superstore at our corporate headquarters, we lease all of our
superstores. All leased premises are held under long-term leases with differing
provisions and expiration dates. Leases provide for monthly rentals, typically
computed on the basis of a fixed amount. Most leases contain provisions
permitting us to renew for one or more specified terms. Details of our
non-superstore properties and facilities are as follows:

<Table>
<Caption>
                                     SIZE                                            YEAR    OWNED
    LOCATION                       (SQ. FT.)              FACILITY TYPE             OPENED   LEASED
    --------                       ---------              -------------             ------   ------
    <S>                            <C>         <C>                                  <C>      <C>
    Austin, Texas................    60,000    Office                                1992     Owned
    Austin, Texas................    50,000    Warehouse                             1994     Owned
    Austin, Texas................   140,000    Distribution Center                   1999     Owned
    Austin, Texas................    50,000    Shipping Facility                     1994     Owned
    Austin, Texas................  17 Acres    Driving Range and Training Facility   1992     Owned
    Toronto, Canada..............     3,906    Direct-to-Consumer Order              2001    Leased
                                                 Fulfillment Facility
    St. Ives, Cambridgeshire,
      England....................    15,900    Office, Warehouse and Shipping        2001    Leased
                                                 Facility
</Table>

     The following table shows the number of our stores by state as of April 3,
2004:

<Table>
<Caption>
                                                               NUMBER
LOCATION                                                      OF STORES
--------                                                      ---------
<S>                                                           <C>
Arizona.....................................................      3
California..................................................     12
Colorado....................................................      2
Connecticut.................................................      1
Georgia.....................................................      3
Illinois....................................................      4
Michigan....................................................      3
Minnesota...................................................      1
New Jersey..................................................      1
New York....................................................      2
Ohio........................................................      1
Texas.......................................................      9
</Table>

LEGAL PROCEEDINGS

     We are a party to a number of claims and lawsuits incidental to our
business. We believe that the ultimate outcome of such matters, in the
aggregate, will not have a material adverse impact on our financial position,
liquidity or results of operations.

                                        51
<PAGE>

                                   MANAGEMENT

     The following table sets forth information regarding our executive officers
and directors as of July 2, 2004:

<Table>
<Caption>
NAME                                  AGE                      POSITION
----                                  ---                      --------
<S>                                   <C>   <C>
James D. Thompson...................  41    Chief Executive Officer, President and Director
Virginia Bunte......................  39    Vice President -- Chief Financial Officer
Kenneth Brugh.......................  54    Vice President -- Operations
Fred Quandt.........................  34    Vice President -- Merchandising
Kiprian Miles.......................  42    Vice President -- Chief Information Officer
James Loden, Jr. ...................  37    Vice President -- Retail Operations
Jeff Sheets.........................  45    Vice President -- Research and Development
James Grover........................  32    Vice President, Secretary and Director
Noel Wilens.........................  41    Vice President and Director
Charles Shaw........................  70    Chairman of the Board
Roberto Buaron......................  58    Director
Thomas G. Hardy.....................  59    Director
James Long..........................  61    Director
Carl Paul...........................  64    Director
</Table>

     James D. Thompson became our chief executive officer, president and a
director upon completion of the merger. Prior to that, Mr. Thompson was our
senior vice president from September 2000 until the merger. From August 1999 to
September 2000, Mr. Thompson was vice president of merchandising, and from
January 1999 to August 1999 he was director of brand management. From 1998 to
1999, Mr. Thompson was responsible for home computing products for Circuit City.
From 1995 to 1998, Mr. Thompson served as senior director, business solutions
and in other management positions for CompUSA. From January 1986 to July 1993,
he served as national merchant and in other management positions for Highland
Superstores.

     Virginia Bunte joined us in 1995 and has been our vice president and chief
financial officer since January 2003. From 1995 to 2003, Ms. Bunte served in
positions for Golfsmith including assistant controller, controller and vice
president of finance.

     Kenneth Brugh joined us in 1981 and has been our vice president of
operations since the merger. Prior to that, Mr. Brugh was vice president since
May 2001. From 1981 to 2001, Mr. Brugh served in positions including vice
president, general manager and sales associate.

     Fred Quandt joined us in 1995 and has been our vice president of
merchandising since October 2002. From 1995 until the merger, Mr. Quandt served
as director of merchandising and divisional merchandise manager and in various
other merchandising positions for us.

     Kiprian Miles joined us in October 2002 as our vice president and chief
information officer. From April 1999 until June 2002, Mr. Miles was responsible
for technology decisions, information infrastructure and marketing and sales
support systems as vice president, marketing systems and chief architect, at
Office Depot, Inc. From August 1997 to April 1999, Mr. Miles was chief architect
at Alcoa Inc., where he was responsible for developing and managing the
technology infrastructure.

     James Loden, Jr. joined us in February 2003 as our vice president of retail
operations. From May of 1997 until he joined our company in 2003, Mr. Loden was
with CompUSA, where he served as a general manager, a regional manager, and then
the senior director of business development. Prior to that, he was with Circuit
City for five years as a general manager.

     Jeff Sheets has been our vice president of research and development since
April 2002. Prior to that, he was responsible for product development at Wilson
Sporting Goods and also served as director of

                                        52
<PAGE>

research and development for Spalding, Ben Hogan and Founders Club golf
companies over the past decade. Mr. Sheets initially began his golf career
working on the PGA Tour as a fitting specialist equipment fittings and equipment
technician for Brunswick Golf (now Royal Precision) and Founders Club.

     James Grover became a vice president and a director upon the completion of
the merger. Mr. Grover has been a vice president at First Atlantic since August
2000. From July 1998 until August 2000, Mr. Grover was an associate with First
Atlantic. Prior to joining First Atlantic in 1998, Mr. Grover was an associate
and business analyst at New York Consulting Partners, Inc.

     Noel Wilens became a vice president and a director upon the completion of
the merger. Mr. Wilens has been a principal at First Atlantic since May 2001.
Prior to that, Mr. Wilens was a general partner and managing director of
Bradford Equities Fund, L.L.C., a New York-based private equity firm focused on
the acquisition of small and medium size U.S. industrial manufacturers and
distributors. Previously, Mr. Wilens was a principal of The Invus Group, Ltd., a
private equity firm specializing in food industry acquisitions on behalf of
European investors.

     Charles Shaw became a director upon the completion of the merger. Mr. Shaw
has been a managing director at First Atlantic since 2001. From 1997 to 2000,
Mr. Shaw was a senior advisor to First Atlantic. He was a senior partner at
McKinsey & Company, Inc. for twenty-five of his thirty-five year tenure which
ended in 2000. In addition to consulting with many Fortune 500 companies and
their international equivalents, Mr. Shaw served on McKinsey's board for
eighteen years and had a variety of management positions worldwide. Also, he was
deeply involved in investment activities at McKinsey as a trustee of the profit
sharing retirement plan and as a member of the investment committee.

     Roberto Buaron became a director upon the completion of the merger. Mr.
Buaron has been the chairman and chief executive officer of First Atlantic since
he founded the firm in 1989. Prior to that, Mr. Buaron was a senior partner with
Overseas Partners Inc., a firm which invested international funds in leveraged
buyouts in the United States. From 1983 to 1986, Mr. Buaron was a first vice
president of First Century, Inc., and a general partner of its venture capital
affiliate, First Century Partnership. Prior to joining First Century, Mr. Buaron
was a partner of McKinsey & Company, Inc. During his nine-year tenure at
McKinsey, Mr. Buaron counseled senior management at a number of Fortune 500
companies on improving their strategic position and operating performance.

     Thomas G. Hardy became a director upon the completion of the merger. Mr.
Hardy is currently vice chairman of OR International, a developer of specialty
surgical hospitals, and a Member of the Advisory Board of Main Street Resources,
a private equity fund specializing in mid-sized management buy-outs. From 1993
to 1999, Mr. Hardy was the president and chief operating officer of
Trans-Resources, Inc., a multinational manufacturer and distributor of
industrial and organic chemicals. Prior to that, Mr. Hardy was a partner for 15
years with McKinsey & Company, Inc.

     James Long became a director upon the completion of the merger. Mr. Long
has been a managing director at First Atlantic since 1991. Prior to joining
First Atlantic, Mr. Long was a managing director at Kleinwort Benson North
America during 1990. From 1975 to 1989, Mr. Long was an executive vice president
of mergers, acquisitions and strategic planning at Primerica Corporation
(formerly American Can Company). From 1970 to 1975, Mr. Long was director of
acquisitions for The Sperry and Hutchinson Company.

     Carl Paul founded Golfsmith in 1967. He has been a director since
completion of the merger. Mr. Paul was chairman of the board and chief executive
officer of Golfsmith from 1967 until the merger.

     All executive officers are appointed by our board of directors and serve
until their successors have been appointed or until they are removed by a
majority vote of the board of directors. Each director is elected for a one-year
term by a majority vote of our stockholders at the annual statutory stockholder
meeting, or until his successor is duly elected.

                                        53
<PAGE>

BOARD COMPOSITION

     Our board of directors is comprised of eight directors. Pursuant to a
stockholders agreement, which is described under "Related Party
Transactions -- Stockholders Agreement," certain of our stockholders have the
right to elect one person to our board of directors for so long as Carl Paul,
Frank Paul and their families own more than 50% of the shares of common stock of
Holdings that they received upon the closing of the merger. Carl Paul is that
director. In addition, pursuant to the stockholders agreement, Atlantic Equity
Partners III is entitled to nominate all other directors to fill the remaining
board seats so long as it owns at least 25% of the voting stock of Holdings.

AUDIT COMMITTEE

     Our audit committee makes recommendations to our board of directors
regarding the selection of independent auditors, reviews the scope of audit and
other services by our independent auditors, reviews the accounting principles
and auditing practices and procedures to be used for our financial statements
and reviews the results of those audits. The members of our audit committee are
James Grover and Thomas Hardy.

DIRECTOR COMPENSATION

     Each of our directors who is not an officer and who is affiliated with
First Atlantic receives reimbursement of reasonable and necessary costs and
expenses incurred due to attendance of board meetings. Our outside director who
is not one of our officers and is not affiliated with First Atlantic receives,
in addition to reimbursement of reasonable and necessary costs and expenses
incurred, a fee of $5,000 for each regular and special meeting of the board that
he or she attends.

EXECUTIVE COMPENSATION

     The following table sets forth information concerning the compensation paid
to our chief executive officer and our four other most highly compensated
executive officers for the fiscal years 2001, 2002, and

                                        54
<PAGE>

2003. Our chief executive officer and such other executive officers are
collectively referred to as the "named executive officers."

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                                             LONG-TERM
                                                                            COMPENSATION
                                         ANNUAL COMPENSATION               --------------
                             -------------------------------------------     SECURITIES
                                                          OTHER ANNUAL       UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR    SALARY     BONUS    COMPENSATION(1)   OPTIONS (#)(2)   COMPENSATION(3)
---------------------------  ----   --------   -------   ---------------   --------------   ---------------
<S>                          <C>    <C>        <C>       <C>               <C>              <C>
James D. Thompson(4)......   2003   $297,000   $55,000       $3,561           400,000          $     --
  Chief Executive Officer    2002    212,231    50,000        4,589            50,000           519,650
                             2001    177,308    25,000        3,141            20,000                --

Kenneth Brugh(5)..........   2003    200,000    24,750           --            90,000                --
  Vice President --          2002    200,000    48,404           --                --           786,900
  Operations                 2001    200,018        --           --                --                --

Virginia Bunte(6).........   2003    159,808    20,000        5,585            90,000                --
  Chief Financial Officer    2002     91,358    18,578        3,303             5,000           124,463
                             2001     74,808     2,884        2,161             5,000                --

Kiprian Miles(7)..........   2003    175,000        --        2,423            90,000                --
  Vice President -- Chief    2002     23,558    50,000           --                --                --
  Informational Officer      2001         --        --           --                --                --

James Loden, Jr.(8).......   2003    131,869    45,907           --            90,000                --
  Vice President -- Retail   2002         --        --           --                --                --
                             2001         --        --           --                --                --
</Table>

---------------

(1) Amounts represent matching contributions made by us under our Retirement
    Savings Plan.

(2) In connection with the merger, all existing options, including those listed
    in this column for 2001 and 2002, vested and were either canceled in
    exchange for the right to receive cash or surrendered in exchange for equity
    units entitling the holder thereof to shares of common stock of Holdings.
    Amounts for fiscal 2003 represent grants of options to purchase shares of
    common stock of Holdings under the Golfsmith International Holdings, Inc.
    2002 Incentive Stock Plan.

(3) Represents cash received as consideration for the cancellation of options in
    connection with the merger in October 2002.

(4) Mr. Thompson became our chief executive officer and president upon
    completion of the merger in October 2002. Mr. Thompson holds 149,750 equity
    units entitling him to 149,750 shares of common stock of Holdings with a
    value at April 3, 2004 of $449,250.

(5) Mr. Brugh holds 128,100 equity units entitling him to 128,100 shares of
    common stock of Holdings with a value at April 3, 2004 of $384,300.

(6) Ms. Bunte became our chief financial officer in January 2003. Prior to that,
    Ms. Bunte was our vice president of finance. Ms. Bunte holds 12,563 equity
    units entitling her to 12,563 shares of common stock of Holdings with a
    value at April 3, 2004 of $37,869.

(7) Mr. Miles became our vice president of and chief information officer in
    October 2002.

(8) Mr. Loden became our vice president of retail operations in February 2003.

OPTION GRANTS IN FISCAL 2003

     The following table sets forth information relating to stock options
granted during fiscal 2003 to our named executive officers. Also shown below is
the potential realizable value over the terms of the options (the period from
the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually from the date the options were
granted. The potential realizable value is

                                        55
<PAGE>

net of the applicable exercise price. We have not granted any stock appreciation
rights. All options were granted under Holdings' 2002 Incentive Stock Plan
described below and are exercisable for shares of common stock of Holdings. No
options were exercised by the named executive officers in fiscal 2003 or since
the inception of the 2002 Incentive Stock Plan and all options listed below
remain outstanding as of January 3, 2004. In accordance with each individual
optionee's vesting schedule, no options were exercisable as of January 3, 2004.
All options vest on the same schedule over a seven-year period in increments
depending on our financial performance. After seven years, all options become
vested for optionees then employed by us. There is no established public trading
market for any class of Holdings' common equity.

<Table>
<Caption>
                                            INDIVIDUAL GRANTS                        POTENTIAL REALIZABLE VALUE
                       -----------------------------------------------------------     AT ASSUMED ANNUAL RATES
                          NUMBER OF      PERCENT OF TOTAL                            OF STOCK PRICE APPRECIATION
                         SECURITIES      OPTIONS GRANTED    EXERCISE OR EXPIRATION         FOR OPTION TERM
                         UNDERLYING      TO EMPLOYEES IN    ----------------------   ---------------------------
NAME                   OPTIONS GRANTED     FISCAL YEAR      BASE PRICE     DATE          5%             10%
----                   ---------------   ----------------   ----------   ---------   -----------   -------------
<S>                    <C>               <C>                <C>          <C>         <C>           <C>
James D. Thompson....      400,000             21.7%          $3.00      June 2013    $754,674      $1,912,491
Kenneth Brugh........       90,000              4.9%          $3.00      June 2013     169,802         430,310
Virginia Bunte.......       90,000              4.9%          $3.00      June 2013     169,802         430,310
Kiprian Miles........       90,000              4.9%          $3.00      June 2013     169,802         430,310
James Loden, Jr. ....       90,000              4.9%          $3.00      June 2013     169,802         430,310
</Table>

AGGREGATE OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR-END OPTION VALUES

     No options were exercised by the named executive officers in fiscal 2003.
The following table sets forth information concerning the number of unexercised
options with respect to the named executive officers as of January 3, 2004. As
of such date, no established published trading market exists for Holdings'
common stock. As of January 3, 2004, the fair market value of the underlying
stock equals the exercise price of the respective stock options.

<Table>
<Caption>
                                                                 NUMBER OF SECURITIES
                                                                UNDERLYING UNEXERCISED
                                                              OPTIONS AT JANUARY 3, 2004
                                                              ---------------------------
NAME                                                          EXERCISABLE   UNEXERCISABLE
----                                                          -----------   -------------
<S>                                                           <C>           <C>
James D. Thompson...........................................      --           400,000
Kenneth Brugh...............................................      --            90,000
Virginia Bunte..............................................      --            90,000
Kiprian Miles...............................................      --            90,000
James Loden, Jr. ...........................................      --            90,000
</Table>

EMPLOYMENT AGREEMENTS

     We have entered into the employment agreements described below.

     Under Mr. Thompson's employment agreement entered into in October 2002, Mr.
Thompson is our president and chief executive officer and his initial base
salary is $297,000 per year with an annual bonus calculated based upon
attainment of financial targets for that fiscal year. Mr. Thompson receives
stock options in our parent company at the discretion of our board of directors,
subject to the terms and conditions of our 2002 Incentive Stock Plan described
below. The term of Mr. Thompson's employment agreement is three years, with
automatic successive one-year extensions unless terminated by either party. If
Mr. Thompson is terminated without cause, or he resigns for good reason, he will
be entitled to receive his earned but unpaid base salary plus 100% of his
current total annual base salary and the earned bonus for the year of
termination. Should Mr. Thompson's employment be terminated for cause, or if he
resigns without good reason, he will have the right to receive only his earned
but unpaid salary up to the date of termination.

                                        56
<PAGE>

     Under Ms. Bunte's agreement entered into in January 2003, Ms. Bunte is our
chief financial officer and her initial base salary is $165,000 per year with an
annual bonus calculated based upon attainment of financial targets for that
fiscal year. Ms. Bunte receives stock options in our parent company at the
discretion of our board of directors, subject to the terms and conditions of our
2002 Incentive Stock Plan described below. The term of Ms. Bunte's employment
agreement is one year, with automatic successive one-year extensions unless
terminated by either party. If Ms. Bunte is terminated without cause, or she
resigns for good reason, she will be entitled to receive her earned but unpaid
base salary plus 100% of her current total annual base salary and the earned
bonus for the year of termination. Should Ms. Bunte's employment be terminated
for cause, or if she resigns without good reason, she will have the right to
receive only her earned but unpaid salary up to the date of termination.

     Under the employment agreements for Carl Paul, one of our directors, and
Frank Paul, one of our stockholders, each receives an initial base salary of
$50,000 per year, with no provision for bonus payments. Each acts as a senior
advisor to Golfsmith's Golf Club Components Division and renders services on an
"as needed" basis, as mutually agreed upon by the parties. The term of each of
the agreements is one year, with automatic successive one-year extensions unless
terminated by either party. The board of directors may terminate the employment
of Carl Paul or Frank Paul at any time, with or without cause, and either may
resign from his position at any time. Upon termination or resignation of either
Carl Paul or Frank Paul, or both, we are only obligated to pay any earned but
unpaid salary, if any, up to the date of termination.

2004 MANAGEMENT INCENTIVE PLAN

     In 2004, we established our 2004 Management Incentive Plan under which we
agreed to pay specified bonuses to eligible management employees based upon
their individual and company-wide performance. The bonuses are payable within 90
days of the end of the applicable measurement period.

2002 INCENTIVE STOCK PLAN

     Subsequent to the merger, we adopted a new stock option plan, the 2002
Incentive Stock Plan. Our 2002 Incentive Stock Plan provides for the grant of
incentive stock options to our employees and nonstatutory stock options, stock
grants and stock appreciation rights to our employees, directors and
consultants. An aggregate of 2.85 million shares of the common stock of Holdings
has been reserved for issuance under this plan.

     Our board of directors or the compensation committee of our board of
directors administers the plan and determines the terms of options, stock grants
and stock appreciation rights, including the exercise price, the stock
appreciation rights' value, the number of shares subject to individual option
awards, stock grants and stock appreciation rights, the vesting period of
options, the exercise period for any stock appreciation rights and the
conditions on any stock grant. The exercise price of nonstatutory options will
be determined by the compensation committee. The exercise price of incentive
stock options cannot be lower than 100% of the fair market value of our common
stock on the date of grant and, in the case of incentive stock options granted
to holders of shares representing more than 10% of our voting power, not less
than 110% of the fair market value. The value of stock appreciation rights
cannot be less than fair market value. The term of an incentive stock option
cannot exceed 10 years, and the term of an incentive stock option granted to a
holder of more than 10% of our voting power cannot exceed five years. The
exercise period for a stock appreciation right cannot exceed ten years.

     Options, stock grants and stock appreciation rights granted under the plan
will accelerate and become fully vested in the event we are acquired or merge
with another company. Under the plan, our board of directors will not be
permitted, without the adversely affected optionee's or grantee's prior written
consent, to amend, modify or terminate our stock plan if the amendment,
modification or termination would impair the rights of optionees or grantees.
The plan will terminate in 2012 unless terminated earlier by our board of
directors.

                                        57
<PAGE>

401(k) PLAN

     We have a retirement savings plan which permits eligible employees to make
contributions to the plan on a pretax basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. For employees that satisfy certain
eligibility requirements, we make a matching contribution of 50% of the
employee's pretax contribution, up to 6% of the employee's compensation, in any
calendar year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Compensation decisions for executive officers are made by our board of
directors and the compensation committee which is composed of Mr. Shaw and Mr.
Wilens. The purpose of the compensation committee is to establish and execute
compensation policy and programs for our executives and employees. For example,
the compensation committee recommends the compensation arrangements for senior
management and directors. It also determines the allocation of options to be
granted under our stock option plan. Mr. Shaw is a managing director and Mr.
Wilens is a principal at First Atlantic, which is a party to the management
consulting agreement described more fully in "Related Party Transactions --
Management Consulting Agreement." Mr. Wilens is one of our executive officers,
but does not receive any compensation in such capacity.

     Certain key members of our management are employed under employment
agreements. You should read the information set forth above under "-- Employment
Agreements" for a description of these agreements. Directors who are officers,
employees or otherwise an affiliate of us receive no compensation for their
services as directors.

                                        58
<PAGE>

                    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                             OWNERS AND MANAGEMENT

     All of our common stock is owned by Golfsmith International Holdings, Inc.,
our parent company. The following table sets forth information regarding the
beneficial ownership of the common stock of Holdings, which is the parent
company of Golfsmith International, Inc., the issuer of the notes, as of April
3, 2004, by:

     - our named executive officers;

     - each of our directors;

     - all of our executive officers and directors as a group; and

     - each person known to us to be a beneficial owner of more than 5% of the
       outstanding common stock,

in each case, before and after giving effect to the exchange of all of the notes
beneficially owned by Atlantic Equity Partners III, L.P. for shares of common
stock of Holdings (assuming that Holdings will issue 1,526,109 shares of its
common stock to Atlantic Equity Partners III in this exchange, which assumes
that Holdings will sell the notes offered by this prospectus for an offering
price of 83.8478% of the principal amount at maturity, the book value of such
notes as of July 2, 2004) in a private transaction. See "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder."

     All shares indicated below as beneficially owned are held with sole voting
and investment power except as otherwise indicated. Certain of our stockholders
are parties to a stockholders agreement that contains certain voting agreements.
You should read the description of the stockholders agreement set forth under
"Related Party Transactions" for more information regarding the voting
arrangements. Unless otherwise indicated, the address for each stockholder on
this table is c/o Golfsmith International, Inc., 11000 N. IH-35, Austin, Texas
78753-3195. As of April 3, 2004, 21,594,597 shares of Holdings' common stock
were issued and outstanding.

<Table>
<Caption>
                                       SHARES BENEFICIALLY OWNED     SHARES BENEFICIALLY OWNED
                                            BEFORE EXCHANGE               AFTER EXCHANGE
                                      ---------------------------   ---------------------------
                                                       PERCENT OF                    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER    NUMBER           CLASS        NUMBER           CLASS
------------------------------------  -----------      ----------   -----------      ----------
<S>                                   <C>              <C>          <C>              <C>
Atlantic Equity Partners III,
  L.P.............................     21,594,597(1)     100.0%      23,120,706(1)     100.0%
Carl Paul.........................     21,594,597(2)     100.0%      23,120,706(2)     100.0%
Franklin Paul.....................     21,594,597(3)     100.0%      23,120,706(3)     100.0%
Roberto Buaron....................     21,594,597(4)     100.0%      23,120,706(4)     100.0%
James D. Thompson.................             --(5)        --               --(5)        --
Kenneth Brugh.....................             --(6)        --               --(6)        --
Viginia Bunte.....................             --(7)        --               --(7)        --
Kiprian Miles.....................             --           --               --           --
James Loden, Jr...................             --           --               --           --
Charles Shaw......................             --(8)        --               --(8)        --
James Grover......................             --(9)        --               --(9)        --
Thomas G. Hardy...................         89,043(10)        *           89,043(10)        *
James Long........................             --(11)       --               --(11)       --
Noel Wilens.......................             --(12)       --               --(12)       --
All directors and executive officers
  as a group (17 persons).........     21,594,597        100.0%      23,120,706        100.0%
</Table>

                                        59
<PAGE>

---------------

   *  Represents less than 1% of the number of outstanding shares.

 (1) Includes 3,505,709 shares owned by other stockholders that are subject to
     the stockholders agreement and attributable to Atlantic Equity Partners
     III, L.P. Atlantic Equity Partners III disclaims beneficial ownership of
     these shares. Atlantic Equity Partners III's address is c/o First Atlantic
     Capital Ltd., 135 East 57th Street, New York, New York 10022.

 (2) Includes (i) 2,234,158 shares of common stock and (ii) 19,360,439
     (20,886,548 shares after giving effect to the exchange) shares owned by
     other stockholders that are subject to the stockholders agreement and
     attributable to Carl Paul. Carl Paul disclaims beneficial ownership of the
     shares listed in clause (ii) of the preceding sentence. Does not include
     equity units held by Mr. Paul which entitle the holder therof to 39,375
     shares of common stock.

 (3) Includes (i) 1,182,508 shares of common stock and (ii) 20,412,089
     (21,938,198 shares after giving effect to the exchange) shares owned by
     other stockholders that are subject to the stockholders agreement and
     attributable to Franklin Paul. Franklin Paul disclaims beneficial ownership
     of the shares listed in clause (ii) of the preceding sentence. Does not
     include equity units held by Mr. Paul which entitle the holder therof to
     39,375 shares of common stock.

 (4) Includes 18,088,888 (19,614,997 shares after giving effect to the exchange)
     shares owned by Atlantic Equity Partners III, L.P. and an additional
     3,505,709 shares owned by other stockholders that are subject to the
     stockholders agreement and attributable to Atlantic Equity Partners III,
     L.P. Mr. Buaron is the sole member of Buaron Capital Corporation III, LLC.
     Buaron Capital Corporation III is the managing member of Atlantic Equity
     Associates III, LLC. Atlantic Equity Associates III, LLC is the sole
     general partner of Atlantic Equity Associates III, L.P. which is the sole
     general partner of Atlantic Equity Partners III, L.P. and, as such,
     exercises voting and investment power over shares of capital stock owned by
     Atlantic Equity Partners III, L.P., including shares of the common stock of
     Holdings. Mr. Buaron, as the sole member of Buaron Capital Corporation III,
     has voting and investment power, and may be deemed to beneficially own, the
     shares of the common stock of Holdings owned by Atlantic Equity Partners
     III, L.P. Mr. Buaron disclaims beneficial ownership of these shares. Mr.
     Buaron's address is c/o First Atlantic Capital Ltd., 135 East 57th Street,
     New York, New York 10022.

 (5) Does not include equity units held by Mr. Thompson which entitle the holder
     thereof to 149,750 shares of common stock.

 (6) Does not include equity units held by Mr. Brugh which entitle the holder
     thereof to 128,100 shares of common stock.

 (7) Does not include equity units held by Ms. Bunte which entitle the holder
     thereof to 12,563 shares of common stock.

 (8) Mr. Shaw's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

 (9) Mr. Grover's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

(10) Mr. Hardy's address is 935 Park Avenue, New York, New York 10028.

(11) Mr. Long's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

(12) Mr. Wilens's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

                                        60
<PAGE>

                           RELATED PARTY TRANSACTIONS

MERGER AGREEMENT

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. Golfsmith is the surviving corporation and is a wholly owned
subsidiary of Holdings. Contingent consideration of $6,250,000 was placed in an
escrow account by the selling stockholders to secure certain indemnification
obligations of the sellers. The merger agreement contains a provision for
post-closing adjustment to the merger consideration paid to the selling
stockholders based on the difference between expected and actual amounts of
assets and liabilities, as detailed in a statement of working capital of
Golfsmith as of the date the merger was completed. In accordance with this
provision, on May 20, 2003, the parties determined that an adjustment in the
merger consideration of $25,000 was payable to us based on the post-merger
review of Golfsmith's working capital. This amount was paid out of the escrow
account on June 20, 2003. We have adjusted the purchase price allocation
accordingly. On July 24, 2003, $1,107,579 was paid to us from the selling
stockholders escrow account for the repayment of certain obligations owed by the
selling stockholders that were paid by us. On April 15, 2004, all remaining
escrow funds of $5,117,421 were disbursed to the selling stockholders.

     Carl Paul, one of our directors, and Frank Paul have agreed to indemnify us
or Holdings up to an additional $6.25 million for the required post-closing
adjustments to the merger consideration, or any indemnification obligations for
any losses that we or Holdings incur, that exceed the available amounts in
escrow. Carl Paul and Frank Paul have also agreed to indemnify us or Holdings up
to an additional $6.25 million for any losses we or Holdings incur as a result
of fraud by certain of our officers prior to the merger.

ISSUANCES OF COMMON STOCK OF HOLDINGS

     Holdings intends to issue additional shares of common stock and cash to its
majority stockholder, Atlantic Equity Partners III, L.P., in exchange for
$7,250,000 aggregate principal amount at maturity of notes in a private
transaction. The number of shares of common stock of Holdings to be issued to
Atlantic Equity Partners III in this exchange will be equal to the aggregate
sale price for the notes sold by Holdings in this offering, after deducting the
expenses related to this offering and the amount of the cash payment described
below, divided by approximately $3.85 (the fair market value of each share of
common stock of Holdings as previously determined by an independent appraisal).
The amount of cash to be paid by Holdings to Atlantic Equity Partners III is
intended to be an amount sufficient for Atlantic Equity Partners III or its
partners, as applicable, to discharge any federal, state and local tax liability
arising from Atlantic Equity Partners III's sale of the notes. For this purpose,
Holdings and Atlantic Equity Partners III have agreed that each partner of
Atlantic Equity Partners III will be assumed to be subject to tax at the highest
marginal rate for an individual taxpayer resident in New York City, New York and
that any gain from the sale of the notes will be long term capital gain for
federal income tax purposes. The notes to be acquired by Holdings in this
exchange are being registered by the registration statement of which this
prospectus is a part for sale by Holdings. Atlantic Equity Partners III, L.P.
purchased $7,250,000 aggregate principal amount at maturity of the notes in the
initial offering on October 15, 2002.

     On July 24, 2003, in conjunction with our acquisition of Don Sherwood Golf
Shop, Atlantic Equity Partners III, L.P., Holdings' majority stockholder,
purchased 1,427,623 shares of Holdings' common stock for an aggregate purchase
price of $4.3 million. Five of Holdings' directors, including Holdings' chairman
of the board, hold positions with First Atlantic, as described in "Management."

     On May 28, 2003, Holdings issued 83,333 shares of its common stock to
Thomas G. Hardy, one of Holdings' directors, for an aggregate purchase price of
$249,999, or $3.00 per share. On July 24, 2003, in conjunction with our
acquisition of Don Sherwood Golf Shop, Holdings issued 5,710 shares of its
common stock to Thomas G. Hardy for an aggregate purchase price of $17,131, or
$3.00 per share.

                                        61
<PAGE>

STOCKHOLDERS AGREEMENT

     In connection with the merger, Holdings, Atlantic Equity Partners III, L.P.
and the members of our management who own equity securities of Holdings,
including but not limited to James Thompson, Virginia Bunte, Curt Young, Ken
Brugh, Barry Rinke, Fred Quandt, Carl Paul, Franklin Paul and all of Holdings'
other stockholders following the merger, entered into a stockholders agreement.
Under the stockholders agreement, the parties are required:

     - to vote their shares of Holdings' common stock owned by each of them in
       favor of the election of one director nominated by Carl Paul, Frank Paul
       and their families and all of the directors nominated by Atlantic Equity
       Partners III to fill all of the remaining board seats so long as each of
       the parties maintains a minimum level of stock ownership;

     - to consent to a sale of Holdings if board of directors of Holdings and
       Atlantic Equity Partners III approve of such sale and if:

      - stockholders would receive as consideration cash or specified kinds of
        securities;

      - each stockholder would receive as consideration the same proportion of
        the aggregate consideration that such stockholder would receive if
        Holdings were liquidated;

      - any stockholders are given an option as to the form and amount of
        consideration, all stockholders are given the same option;

      - all holders of rights to acquire shares of common stock of Holdings are
        given certain rights with respect to proceeds from the sale;

      - except in certain circumstances, any economic benefits available to any
        stockholder with respect to its shares will be available to all
        stockholders on a pro rata basis; and

      - the expenditures required to be paid by the stockholders and any
        representations and warranties required to be made by the stockholders
        in connection with the sale do not exceed certain limitations;

     - to cause Holdings to register shares of its common stock held by parties
       to the stockholders agreement upon the request of Atlantic Equity
       Partners III in certain circumstances;

     - except in certain circumstances, to cause Holdings to give certain
       parties to the stockholders agreement preemptive rights to purchase
       common stock;

     - not to transfer shares of common stock of Holdings unless certain
       conditions are met; and

     - in the case of certain members of our management, grant Holdings
       repurchase rights with respect to the shares of Holdings' common stock
       owned by them.

     The stockholders agreement will terminate upon the earliest of:

     - the sale of Holdings;

     - an initial public offering of the common stock of Holdings;

     - the dissolution or liquidation of Holdings;

     - the approval of such termination by us, Atlantic Equity Partners III and
       the holders of at least 50% of the shares held by the other stockholders
       of Holdings; and

     - October 15, 2022.

MANAGEMENT CONSULTING AGREEMENT

     Upon completion of the merger, we and Holdings entered into a management
consulting agreement with First Atlantic under which First Atlantic advises us
and Holdings on management matters that relate to proposed financial
transactions, acquisitions and other senior management matters. We and Holdings
                                        62
<PAGE>

have agreed to pay First Atlantic for these services an annual fee of $600,000
in equal monthly installments and will reimburse First Atlantic for its
expenses. During the period from October 16, 2002 through December 28, 2002, the
fiscal year ended January 3, 2004 and the three months ended April 3, 2004, we
paid approximately $150,000, $812,000 and $131,000 to First Atlantic under this
agreement. In addition, First Atlantic received a closing fee of $1,252,500 and
reimbursement of its expenses for services rendered in connection with the
merger. First Atlantic may receive additional fees from us under the agreement
in connection with future financings or dispositions or acquisitions by us or
Holdings. Under the terms of the agreement, such additional fees will not exceed
an amount equal to:

     - in the case of a transaction involving less than $50,000,000 in total
       enterprise value, 2% of such total enterprise value;

     - in the case of a transaction involving $50,000,000 or more but less than
       $100,000,000 in total enterprise value, $1,000,000; and

     - in the case of a transaction involving $100,000,000 or more in total
       enterprise value, 1% of such total enterprise value.

     With respect to a transaction involving a sale of Holdings, First Atlantic
will be paid a fee equal to 1% of the total enterprise value of our company.

     The management consulting agreement has a term of 10 years but will
automatically terminate if Atlantic Equity Partners III and its affiliates
collectively own less than 50% of the shares of the common stock of Holdings, or
upon an initial public offering of the common stock of Holdings. Five of our
directors, including our chairman of the board, hold positions with First
Atlantic, as described in "Management."

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements with James D. Thompson, our
president and chief executive officer, and with Virginia Bunte, our chief
financial officer. We also entered into employment agreements with Carl Paul and
Franklin Paul to provide advising services. You should read the information set
forth in "Management -- Employment Agreements," for a description of these
agreements.

AGREEMENT TO PROVIDE HEALTH BENEFITS TO OUR FOUNDERS

     In connection with the merger, we agreed to amend our group health plan so
that Carl Paul and Franklin Paul, our founders, will continue to be eligible to
participate in our health plan on the same basis as full-time employees. We
report these benefits under the plan as non-taxable benefits, based on our
determination that such reporting is permissible. Neither we nor Carl Paul or
Franklin Paul have agreed to indemnify the other party for any losses that
either of us may suffer as a result of this tax reporting or the amendment to
the plan.

INDEMNIFICATION AGREEMENTS

     In connection with the merger, we agreed to indemnify our directors prior
to the completion of the merger, including Carl Paul, one of our current
directors, in the event that any of them suffer losses as a result of actions
taken or statements made on behalf of us and in their capacities as our
directors, officers or agents.

                                        63
<PAGE>

                               SELLING NOTEHOLDER

     The selling noteholder is Golfsmith International Holdings, Inc., our
parent company. Upon consummation of the private transaction described below,
Holdings will become the beneficial owner of $7,250,000 aggregate principal
amount at maturity of the notes, representing 7.7% of the outstanding notes as
of the date of this prospectus. Atlantic Equity Partners III, L.P., Holdings'
majority stockholder, purchased $7,250,000 aggregate principal amount at
maturity of the notes in the initial offering on October 15, 2002. In connection
with our initial issuance of the notes, we entered into a registration rights
agreement in which we granted certain registration rights to the noteholders. In
July 2003, pursuant to our obligations under the registration rights agreement,
we conducted an exchange offer in which we offered to exchange all of the
outstanding unregistered notes for substantially identical notes that were
registered under the Securities Act. As an affiliate of us, Atlantic Equity
Partners III, L.P. was not eligible to participate in the exchange offer.

     Atlantic Equity Partners III, L.P. intends to exchange the $7,250,000
aggregate principal amount at maturity of unregistered notes beneficially owned
by it for cash and a number of shares of common stock of Holdings equal to the
aggregate sale price for the notes sold by Holdings in this offering, after
deducting the expenses related to this offering and the amount of the cash
payment described below, divided by approximately $3.85 (the fair market value
of each share of common stock of Holdings as previously determined by an
independent appraisal) in a private transaction. The amount of cash to be paid
by Holdings to Atlantic Equity Partners III is intended to be an amount
sufficient for Atlantic Equity Partners III or its partners, as applicable, to
discharge any federal, state and local tax liability arising from Atlantic
Equity Partners III's sale of the notes. For this purpose, Holdings and Atlantic
Equity Partners III have agreed that each partner of Atlantic Equity Partners
III will be assumed to be subject to tax at the highest marginal rate for an
individual taxpayer resident in New York City, New York and that any gain from
the sale of the notes will be long term capital gain for federal income tax
purposes. The notes offered under this prospectus are being registered to permit
Holdings to sell these notes to the public. Holdings will own no notes after the
completion of this offering.

                                        64
<PAGE>

                     DESCRIPTION OF SENIOR CREDIT FACILITY

CREDIT FACILITY

     General.  Our senior credit facility, as amended, is a revolving agreement
in an amount equal to $12.5 million and expires on April 15, 2007. The senior
credit facility also provides for the issuance of letters of credit, within the
overall borrowing availability. The amount available to be borrowed under our
senior credit facility is limited for each borrower to 85% of the net amount of
eligible receivables of such borrower plus the lesser of 65% of the value of
eligible inventory (valued on a lower of cost or market basis) of such borrower
and 60% of the net orderly liquidation value of eligible inventory of such
borrower. The lender agent under our senior credit facility also retains the
right from time to time to establish or modify advance rates, standards of
eligibility and reserves against availability. The borrowers have agreed with
the lender agent that, in addition to other reserves that the lender agent may
impose, they will maintain an availability reserve at all times of $500,000. As
a result, the amount of borrowings available under the senior credit facility
may at no time exceed $12.0 million, unless the lender agent releases that
reserve. Several of our subsidiaries are borrowers under the senior credit
facility. All borrowings will be on a joint and several basis.

     Interest Rate.  The senior credit facility bears interest, at the
borrower's option, at either a variable rate based on the London Interbank
Offered Rate (LIBOR) plus 2.5%, or the base rate on corporate loans quoted in
the Wall Street Journal plus 1.0%.

     Borrowers.  Golfsmith International, L.P., Golfsmith NU, L.L.C. and
Golfsmith USA, L.L.C.

     Guarantees.  Holdings and each of its domestic subsidiaries (other than the
borrowers), including us, guarantee the borrowers' obligations pursuant to the
senior credit facility.

     Security.  The senior credit facility is secured by a first priority lien
on substantially all of the current and future assets (other than real property,
fixtures, equipment and proceeds thereof owned by us, Holdings or our
subsidiaries) of each borrower or guarantor, including all of our stock and
equivalent equity interests of all of our subsidiaries (limited to 65% of voting
stock and 100% of non-voting stock of foreign subsidiaries owned by a domestic
subsidiary and excluding any stock owned by a foreign subsidiary), all accounts
receivable, inventory, intellectual property rights (including patents,
trademarks and service marks) and all other tangible and intangible property.

     Covenants and Events of Default.  In addition to the usual and customary
affirmative and negative covenants, the senior credit facility limits our and
our subsidiaries' ability to: (1) incur additional debt, leasehold obligations
and contingent liabilities; (2) pay dividends and other distributions on capital
stock; and (3) be a party to mergers, consolidations or similar transactions.
The senior credit facility also requires satisfaction of certain financial
covenants and provides for usual and customary events of default as well as
other appropriate events of default, including a cross-default to our and each
borrower's other financial obligations (including the notes).

     Conditions to Borrowing.  The obligations of the lenders to provide the
financing under the senior credit facility are subject to the satisfaction or
waiver of certain conditions, including, among others: (1) the accuracy of the
representations and warranties made by us with respect to the financing; (2)
compliance with certain covenants, including certain financial covenants; and
(3) the absence of any other events of default under the senior credit facility.

     Interest Coverage Ratio.  The senior credit facility requires us to
maintain a specified interest coverage ratio throughout the term of the senior
credit facility. Pursuant to the senior credit facility, our interest coverage
ratio is calculated by:

     - dividing our interest expense deducted in the determination of our
       consolidated net income,

      - less the amortization of capitalized fees and expenses incurred in
        connection with the merger, the initial offering of the notes and the
        senior credit facility, if included in such interest expense;

     - by our EBITDA less our capital expenditures.
                                        65
<PAGE>

EBITDA is defined as:

     - our consolidated net income less:

      - any income tax credits;

      - interest income;

      - gain from extraordinary items (net of losses);

      - any aggregate net gain (but not any aggregate net losses) arising from
        the sale or disposition of capital assets;

      - any other non-cash gains; and

      - certain other expenditures made in connection with the closing of the
        merger, the offering of the notes and the senior credit facility;

     - plus:

      - any provision for income taxes;

      - interest expenses;

      - depreciation and amortization;

      - amortized debt discount;

      - any deduction resulting from a grant of stock to management; and

      - certain expenses relating to the merger, the offering of the notes and
        the senior credit facility.

     At the end of each of our fiscal quarters, we are required to have an
interest coverage ratio for the twelve months then ending of not less than the
following:

<Table>
<Caption>
                                                              REQUIRED INTEREST
QUARTER                                                        COVERAGE RATIO
-------                                                       -----------------
<S>                                                           <C>
FISCAL 2002
  Fourth Quarter............................................        1.60
FISCAL 2003
  First Quarter.............................................        1.60
  Second Quarter............................................        1.50
  Third Quarter.............................................        1.40
  Fourth Quarter............................................        1.60
FISCAL 2004
  First Quarter.............................................        1.00
  Second Quarter............................................        1.20
  Third Quarter.............................................        1.60
  Fourth Quarter............................................        1.80
FISCAL 2005
  First Quarter.............................................        1.80
  Second Quarter............................................        1.80
  Third Quarter.............................................        1.90
  Fourth Quarter............................................        1.90
</Table>

                                        66
<PAGE>

<Table>
<Caption>
                                                              REQUIRED INTEREST
QUARTER                                                        COVERAGE RATIO
-------                                                       -----------------
<S>                                                           <C>
FISCAL 2006
  First Quarter.............................................        1.90
  Second Quarter............................................        2.00
  Third Quarter.............................................        2.00
  Fourth Quarter............................................        2.00
FISCAL 2007
  First Quarter.............................................        2.00
</Table>

     Minimum EBITDA.  The senior credit facility requires us to have a minimum
amount of EBITDA, as calculated above, throughout the term of the senior credit
facility. At the end of each of our fiscal quarters, we are required to have
EBITDA for the twelve months then ending of not less than the following:

<Table>
<Caption>
QUARTER                                                       MINIMUM EBITDA
-------                                                       --------------
<S>                                                           <C>
FISCAL 2002
  Fourth Quarter............................................   $15,864,000
FISCAL 2003
  First Quarter.............................................    17,292,000
  Second Quarter............................................    17,763,000
  Third Quarter.............................................    18,006,000
  Fourth Quarter............................................    18,720,000
FISCAL 2004
  First Quarter.............................................    14,550,000
  Second Quarter............................................    17,220,000
  Third Quarter.............................................    19,980,000
  Fourth Quarter............................................    20,400,000
FISCAL 2005
  First Quarter.............................................    20,760,000
  Second Quarter............................................    21,120,000
  Third Quarter.............................................    21,480,000
  Fourth Quarter............................................    21,840,000
FISCAL 2006
  First Quarter.............................................    22,640,000
  Second Quarter............................................    23,440,000
  Third Quarter.............................................    24,240,000
  Fourth Quarter............................................    25,040,000
FISCAL 2007
  First Quarter.............................................    26,020,000
</Table>

                                        67
<PAGE>

     Limitation on Capital Expenditures.  The senior credit facility prohibits
us from making capital expenditures that exceed in the aggregate the following
amounts in each of the specified fiscal years:

<Table>
<Caption>
                                                              CAPITAL EXPENDITURE
FISCAL YEAR                                                          LIMIT
-----------                                                   -------------------
<S>                                                           <C>
2002........................................................      $5,400,000
2003........................................................       6,250,000
2004........................................................       6,800,000
2005........................................................       7,200,000
2006........................................................       8,400,000
</Table>

INTERCREDITOR AGREEMENT

     An intercreditor agreement, dated as of October 15, 2002, among us, the
guarantors, General Electric Capital Corporation, as agent for the lenders under
the senior credit facility, and U.S. Bank Trust National Association, as trustee
and collateral agent under the indenture, sets forth the relative rights to our
collateral of the lenders under the senior credit facility, on the one hand, and
the holders of notes on the other hand. Proceeds from the sale of collateral in
which the lenders have a security interest will be used first to satisfy
obligations under the senior credit facility and, thereafter, the notes. You
should read the information set forth under "Description of the
Notes -- Security" and "-- Intercreditor Agreement" for more information
relating to the collateral securing the senior credit facility and the
intercreditor arrangements.

                                        68
<PAGE>

                            DESCRIPTION OF THE NOTES

     The notes were issued under an indenture dated as of October 15, 2002,
among our company, the Guarantors and U.S. Bank Trust National Association, as
trustee. The indenture is subject to and governed by the Trust Indenture Act of
1939. The following is a summary of the material provisions of the indenture. It
does not include all of the provisions of the indenture. You should read the
indenture, including the definitions of certain terms contained therein and
those terms made part of the indenture by reference to the Trust Indenture Act,
in its entirety for provisions that may be important to you. The indenture will
be incorporated by reference into the registration statement of which this
prospectus is a part. You can find definitions of certain capitalized terms used
in this description under "-- Certain Definitions." For purposes of this
"Description of the Notes," references to "our company," "we," "our" or "us"
refer solely to Golfsmith International, Inc. and not any of our Subsidiaries.

GENERAL

     The notes are our senior obligations and rank equal in right of payment
with all of our other senior obligations and senior in right of payment with all
of our Indebtedness which by its terms is subordinated to the notes. The notes
are guaranteed, jointly and severally on a senior secured basis by the
Guarantors set forth under "-- Guarantees" below.

     We issued the notes in fully registered form in denominations of $1,000 and
integral multiples thereof. The trustee is acting as paying agent and registrar
for the notes. The notes may be presented for registration of transfer or
exchange at the offices of the registrar. No service charge will be made for any
registration of transfer or exchange or redemption of notes, but we may require
payment in certain circumstances of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. We may change
any paying agent and registrar without notice to holders of the notes. We will
pay principal (and premium, if any) on the notes at the trustee's corporate
office in New York, New York. At our option, interest may be paid at the
trustee's corporate trust office or by check mailed to the registered address of
holders.

PRINCIPAL, MATURITY AND INTEREST

     We initially issued $93.75 million in aggregate principal amount at
maturity of notes. We may issue additional notes from time to time after this
offering provided that we comply with the covenant described below under the
caption "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness." The notes were issued at a discount to yield gross proceeds of
$75.0 million. The notes and any additional notes will be substantially
identical other than the issuance dates and the dates from which interest will
accrue. The notes and any additional notes will be treated as a single class of
notes under the indenture and will vote together as a single class. Because,
however, any additional notes may not be fungible with the notes for federal
income tax purposes, they may have a different CUSIP number or numbers, be
represented by a different global note or notes, and otherwise be treated as a
separate class or classes of notes for other purposes.

     The notes will mature on October 15, 2009. Interest on the notes accrues at
the rate of 8.375% per annum and is payable semiannually in cash on each March 1
and September 1 to the persons who are registered holders at the close of
business on the February 15 or August 15 immediately preceding the applicable
interest payment date. Interest on the notes accrues from the most recent date
to which interest has been paid or, if no interest has been paid, from and
including the date of issuance. Interest is computed on the basis of a 360-day
year comprised of twelve 30-day months.

                                        69
<PAGE>

     On each interest payment date beginning March 1, 2008, in addition to
accrued interest due on that date, we will make a payment (the "HYDO Payment")
on each note in cash in immediately available funds, which payment will reduce
the outstanding principal amount at maturity of the note, in an amount equal to
the excess, if any, of:

     - the total amount of interest and original issue discount (as determined
       under the Internal Revenue Code of 1986, as amended (the "Code")) accrued
       on the note through such interest payment date, over

     - the sum of:

      - all amounts of interest and original issue discount paid in cash with
        respect to such note (or any predecessor note) through and including
        such interest payment date;

      - all HYDO Payments previously made by us; and

      - the annual "yield to maturity" applicable for purposes of the accrual of
        original issue discount under the Code multiplied by the original
        principal amount at maturity of the note.

     Any reduction as described above will reduce the principal amount of the
note for all purposes under the indenture. As a result of making these HYDO
payments, we will not be subject to special rules (applicable to some high-yield
debt obligations with significant amounts of unpaid original issue discount
after five years from their issue date), that would otherwise limit the amount
of interest expense we could deduct on the notes for U.S. federal income tax
purposes.

SECURITY

     Pursuant to the terms of the Collateral Agreements, we and our Domestic
Restricted Subsidiaries granted to the Collateral Agent or one or more
sub-Collateral Agents appointed under the intercreditor agreement, security
interests in substantially all of our respective assets, including all of the
stock of domestic Subsidiaries directly owned by us or any Domestic Restricted
Subsidiary, 65% of the capital stock entitling the holders thereof to vote in
the election of members of the board of directors, which we refer to as voting
stock, of foreign Subsidiaries directly owned by us or any Domestic Restricted
Subsidiary and 100% of the non-voting Stock of foreign Subsidiaries directly
owned by us or any Domestic Restricted Subsidiary, but excluding certain
"excluded assets" (including leasehold interests existing on the Issue Date). In
addition, Holdings granted a security interest in all of its assets (including
its stock in our company). Security interests in all such assets (other than
real property, fixtures, equipment and proceeds thereof) secure the obligations
under the Credit Agreement on a first priority basis and the obligations under
the notes, the guarantees and the indenture on a second priority basis, subject
in each case to Permitted Liens. Security interests in real property, fixtures,
equipment and proceeds thereof will secure the obligations under the notes, the
guarantees and the indenture on a first priority basis, subject to the Permitted
Liens.

     Upon an Event of Default, the proceeds from the sale of Collateral securing
the notes will likely be insufficient to satisfy our obligations under the
notes. No appraisals of any of the Collateral have been prepared in connection
with this offering. Moreover, the amount to be received upon such a sale would
be dependent upon numerous factors, including the condition, age and useful life
of the Collateral at the time of such sale, as well as the timing and manner of
such sale. By its nature, all or some of the Collateral will be illiquid and may
have no readily ascertainable market value. Accordingly, there can be no
assurance that the Collateral, if saleable, can be sold in a short period of
time or at an appropriate price.

     We have the ability to issue additional notes as part of the same series of
notes, which may also be secured by the Collateral. We and the Guarantors can
increase our Indebtedness but there can be no assurance that there will be a
proportionate increase in the value of the Collateral as a percentage of the
aggregate principal amount at maturity of outstanding notes.

     A significant portion of our assets consists of leasehold improvements.
Because leasehold improvements may be deemed to be a part of either the real
property covered by the lease (which real
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property is not owned by us or our Restricted Subsidiaries) or our current real
estate leasehold interests (which interests are not included in the Collateral
securing the notes), there can be no assurance as to whether or to what extent
such assets would be available as collateral securing the notes. Moreover, the
ability of the Collateral Agent to obtain possession of Collateral located on
leaseholds may be subject to conflicting claims of landlords. We believe,
however, that the realizable value of such leasehold interests upon our
liquidation would not be material.

     To the extent third parties hold Permitted Liens, such third parties may
have rights and remedies with respect to the property subject to such Liens
that, if exercised, could adversely affect the value of the Collateral. Given
the intangible nature of certain of the Collateral, any sale of such Collateral
separately from our company and our Restricted Subsidiaries as a whole may not
be feasible. Additionally, the inclusion of our and our Restricted Subsidiaries'
fixtures in the Collateral securing the notes will be limited by the extent to
which (a) such fixtures are deemed not to be personal property and (b) any
applicable state laws would, for purposes of perfecting security interests with
respect thereto, require that the Collateral Agent effectuate certain filings in
applicable real estate land records. Our and our Restricted Subsidiaries'
ability to grant a first (or second) priority security interest in certain
Collateral may be limited by legal or other logistical considerations. The
ability of the holders of notes to realize upon the Collateral may be subject to
certain bankruptcy law limitations in the event of a bankruptcy. See "-- Certain
Bankruptcy Limitations."

     We are only permitted to form new Subsidiaries and to transfer all or a
portion of the Collateral to one or more of our Subsidiaries if such formation
and transfer is in accordance with the provisions described under "-- Certain
Covenants -- Additional Subsidiary Guarantees."

     Subject to the restrictions on incurring Indebtedness set forth herein, we
and our Subsidiaries will have the right to grant (and suffer to exist) Liens
securing Purchase Money Indebtedness respecting fixed assets and to acquire any
such assets subject to such Liens. Liens created by the Collateral Agreements
are intended to be, and will be, at all times automatically subordinate in
priority to all such Liens.

     The Collateral release provisions of the indenture permit the release of
Collateral without substitution of Collateral of at least equal value under
certain circumstances, including asset sales made in compliance with the
indenture.

     Neither we nor any of our Restricted Subsidiaries will encumber any asset
or property of our company or such Restricted Subsidiaries or suffer to exist
any Lien thereon, other than Permitted Liens or as otherwise expressly permitted
by the indenture.

     So long as no Event of Default has occurred and is continuing, and subject
to certain terms and conditions in the indenture, the Credit Agreement, the
Collateral Agreements and the intercreditor agreement, we will be entitled to
receive all cash dividends, interest and other payments made upon or with
respect to the Capital Stock of any of our Subsidiaries held as Collateral and
to exercise any voting, consensual and other rights pertaining to such Capital
Stock. Upon the occurrence and during the continuance of an Event of Default,
subject to the terms of the intercreditor agreement and the documents securing
the Credit Agreement, upon notice from the Collateral Agent, (a) all of our
rights to exercise such voting, consensual or other rights will cease and all
such rights will become vested in the Collateral Agent, which, to the extent
permitted by law, will have the sole right to exercise such voting, consensual
or other rights, (b) all of our rights to receive all cash dividends, interest
and other payments made upon or with respect to the Collateral will cease, and
such cash dividends, interest and other payments will be paid to the Collateral
Agent or the lenders under the Credit Agreement, and (c) the Collateral Agent
may sell the Collateral or any part thereof in accordance with, and subject to
the terms of, the Collateral Agreements subject to the prior rights of the
lenders under the Credit Agreement. All funds distributed under the Collateral
Agreements by the Collateral Agent will be distributed by the Collateral Agent
in accordance with the provisions of the intercreditor agreement and the
indenture.

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<PAGE>

     The Collateral Agreements will terminate, subject to the intercreditor
agreement, and the pledged Collateral will be released from the liens created
thereunder, upon:

     - payment in full of all amounts due in respect of the notes;

     - satisfaction and discharge of the indenture in accordance with its terms;
       and

     - a legal defeasance or covenant defeasance in accordance with the
       provisions described below under "-- Legal Defeasance and Covenant
       Defeasance."

     Liens securing the notes will be released, in part, with respect to any
asset constituting Collateral:

     - that is sold or otherwise disposed of by us or one of the Subsidiary
       Guarantors to a Person other than us or a Subsidiary Guarantor in a
       transaction permitted by the indenture, at the time of such sale or
       disposition;

     - that is owned or at any time acquired by a Subsidiary Guarantor that has
       been released from its Guarantee concurrently with the release of the
       Guarantee (including by virtue of such Restricted Guarantor becoming an
       Unrestricted Subsidiary); or

     - to the extent that we mail written notice of our request to release the
       lien relating to such asset to the trustee and the holders of the notes
       and we do not receive written objections from holders of at least 25% in
       aggregate principal amount at maturity of the notes within 20 business
       days after the mailing, provided that if we receive such objections, then
       we will not be entitled to the release unless we obtain the consent of
       holders of at least a majority in principal amount at maturity of the
       notes.

CERTAIN BANKRUPTCY LIMITATIONS

     The right of the Collateral Agent to repossess and dispose of the
Collateral upon the occurrence of an Event of Default is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy proceeding
were to be commenced by or against us or any of the Guarantors prior to the
Collateral Agent having repossessed and disposed of the Collateral or otherwise
completed the realization of the Collateral securing the notes. Under the
Bankruptcy Code, a secured creditor such as the Collateral Agent is prohibited
from repossessing its security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without bankruptcy court
approval. Moreover, the Bankruptcy Code permits the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable
debt instruments; provided that, under the Bankruptcy Code, the secured creditor
is given "adequate protection." The meaning of the term "adequate protection"
may vary according to circumstances, but it is intended in general to protect
the value of the secured creditor's interest in the collateral securing the
obligations owed to it and may include cash payments or the granting of
additional security, if and at such times as the bankruptcy court in its
discretion so determines, for any diminution in the value of such collateral as
a result of the stay of repossession or disposition or any use of the Collateral
by the debtor during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how long
payments under the notes could be delayed following commencement of a bankruptcy
case, whether or when the Collateral Agent could repossess or dispose of the
Collateral or whether or to what extent holders of the notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection."

     The intercreditor agreement prohibits the holders of the notes or the
Collateral Agent from seeking adequate protection with respect to the Collateral
which also secures the Credit Agreement and requires the Collateral Agent and
the holders of the notes not to object to the Lender Agent or the Lenders
seeking adequate protection with respect to such Collateral.

     The Collateral Agent and the holders of the notes have agreed not to seek
relief from the automatic stay in respect of Collateral securing the obligations
under the Credit Agreement so long as any amounts remain outstanding under the
Credit Agreement (or if the Credit Agreement is a debtor-in-possession
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<PAGE>

facility in whole or in part, any commitment thereunder is in effect), and not
to object to any motion by the Lender Agent for relief from the automatic stay.
The Lender Agent and the Lenders agreed not to object to any motion by the
Collateral Agent or any holder of notes for relief from the automatic stay in
respect of the Collateral securing the indenture, the notes and the Guarantees
on a first priority basis. The Collateral Agent and the holders of the notes
have agreed not to object to any debtor-in-possession financing priming the
security interest with respect to the Collateral securing the notes and the
Credit Agreement so long as the Lenders agree to such financing priming the
corresponding security interest of the Lenders and certain related matters. The
holders of the notes have also agreed not to vote their secured claims for any
plan of reorganization that does not provide for the payment in full in cash on
the effective date of the plan of all obligations of the Lenders or such other
treatment that may be acceptable to the Lenders. The Collateral Agent and the
holders of the notes have agreed not to challenge the right of the Lenders to
receive post-petition interest, fees and expenses with respect to Collateral
securing the Credit Agreement and the lenders and the Lender Agent have agreed
not to challenge the right of the holders of the notes to receive post-petition
interest, fees and expenses with respect to the Collateral securing the
indenture, the notes and the Guarantees.

INTERCREDITOR AGREEMENT

     On October 15, 2002, we, the Guarantors, the Lender Agent, on behalf of
itself and the Lenders, the trustee and the Collateral Agent, on behalf of the
holders of the notes, entered into the intercreditor agreement. The
intercreditor agreement, among other things, provides that the obligations of
our company and our subsidiaries under the Credit Agreement are secured by
substantially all of the assets (other than real property, fixtures, equipment
and proceeds thereof) of our company, Holdings and our domestic subsidiaries on
a first priority basis and the obligations of our company, Holdings and our
subsidiaries under the notes, the guarantees and the indenture are secured by
the real property, fixtures, equipment and proceeds thereof of our company,
Holdings and our Domestic Restricted Subsidiaries on a first priority basis and
all of the other assets of our company, Holdings and our Domestic Restricted
Subsidiaries on a second priority basis, and provides that upon and during the
continuance of an event of default under the Credit Agreement, the Lender Agent
is entitled to manage all aspects of, including exercising or refraining from
exercising all rights and remedies with respect to, the Collateral securing the
Credit Agreement.

     Pursuant to the intercreditor agreement, neither the Collateral Agent nor
any holder of notes may challenge the Liens securing obligations under the
Credit Agreement and neither the Lender Agent nor any Lender may challenge the
Liens securing obligations under the indenture and the notes. In addition, while
the Credit Agreement remains in effect, or any borrowings are outstanding
thereunder, neither the Collateral Agent nor any holder of notes may take any
action to enforce the Liens securing obligations under the indenture and the
notes. The Collateral Agent and the holders of the notes also agree to turn over
to the Lender Agent any proceeds of Collateral securing the obligations under
the Credit Agreement which it or any of them obtains so long as any amounts are
outstanding under the Credit Agreement.

     The Collateral Agent and all holders of notes:

     - agree to waive all claims against the Lenders and the Lender Agent with
       respect to the Collateral securing obligations under the Credit Agreement
       (other than those arising from willful misconduct or breach of the
       intercreditor agreement),

     - must postpone exercising any rights with respect to such Collateral until
       the Credit Agreement is terminated and paid in full, and

     - acknowledge that the Lenders and the Lender Agent owe no duty to the
       Collateral Agent or the holders of the notes, other than (a) turning over
       control of Collateral to the trustee following the termination of the
       Credit Agreement and payment of all amounts thereunder and (b) following
       such events, executing and delivering such instruments as are necessary
       to evidence any transfer by subrogation to the trustee and the holders of
       the notes of an interest in the Credit Agreement resulting from, among
       other things, any turnover by the trustee and/or the holders of the notes
       of proceeds from Collateral to the Lender Agent and the Lenders.
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<PAGE>

DEFAULT PURCHASE OPTION

     Pursuant to the Credit Agreement, one or more of the holders of the notes
will be entitled to purchase, for cash at a price equal to all amounts owing
under the Credit Agreement, all amounts owing under the Credit Agreement and all
rights under the Credit Agreement (other than obligations (excluding the
principal of, interest and premium (if any) on and fees relating to any
indebtedness and contingent reimbursement obligations in respect of amounts
drawn under letters of credit) for taxes, costs, indemnifications,
reimbursements, damages and other liabilities in respect of which no claim or
demand for payment has been made or, in the case of obligations for
indemnification, no notice for indemnification has been given at such time),
including the security interests granted under the Credit Agreement, during a
period beginning on the date that either:

     - the commitment under the Credit Agreement is terminated, or

     - all amounts outstanding thereunder become accelerated and any letters of
       credit issued thereunder are required to be cash collateralized,

and ending on the 20th business day following the delivery by the Lender Agent
or any Lender of notice of the occurrence of either such date.

GUARANTEES

     The full and prompt payment of our obligations under the notes and the
indenture are and will be guaranteed, jointly and severally, by Holdings (the
"Parent Guarantee") and by all of our present and future Domestic Restricted
Subsidiaries (the "Subsidiary Guarantees" and, together with the Parent
Guarantee, the "Guarantees"). The guarantors under the Subsidiary Guarantees are
referred to as the "Subsidiary Guarantors" and, together with Holdings are
referred to as the "Guarantors." Holdings currently has no material assets other
than the common stock of our company. As of the Issue Date, all of our
subsidiaries were Domestic Restricted Subsidiaries. Each Guarantor has fully and
unconditionally guaranteed on a senior basis, jointly and severally, to each
holder and the trustee, the full and prompt performance of our obligations under
the indenture, the notes and the Collateral Agreements, including the payment of
principal of, interest on and premium, if any, on the notes. The Guarantee of
each Guarantor ranks senior in right of payment to all subordinated indebtedness
of such Guarantor and equal in right of payment with all other senior
obligations of such Guarantor, including borrowings or guarantees of borrowings
under the Credit Agreement. The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the indenture, will result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. The net worth of any Guarantor
for such purpose will include any claim of such Guarantor against us for
reimbursement and any claim against any other Guarantor for contribution. Each
Guarantor may consolidate with or merge into or sell its assets to us or another
Guarantor without limitation. See "-- Certain Covenants -- Mergers,
Consolidation and Sale of Assets" and "-- Limitation on Asset Sales." The rights
of the holders of the notes to participate in any distribution of assets of the
guarantors (or proceeds therefrom) upon a bankruptcy will be subject to the
claims of the senior lenders under our credit facility. See "Risk Factors -- The
collateral which secures both the notes and borrowings under our senior credit
facility is subject to control by the lenders under our senior credit facility.
If there is a default, the proceeds from the collateral may not be sufficient to
repay both the lenders under our senior credit facility and the holders of the
notes and the lenders under the senior credit facility will be repaid before the
holders of the notes."

REDEMPTION

     Mandatory Redemption.  On each of October 15, 2007 and October 15, 2008, we
must make a pro rata partial redemption of the principal amount of each note
equal to 20% and 10%, respectively, of the
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<PAGE>

original principal amount at maturity of such note. In addition, we must pay
accrued and unpaid interest on the principal amount of the notes redeemed to the
redemption date. If we issue additional notes after the Issue Date, these
percentages will be reduced by multiplying the relevant percentage by a
fraction, the numerator of which is the principal amount at maturity of notes
issued on the Issue Date and the denominator of which is the sum of the
principal amount at maturity of such notes and the principal amount at maturity
of any additional notes.

     However, the principal amount at maturity of notes we must redeem on the
dates set forth above may be reduced by the aggregate principal amount at
maturity of notes we have previously repurchased pursuant to the excess cash
flow offers described below.

     Any mandatory redemption payment will be made in the same manner as
ordinary interest payments on the notes.

     Any redemption as described above will reduce the principal amount at
maturity of each note for all purposes under the indenture.

     We may elect to credit against these mandatory redemptions an amount equal
to 100% of the principal amount at maturity of any notes that we have redeemed
or otherwise acquired pursuant to "-- Excess Cash Flow Offer" and delivered to
the trustee for cancellation. We will, no later than the August 15 in the year
in which a mandatory redemption is required, provide the trustee with an
officers' certificate stating the aggregate principal amount of each note to be
redeemed pursuant to the provisions of the first paragraph of this section and
setting forth the aggregate principal amount at maturity of notes to be credited
against the next mandatory redemption. We will deliver the notes which are to be
so credited to the trustee with such officers' certificate (if not previously
delivered to the trustee for cancellation) for retention and credit in
accordance with such officers' certificate.

     Optional Redemption Prior to October 15, 2006.  At any time prior to
October 15, 2006, we may, at our option, on one or more occasions redeem all or
part of the notes at a redemption price equal to the greater of (1) 100% of the
Accreted Value of the notes being redeemed and (2) the sum of the present values
of 106.50% of the Accreted Value of the notes being redeemed and scheduled
payments of interest on such notes to and including October 15, 2006 discounted
to the date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points,
together in either case with accrued and unpaid interest, if any, to the date of
redemption.

     "Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption period.

     "Comparable Treasury Issue" means the United States Treasury security
selected by a Reference Treasury Dealer appointed by us as having a maturity
comparable to the remaining term of the notes (as if the final maturity of the
notes was October 15, 2006) that would be utilized at the time of selection and
in accordance with customary financial practice in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes (as if the final maturity of the notes was October 15, 2006).

     "Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (2) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations (as defined below) for such
redemption date, after excluding the highest and lowest such Reference Treasury
Dealer Quotation or (B) if we obtain fewer than three such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
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<PAGE>

     "Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by us, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to us by such
Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such
redemption date.

     "Reference Treasury Dealer" means any primary U.S. government securities
dealer in the City of New York (a "Primary Treasury Dealer") selected by us.

     Optional Redemption on or After October 15, 2006.  We may, at our option,
redeem the notes in whole or in part at any time on or after October 15, 2006,
at the following redemption prices (expressed as percentages of the Accreted
Value thereof) if redeemed during the twelve-month period beginning on October
15 of the year set forth below:

<Table>
<Caption>
YEAR                                                          REDEMPTION PRICE
----                                                          ----------------
<S>                                                           <C>
2006........................................................       106.50%
2007........................................................       103.25%
2008 and thereafter.........................................       100.00%
</Table>

     In addition, we must pay accrued and unpaid interest on the notes redeemed
to the redemption date.

     Optional Redemption upon Equity Offerings.  At any time on or prior to
October 15, 2005, we may, at our option, on one or more occasions, use the net
cash proceeds of one or more Equity Offerings to redeem up to 35% of the
principal amount at maturity of the notes originally issued under the indenture
at a redemption price of 113.00% of the Accreted Value thereof, plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that:

          (1) at least 65% of the principal amount at maturity of notes issued
     under the indenture remains outstanding immediately after any such
     redemption; and

          (2) we make such redemption not more than 120 days after the
     consummation of any such Equity Offering.

     "Equity Offering" means any public or private offering of our Qualified
Capital Stock.

SELECTION AND NOTICE OF REDEMPTION

     In the event that we are redeeming less than all of the notes pursuant to
one of our optional redemption rights, selection of the notes for redemption
will be made by the trustee either:

          (1) in compliance with the requirements of the principal national
     securities exchange, if any, on which the notes are listed; or

          (2) on a pro rata basis, by lot or by such method as the trustee may
     reasonably determine is fair and appropriate;

provided that no partial redemption will reduce the principal amount at maturity
of a note not redeemed to less than $1,000; and provided, further, that any such
partial redemption made with the proceeds of an Equity Offering will be made
only on a pro rata basis or on as nearly a pro rata basis as is practicable
(subject to the procedures of DTC or any other depository). We will mail notice
of redemption by first-class mail, postage prepaid, at least 30 but not more
than 60 days before the redemption date to each holder of notes to be redeemed
at its registered address. On and after the redemption date, interest will cease
to accrue on notes or portions thereof called for redemption as long as we have
deposited with the paying agent funds in satisfaction of the applicable
redemption price.

REPURCHASE UPON CHANGE OF CONTROL

     Upon the occurrence of a Change of Control, each holder will have the right
to require us to purchase all or a portion of such holder's notes using
immediately available funds pursuant to the offer described

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<PAGE>

below, at a purchase price equal to 101% of the Accreted Value thereof plus
accrued and unpaid interest to the date of purchase.

     Within 30 days following the date upon which the Change of Control
occurred, we must send, by first-class mail, postage prepaid, an offer to each
holder, with a copy to the trustee, which offer will govern the terms of the
Change of Control offer. Such offer will state, among other things:

     - the purchase price;

     - the purchase date, which must be no earlier than 30 days nor later than
       60 days from the date such notice is mailed, other than as may be
       required by law;

     - that a Change of Control has occurred;

     - that any note not tendered will continue to accrue interest;

     - that unless we default on the payment of the purchase price, any notes
       accepted for payment pursuant to the Change of Control offer will cease
       to accrue interest after the purchase date; and

     - certain procedures that a holder of notes must follow to accept the
       Change of Control offer or to withdraw such acceptance.

     Holders electing to have a note purchased pursuant to a Change of Control
offer will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the third business day prior to the purchase date.

     On the purchase date, we will, to the extent lawful:

     - accept for payment all notes or portions thereof properly tendered
       pursuant to the Change of Control offer;

     - deposit with the paying agent an amount equal to the purchase price in
       respect of all notes or portions thereof so tendered; and

     - deliver or cause to be delivered to the trustee the notes so accepted
       together with an officers' certificate stating the aggregate principal
       amount at maturity of notes or portions thereof being purchased by us.

     The paying agent will promptly mail to each holder of notes so tendered the
purchase price for such notes, and the trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each holder a note equal in
principal amount at maturity to any unpurchased portion of the notes
surrendered; provided that each such note will be in a principal amount at
maturity of $1,000 or an integral multiple thereof.

     We will not be required to make a Change of Control offer upon a Change of
Control if a third party makes the Change of Control offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control offer made by us and purchases all
notes validly tendered and not withdrawn under such Change of Control offer.

     The trustee may not waive the covenant to offer to purchase the notes upon
a Change of Control. Restrictions in the indenture on our and our Restricted
Subsidiaries' ability to incur additional Indebtedness, to grant liens on its
property, to make Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of our company, whether favored or opposed by
our management or our board of directors. These restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of our company or any of our
Subsidiaries by our management. Consummation of any such transaction in certain
circumstances may require a repurchase of the notes, and neither we nor the
acquiring party may have sufficient financial resources to effect such
repurchase. In addition, the terms of the Credit Agreement and the indenture may
restrict our ability to obtain the financing necessary to fund a Change of
Control offer.

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Our failure to purchase tendered notes following a Change of Control, whether
because of a lack of financial resources, a provision in our Credit Agreement or
in the indenture, or otherwise, would constitute an Event of Default under the
indenture which, in turn, would constitute a default under the Credit Agreement.
While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the indenture
may not afford the holders protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring,
merger, recapitalization or similar transaction.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to a Change of Control offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Change of Control" provisions
of the indenture, we will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
"Change of Control" provisions of the indenture by virtue thereof.

EXCESS CASH FLOW OFFER

     Within 120 days after the end of each fiscal year (beginning with the first
full fiscal year after the Issue Date), we will make an offer to purchase to all
holders to purchase the maximum principal amount of notes that may be purchased
with 50% of Excess Cash Flow for such fiscal year (the "Excess Cash Flow Offer
Amount"), at a purchase price in cash equal to 100% of the Accreted Value of the
notes to be purchased, plus accrued and unpaid interest to the date of such
purchase. The indenture provides for each Excess Cash Flow offer to remain open
for a period of 20 business days, unless a longer period is required by law.
Promptly after the termination of the Excess Cash Flow offer period, we will
purchase and mail or deliver payment for the Excess Cash Flow Offer Amount for
the notes or portions thereof tendered, pro rata or by such other method as may
be required by law, or, if less than the Excess Cash Flow Offer Amount has been
tendered, all notes tendered pursuant to the Excess Cash Flow offer. If the
aggregate amount of notes tendered pursuant to any Excess Cash Flow offer is
less than the Excess Cash Flow Offer Amount, we may, subject to the other
provisions of the indenture and the Collateral Agreements, use any such excess
cash flow for general corporate purposes. Upon receiving notice of the Excess
Cash Flow offer, holders may elect to tender their notes, in whole or in part,
in integral multiples of $1,000 in exchange for cash.

     No later than 30 days prior to the required purchase date, we must send, by
first-class mail, postage prepaid, an offer to each holder, with a copy to the
trustee, which offer will govern the terms of the Excess Cash Flow offer. Such
offer will state, among other things:

     - the purchase price;

     - the purchase date, which must be no earlier than 30 days nor later than
       60 days from the date such notice is mailed, other than as may be
       required by law;

     - that we are making an Excess Cash Flow offer;

     - that any note not tendered will continue to accrue interest;

     - that unless we default on the payment of the purchase price, any notes
       accepted for payment pursuant to the Excess Cash Flow offer will cease to
       accrue interest after the purchase date; and

     - certain procedures that a holder of notes must follow to accept the
       Excess Cash Flow offer or to withdraw such acceptance.

     Holders electing to have a note purchased pursuant to an Excess Cash Flow
offer will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the third business day prior to the purchase date.

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     On the purchase date, we will, to the extent lawful:

     - accept for payment all notes or portions thereof properly tendered
       pursuant to the Excess Cash Flow offer;

     - deposit with the paying agent an amount equal to the purchase price in
       respect of all notes or portions thereof so tendered; and

     - deliver or cause to be delivered to the trustee the notes so accepted
       together with an officer's certificate stating the aggregate principal
       amount at maturity of notes or portions thereof being purchased by us.

     The paying agent will promptly mail to each holder of notes so tendered the
purchase price for such notes, and the trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each holder a note equal in
principal amount at maturity to any unpurchased portion of the notes
surrendered; provided that each such note will be in a principal amount at
maturity of $1,000 or an integral multiple thereof.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to an Excess Cash Flow offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Excess Cash Flow Offer"
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the "Excess Cash Flow Offer" provisions of the indenture by virtue thereof.

CERTAIN COVENANTS

     The indenture contains, among others, the following covenants:

     Limitation on Capital Expenditures.  The aggregate amount of our and our
Restricted Subsidiaries' Capital Expenditures in any consecutive four fiscal
quarter period is limited to the greater of (1) one-third of our EBITDA in the
consecutive four fiscal quarter period ending with the latest fiscal quarter for
which financial statements are required to be delivered pursuant to the
indenture and (2) the Capital Expenditure Basket.

     Limitation on Incurrence of Additional Indebtedness.  We will not, and will
not permit any of our Restricted Subsidiaries to, directly or indirectly,
create, incur, assume, guarantee, acquire, become liable with respect to, or
otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if no
Default or Event of Default will have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, we or any of our
Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor
may incur Indebtedness (including, without limitation, Acquired Indebtedness)
and any Restricted Subsidiary that is not or will not, upon such incurrence,
become a Guarantor may incur Acquired Indebtedness, in each case if on the date
of the incurrence of such Indebtedness, after giving effect to the incurrence
thereof, our Consolidated Fixed Charge Coverage Ratio is at least equal to:

     - 2.0 to 1.0, if such proposed incurrence is to be consummated on or prior
       to October 15, 2004;

     - 2.25 to 1.0, if such proposed incurrence is to be consummated on or prior
       to October 15, 2005; and

     - 2.5 to 1.0, if such proposed incurrence is to be consummated thereafter.

     Limitation on Restricted Payments.  We will not, and will not cause or
permit any of our Restricted Subsidiaries to, directly or indirectly (each, a
"Restricted Payment"):

          (1) declare or pay any dividend or make any distribution (other than
     dividends or distributions payable in our Qualified Capital Stock,
     dividends and distributions payable to us or any Restricted Subsidiary and
     pro rata dividends or distributions made by a Restricted Subsidiary that is
     not a

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     Wholly-Owned Subsidiary) on or in respect of our Capital Stock or Capital
     Stock of our Restricted Subsidiaries to holders of such Capital Stock;

          (2) purchase, redeem or otherwise acquire or retire for value any of
     our Capital Stock or Capital Stock of our Restricted Subsidiaries (other
     than any such Capital Stock of a Restricted Subsidiary held by us or a
     Guarantor);

          (3) make any principal payment on, purchase, defease, redeem, prepay,
     decrease or otherwise acquire or retire for value, prior to any scheduled
     final maturity, scheduled repayment or scheduled sinking fund payment, any
     Indebtedness of our company or any Guarantor that is subordinate or junior
     in right of payment to the notes or a Guarantee (other than Indebtedness
     permitted under clause (6) of the definition of "Permitted Indebtedness");
     or

          (4) make any Investment (other than any Permitted Investment);

     if at the time of such Restricted Payment or immediately after giving
effect thereto,

             (i) a Default or an Event of Default will have occurred and be
        continuing; or

             (ii) we are not able to incur at least $1.00 of additional
        Indebtedness (other than Permitted Indebtedness) in compliance with the
        covenant described under "-- Limitation on Incurrence of Additional
        Indebtedness;" or

             (iii) the aggregate amount of all Restricted Payments (including
        such proposed Restricted Payment) made subsequent to the Issue Date (the
        amount expended for such purposes, if other than in cash, being the Fair
        Market Value of such property as determined in good faith by our board
        of directors at the time of the making thereof) will exceed the sum of:

                (w) 50% of our cumulative Consolidated Net Income (or if
           cumulative Consolidated Net Income will be a loss, minus 100% of such
           loss) earned subsequent to the Issue Date and ending on the last day
           of our last fiscal quarter for which financial statements are
           available (the "Reference Date") (treating such period as a single
           accounting period); plus

                (x) 100% of the aggregate net cash proceeds received by us from
           any Person (other than a Subsidiary of ours) as a contribution to our
           capital or from the issuance and sale subsequent to the Issue Date
           and on or prior to the Reference Date of our Qualified Capital Stock
           (including upon the exercise of options, warrants or rights); plus

                (y) 100% of the aggregate net cash proceeds received from the
           issuance of our Indebtedness that have been converted into or
           exchanged for our Qualified Capital Stock subsequent to the Issue
           Date and on or prior to the Reference Date; plus

                (z) an amount equal to the sum of (i) the net reduction in the
           Investments (other than Permitted Investments) made by us or any
           Restricted Subsidiary in any Person resulting from repurchases,
           repayments or redemptions of such Investments by such Person,
           proceeds realized on the sale of such Investment and proceeds
           representing the return of capital (excluding dividends and
           distributions), in each case received by us or any Restricted
           Subsidiary, and (ii) to the extent such Person is an Unrestricted
           Subsidiary, the portion (proportionate to our equity interest in such
           Subsidiary) of the fair market value of the net assets of such
           Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
           designated a Restricted Subsidiary; provided, however, that the
           foregoing sum will not exceed, in the case of any such Person or
           Unrestricted Subsidiary, the amount of Investments (excluding
           Permitted Investments) previously made (and treated as a Restricted
           Payment) by us or any Restricted Subsidiary in such Person or
           Unrestricted Subsidiary; provided further, however, that no amount
           will be included under this clause (z) to the extent it is already
           included in our Consolidated Net Income in clause (w) above.

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     Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:

          (1) the payment of any dividend or redemption of any Capital Stock
     within 60 days after the date of declaration or call for redemption
     thereof, if at such date of declaration or call for redemption such payment
     or redemption would have been permitted;

          (2) the purchase, redemption or other acquisition or retirement for
     value of any of our Capital Stock, either (i) solely in exchange for our
     Qualified Capital Stock or (ii) through the application of net proceeds of
     a substantially concurrent sale for cash (other than to a Subsidiary) of
     our Qualified Capital Stock;

          (3) the purchase, redemption, defeasance or other acquisition or
     retirement for value of any Indebtedness of our company or the Guarantors
     that is subordinate or junior in right of payment to the notes and
     Guarantees either (i) solely in exchange for our Qualified Capital Stock,
     or (ii) through the application of net proceeds of a substantially
     concurrent sale for cash (other than to a Subsidiary) of (a) our Qualified
     Capital Stock or (b) Refinancing Indebtedness;

          (4) an Investment acquired as a result of the capital contribution (i)
     or in exchange for, or out of the proceeds of a substantially concurrent
     (ii) offering (other than to one or more of our Subsidiaries) of, our
     Qualified Capital Stock;

          (5) payments or distributions to stockholders pursuant to appraisal
     rights required under applicable law in connection with any consolidation,
     merger or transfer of assets that complies with the covenant described
     under "-- Merger, Consolidation and Sale of Assets";

          (6) if no Default or Event of Default will have occurred and be
     continuing, repurchases, redemptions, acquisitions or retirements of (or
     payments to Holdings to permit Holdings to repurchase, redeem, acquire or
     retire) our, Holdings' or any Restricted Subsidiary's Qualified Capital
     Stock from employees, former employees, directors or former directors of
     our company or any of our Restricted Subsidiaries or their authorized
     representatives upon the death, disability or termination of employment of
     such employees, former employees, directors or former directors; provided,
     however, that the aggregate amount paid for all repurchased, redeemed,
     acquired or retired Qualified Capital Stock does not exceed $500,000 during
     any twelve-month period (excluding any such repurchases, redemptions,
     acquisitions or retirements with the proceeds of any life insurance policy
     or policies maintained by us or under which we are the beneficiary);

          (7) repurchases, redemptions, acquisitions or retirements of our
     Qualified Capital Stock deemed to occur upon the exercise of options,
     warrants or other rights under employee benefit plans of our company or our
     Subsidiaries if such Qualified Capital Stock represents all or a portion of
     the exercise price thereof;

          (8) if no Default or Event of Default will have occurred and be
     continuing, the redemption, repurchase, acquisition or retirement of
     Capital Stock of any Restricted Subsidiary; provided that if our company or
     any Restricted Subsidiary incurs Indebtedness in connection with such
     redemption, repurchase, acquisition or retirement, after giving effect to
     such incurrence and such redemption, repurchase, acquisition or retirement,
     we could incur $1.00 of additional Indebtedness (other than Permitted
     Indebtedness) in compliance with the covenant described under
     "-- Limitation on Incurrence of Additional Indebtedness";

          (9) dividends or distributions paid by us to Holdings to be used by
     Holdings to pay Federal, state and local taxes payable by Holdings and
     directly attributable or which arise as a result of our and our Restricted
     Subsidiaries' operations; provided that such dividends or distributions do
     not exceed the amount we and our Restricted Subsidiaries would be required
     to pay as a stand-alone taxpayer;

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<PAGE>

          (10) any Restricted Payment pursuant to or contemplated by, or to pay
     amounts due under (whether such Restricted Payment is made to third parties
     or to Holdings for payment to third parties), the merger agreement or the
     management consulting agreement; and

          (11) if no Default or Event of Default will have occurred and be
     continuing, Restricted Payments (in addition to those permitted by clauses
     (1) through (10) of this paragraph) in an aggregate amount not to exceed
     $2.0 million subsequent to the Issue Date.

     In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii), 3(ii)(a), (4), (6)
and (11) will be included in such calculation.

     Not later than the date of making any Restricted Payment, we will deliver
to the trustee an officers' certificate stating that such Restricted Payment
complies with the indenture and setting forth in reasonable detail the basis
upon which the required calculations were computed, which calculations may be
based upon our latest available internal quarterly financial statements.

     Limitation on Sale/Leaseback Transactions.  We will not, and will not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (1) immediately after giving effect to such
transaction, we or such Restricted Subsidiary would be entitled to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "-- Limitation on Incurrence of Additional Indebtedness"
covenant and (2) to the extent such Sale/ Leaseback Transaction is an Asset
Sale, we comply with the covenant described under "-- Limitation on Asset
Sales."

     Limitation on Asset Sales.  We will not, and will not permit any of our
Restricted Subsidiaries to, consummate an Asset Sale unless:

          (1) we or the applicable Restricted Subsidiary, as the case may be,
     receive consideration at the time of such Asset Sale at least equal to the
     Fair Market Value of the assets sold or otherwise disposed of (as
     determined in good faith by our board of directors); and

          (2) at least 75% of the consideration received by us or the Restricted
     Subsidiary, as the case may be, from such Asset Sale will be in the form of
     cash and/or Cash Equivalents and is received at the time of such
     disposition. For purposes of this provision, the following will be deemed
     to be cash: (A) the amount of any liabilities (as shown on the most recent
     applicable balance sheet) of our company or such Restricted Subsidiary
     (other than liabilities that are by their terms subordinated to the notes)
     that are assumed by the transferee of any such assets so long as the
     documents governing such liabilities provide that there is no further
     recourse to us or any of our Subsidiaries with respect to such liabilities
     and (B) notes, securities or other similar obligations received by us or
     any Restricted Subsidiary from such transferee that are converted, sold or
     exchanged, within 180 days of the related Asset Sale, by us or our
     Restricted Subsidiaries into cash (with such amount actually realized being
     the portion deemed to be cash).

     Upon the consummation of an Asset Sale, we may apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 180 days of receipt thereof either:

     - to repay Indebtedness under the Credit Agreement;

     - to make an investment (or to enter into a legally binding agreement to
       invest) in Replacement Assets or to repay any Indebtedness incurred
       within 180 days prior to such Asset Sale and used to acquire Replacement
       Assets in contemplation of such Asset Sale; or

     - a combination of prepayment and investment permitted by the foregoing
       clauses.

     Pending the application of any such Net Cash Proceeds, we may temporarily
reduce Indebtedness or otherwise invest such Net Cash Proceeds in any manner
that is not prohibited by the indenture. If any such legally binding agreement
to invest such Net Cash Proceeds is terminated, then we may, within 90 days of
such termination or within 180 days of such Asset Sale, whichever is later,
invest such Net
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Cash Proceeds as provided in the immediately preceding paragraph (without regard
to the parenthetical contained in the second bullet point thereof). The amount
of such Net Cash Proceeds not so used as set forth in the immediately preceding
paragraph or in this paragraph constitutes "Excess Proceeds." Notwithstanding
the foregoing, for purposes of determining whether an Excess Proceeds offer is
required, pursuant to the immediately following paragraph, Excess Proceeds at
any time will be reduced by the Accreted Value of notes acquired (and
surrendered to the trustee for cancellation) by us through open market purchases
or optional redemption subsequent to the date of the Asset Sale giving rise to
the Excess Proceeds.

     When the aggregate amount of Excess Proceeds exceeds $5.0 million, we will,
not less than 30 nor more than 60 days following such date, make an offer to
purchase from all holders and all holders of other Indebtedness that ranks pari
passu in right of payment with the notes containing provisions requiring the
redemption or prepayment or offers to purchase with the proceeds of sales of
assets on a pro rata basis, that amount of notes equal to the amount of the
Excess Proceeds at a price equal to 100% of the Accreted Value of the notes to
be purchased, plus accrued and unpaid interest, if any, thereon to the date of
purchase (provided that in the case where such other Indebtedness is outstanding
under a revolving credit or similar agreement, the commitment to lend thereunder
is concurrently or permanently reduced). The aggregate Accreted Value of notes
to be purchased pursuant to an Excess Proceeds offer may be reduced by the
Accreted Value of notes acquired by us through open market purchases or optional
redemption subsequent to the date of the Asset Sale giving rise to the Excess
Proceeds offer and surrendered to the trustee for cancellation.

     In the event of the transfer of substantially all (but not all) of the
property and assets of our company and our Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," which transaction does not constitute a Change of Control,
the successor corporation will be deemed to have sold the properties and assets
of our company and our Restricted Subsidiaries not so transferred for purposes
of this covenant, and will comply with the provisions of this covenant with
respect to such deemed sale as if it constituted an Asset Sale. In addition, the
Fair Market Value of such properties and assets deemed to be sold will be deemed
to be Net Cash Proceeds for purposes of this covenant.

     Each notice of an Excess Proceeds offer will be mailed to the record
holders as shown on the register of holders, with a copy to the trustee, and
will comply with the procedures set forth in the indenture. Upon receiving
notice of the Excess Proceeds offer, holders may elect to tender their notes in
whole or in part in integral multiples of $1,000 in exchange for cash. To the
extent holders tender notes in an amount less than the Excess Proceeds, we may
use the deficiency for any purpose not otherwise prohibited by the indenture. To
the extent holders properly tender notes in an amount exceeding the Excess
Proceeds offer amount, we will purchase notes of tendering holders on a pro rata
basis (based on amounts tendered). An Excess Proceeds offer will remain open for
a period of 20 business days or such longer period as may be required by law.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to an Excess Proceeds offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Limitation on Asset Sales"
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the "Limitation on Asset Sales" provisions of the indenture by virtue thereof.

     Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.  We will not, and will not cause or permit any of our Restricted
Subsidiaries to, directly or indirectly, create or

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otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:

          (1) pay dividends or make any other distributions on or in respect of
     its Capital Stock to us;

          (2) make loans or advances or to pay any Indebtedness or other
     obligation owed to us or any other Restricted Subsidiary; or

          (3) transfer any of its property or assets to us or any other
     Restricted Subsidiary,

except, in each case, for such encumbrances or restrictions existing under or by
reason of:

          (a) applicable law;

          (b) the indenture, the notes, the Guarantees and the Collateral
     Agreements;

          (c) customary non-assignment provisions of any contract or any lease
     governing a leasehold interest of any Restricted Subsidiary;

          (d) any instrument governing Acquired Indebtedness, which encumbrance
     or restriction is not applicable to any Person, or the properties or assets
     of any Person, other than the Person or the properties or assets of the
     Person so acquired;

          (e) agreements existing on the Issue Date, including, without
     limitation, the Credit Agreement;

          (f) any contract for sale of assets permitted by the covenant
     contained in "-- Limitation on Asset Sales" with respect to the assets to
     be sold pursuant to such contract;

          (g) in the case of clause (3) above, restrictions contained in
     security agreements or mortgages securing Indebtedness of a Restricted
     Subsidiary permitted under the indenture to the extent such restrictions
     restrict the transfer of the property subject to such security agreements
     or mortgages; and

          (h) amendments, modifications, renewals, Refinancings, replacements or
     substitutions of an instrument or agreement referred to in clause (b), (d)
     or (e) above; provided, however, that the provisions relating to such
     encumbrances or restrictions contained in any such Indebtedness, taken as a
     whole, are no less favorable to us in any material respect as determined by
     our board of directors in their reasonable and good faith judgment than the
     provisions relating to such encumbrances or restrictions contained in the
     agreements or instruments so amended, modified, renewed, Refinanced,
     replaced or substituted.

     Limitation on Issuances and Sales of Capital Stock of Subsidiaries.  We
will not permit or cause any of our Restricted Subsidiaries to issue or sell any
Capital Stock (other than director's qualifying shares and other than to us or
to a Wholly-Owned Subsidiary) or permit any Person (other than us or a Wholly-
Owned Subsidiary) to own or hold any Capital Stock of any Restricted Subsidiary
or any Lien or security interest therein (other than the lenders under the
Credit Agreement); provided, however, that this provision will not prohibit the
sale of all of the Capital Stock of a Restricted Subsidiary in compliance with
the provisions of the "-- Limitation on Asset Sales" covenant.

     Limitation on Liens.  We will not, and will not cause or permit any of our
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens (other than Permitted Liens) of any kind
against or upon any property or assets of our company or any of our Restricted
Subsidiaries whether owned on the Issue Date or acquired after the Issue Date,
or any proceeds therefrom, or assign or otherwise convey any right to receive
income or profits therefrom.

     Merger, Consolidation and Sale of Assets.  We will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary to sell, assign, transfer, lease,
convey or

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otherwise dispose of) all or substantially all of our properties and assets
(determined on a consolidated basis for our company and our Restricted
Subsidiaries) to any Person unless:

          (1) either:

             (a) we will be the surviving or continuing corporation; or

             (b) the Person (if other than our company) formed by or surviving
        such consolidation or merger or the Person which acquires by sale,
        assignment, transfer, lease, conveyance or other disposition all or
        substantially all of the properties and assets of our company and our
        Restricted Subsidiaries:

                (x) will be a corporation organized and validly existing under
           the laws of the United States or any state thereof or the District of
           Columbia; and

                (y) will expressly assume, by supplemental indenture (in form
           and substance reasonably satisfactory to the trustee), executed and
           delivered to the trustee, our obligation for the due and punctual
           payment of the principal of, premium, if any, and interest on all of
           the notes and the performance of every covenant of the notes, the
           indenture, the Collateral Agreements and the Registration Rights
           Agreement on our part to be performed or observed;

          (2) immediately after giving effect to such transaction, our company
     or such surviving entity, as the case may be will be able to incur at least
     $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
     compliance with the "-- Limitation on Incurrence of Additional
     Indebtedness" covenant; provided that this clause (2) does not apply if, in
     the good faith determination of our board of directors, whose determination
     will be evidenced by a board resolution, which includes a certification of
     an secretary or assistant secretary and which resolution is in full force
     and effect or the date of such certification, the principal purpose of such
     transaction is to change the state of incorporation of our company and any
     such transaction will not have as one of its purposes the evasion of the
     foregoing limitations; and

          (3) immediately after giving effect to such transaction or series of
     related transactions, no Default or Event of Default will have occurred or
     be continuing.

     In connection with any such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition, we or the surviving Person
must deliver to the trustee, in form and substance reasonably satisfactory to
the trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of the indenture and that all conditions precedent in the indenture
relating to such transaction have been satisfied.

     The indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of our company in
accordance with the foregoing, in which we are not the continuing corporation,
the successor Person formed by such consolidation or into which we are merged or
to which such conveyance, lease or transfer is made will succeed to, and be
substituted for, and may exercise every right and power of, us under the
indenture and the notes with the same effect as if such surviving entity had
been named as such. Upon such substitution we and any Guarantors that remain
Subsidiaries of us will be released from the indenture and the notes.

     Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the indenture in connection
with any transaction complying with the provisions of "-- Limitation on Asset
Sales") will not, and we will not cause or permit any Guarantor to, consolidate

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with or merge with or into any Person other than us or any other Guarantor that
is a Wholly-Owned Restricted Subsidiary unless:

          (1) the entity formed by or surviving any such consolidation or merger
     (if other than the Guarantor) or to which such sale, lease, conveyance or
     other disposition will have been made is a corporation organized and
     existing under the laws of the United States, any state thereof or the
     District of Columbia;

          (2) such entity assumes by supplemental indenture all of the
     obligations of the Guarantor on the Guarantee;

          (3) immediately after giving effect to such transaction, no Default or
     Event of Default will have occurred and be continuing; and

          (4) immediately after giving effect to such transaction and the use of
     any net proceeds therefrom on a pro forma basis, we could satisfy the
     provisions of clause (2) of the first paragraph of this covenant.

     In connection with any such consolidation or merger, we must deliver to the
trustee, in form and substance reasonably satisfactory to the trustee, an
officers' certificate and an opinion of counsel, each stating that such
consolidation or merger and supplemental indenture comply with the applicable
provisions of the indenture and that all conditions precedent in the indenture
relating to such transaction have been satisfied. Any merger or consolidation of
a Guarantor with and into our company (with our company being the surviving
Person) or another Guarantor that is a Wholly-Owned Restricted Subsidiary of our
company need only comply with this paragraph.

     Limitations on Transactions with Affiliates.  We will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into any
contract, agreement, understanding, loan, advance, guarantee or other
transaction or series of related transactions with, or for the benefit of, any
Affiliate of us or any Restricted Subsidiary (other than us or a Restricted
Subsidiary including any Person that becomes a Restricted Subsidiary as a result
of such transaction) (collectively, "Interested Persons"), unless:

     - such transaction or series of transactions are on terms that are no less
       favorable to us or such Restricted Subsidiary, as the case may be, than
       would have been able to be obtained at the time for a comparable
       transaction in arm's-length dealings with third-parties that are not
       Interested Persons;

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $500,000 and less than
       $1.0 million, we will have delivered an officers' certificate to the
       trustee certifying that such transaction or series of transactions
       complies with the previous bullet point;

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $1.0 million and less
       than $5.0 million, (x) such transaction or series of related transactions
       will be approved by a majority of the disinterested members of our board
       of directors or the board of directors of such Restricted Subsidiary, as
       the case may be, such approval to be evidenced by a board resolution
       stating that such board of directors has determined that such transaction
       or series of related transactions complies with the foregoing provisions
       or (y) we will have obtained a written opinion from an Independent
       Financial Advisor certifying that such transaction or series of related
       transactions is fair to us or our Restricted Subsidiary, as the case may
       be, from a financial point of view; and

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $5.0 million, we will
       have obtained a written opinion from an Independent Financial Advisor
       certifying that such transaction or series of related transactions is
       fair to us or our Restricted Subsidiary, as the case may be, from a
       financial point of view.

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     The restrictions of this covenant will not apply to:

          (1) reasonable fees and compensation (including stock options and
     other awards pursuant to our or our Restricted Subsidiaries' employee
     benefit plans) paid to, and indemnity provided on behalf of, officers,
     directors, employees or consultants of our company or any Restricted
     Subsidiary as determined in good faith by our board of directors or senior
     management;

          (2) transactions exclusively between or among our company and any of
     our Restricted Subsidiaries or exclusively between or among such Restricted
     Subsidiaries, provided such transactions are not otherwise prohibited by
     the indenture;

          (3) transactions pursuant to or contemplated by any agreement as in
     effect as of the Issue Date (including, without limitation, the merger
     agreement, the stockholders agreement and the management consulting
     agreement), or any amendment, modification, renewal, Refinancing,
     replacement or substitution thereof so long as any such amendment,
     modification, renewal, Refinancing, replacement or substitution thereof is
     not more disadvantageous to the holders in any material respect than the
     original agreement as in effect on the Issue Date;

          (4) loans and advances to, and reimbursement of expenses incurred by,
     officers, directors and employees in the ordinary course of business of our
     company or any Restricted Subsidiary;

          (5) any issuance or sale of our Qualified Capital Stock; or

          (6) Restricted Payments permitted by the indenture.

     Additional Subsidiary Guarantees.  If we or any of our Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Subsidiary that, following
such transaction or series of related transactions is a Domestic Restricted
Subsidiary but is not a Guarantor, or if we or any of our Subsidiaries organize,
acquire or otherwise invest in another Subsidiary that, following such
organization, acquisition or investment is a Domestic Restricted Subsidiary but
is not a Guarantor, then such transferee or acquired or other Subsidiary will:

          (1) execute and deliver to the trustee a supplemental indenture in
     form reasonably satisfactory to the trustee pursuant to which such
     Subsidiary will unconditionally guarantee on a senior secured basis all of
     our obligations under the notes and the indenture on the terms set forth in
     the indenture;

          (2) (a) execute and deliver to the Lender Agent such amendments to the
     intercreditor agreement as the Lender Agent deems necessary or advisable in
     order to make such Subsidiary a party to the intercreditor agreement; (b)
     execute and deliver to the Collateral Agent and the trustee such amendments
     to the Collateral Agreements as the Collateral Agent deems necessary or
     advisable in order to grant to the Collateral Agent, for the benefit of the
     holders and the Lenders, a perfected security interest in the Capital Stock
     of such new Subsidiary and the debt securities of such new Subsidiary,
     subject only to Permitted Liens, which are owned by us or any Subsidiary
     and required to be pledged pursuant to the security agreement dated as of
     the Issue Date and made by us and the Guarantors in favor the Collateral
     Agent, which we call the security agreement and (c) deliver to the
     Collateral Agent the certificates representing such Capital Stock and debt
     securities, together with (i) in the case of such Capital Stock, undated
     stock powers or instruments of transfer, as applicable, endorsed in blank,
     and (ii) in the case of such debt securities, endorsed in blank, in each
     case executed and delivered by an officer of our company or such
     Subsidiary, as the case may be;

          (3) take such actions necessary or advisable to grant to the
     Collateral Agent for the benefit of the holders and the trustee a perfected
     security interest in the assets of such new Subsidiary, subject only to
     Permitted Liens, including the filing of Uniform Commercial Code financing
     statements in such jurisdictions as may be required by the security
     agreement or by law or as may be reasonably requested by the Collateral
     Agent;

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          (4) take such further action and execute and deliver such other
     documents specified in the indenture or otherwise reasonably requested by
     the trustee or the Collateral Agent to effectuate the foregoing; and

          (5) deliver to the trustee an opinion of counsel that such
     supplemental indenture and any other documents required to be delivered
     have been duly authorized, executed and delivered by such Restricted
     Subsidiary and constitute legal, valid, binding and enforceable obligations
     of such Restricted Subsidiary and such other opinions regarding the
     perfection of such liens in the Collateral of or consisting of the Capital
     Stock of such Restricted Subsidiary as provided for in the indenture.

Thereafter, such Restricted Subsidiary will be a Subsidiary Guarantor for all
purposes of the indenture.

     Impairment of Security Interest.  Neither we nor any of the Guarantors will
take or omit to take any action which would adversely affect or impair the Liens
in favor of the Collateral Agent, on behalf of itself, the trustee and the
holders of the notes, with respect to the Collateral. Neither we nor any of our
Restricted Subsidiaries will grant to any Person, or permit any Person to retain
(other than the Collateral Agent or a Sub-Collateral Agent), any interest
whatsoever in the Collateral other than Permitted Liens. Neither we nor any of
our Restricted Subsidiaries will enter into any agreement that requires the
proceeds received from any sale of Collateral to be applied to repay, redeem,
defease or otherwise acquire or retire any Indebtedness of any Person, other
than as permitted or required by the indenture, the notes, the intercreditor
agreement, the Credit Agreement or the Collateral Agreements. We will, and will
cause each Guarantor to, at our sole cost and expense, execute and deliver all
such agreements and instruments as the Collateral Agent or the trustee will
reasonably request to more fully or accurately describe the property intended to
be Collateral or the obligations intended to be secured by the Collateral
Agreements. We will, and will cause each Guarantor to, at its sole cost and
expense, file any such notice filings or other agreements or instruments as may
be reasonably necessary or desirable under applicable law to perfect the Liens
created by the Collateral Agreements at such times and at such places as the
Collateral Agent may reasonably request.

     Real Estate Mortgages and Filings.  With respect to any real property,
other than a leasehold (individually and collectively, the "Premises"), (i)
acquired after the Issue Date with a purchase price or (ii) as of the Issue
Date, with a Fair Market Value, of greater than $500,000:

          (1) we will deliver to the Collateral Agent, as mortgagee, fully
     executed counterparts of Mortgages, each dated as of the date of
     acquisition of such property, duly executed by us or the applicable
     Subsidiary, together with evidence of the completion (or satisfactory
     arrangements for the completion), of all recordings and filings of such
     Mortgage as may be necessary or, in the reasonable opinion of the
     Collateral Agent desirable, to create a valid, perfected Lien, subject to
     Permitted Liens, against the properties purported to be covered thereby;

          (2) the Collateral Agent will have received mortgagee's title
     insurance policies in favor of the Collateral Agent, as mortgagee for the
     ratable benefit of the Collateral Agent, the trustee and the holders in
     amounts and in form and substance and issued by insurers reasonably
     acceptable to the Collateral Agent, with respect to the property purported
     to be covered by such Mortgage, insuring that title to such property is
     marketable and that the interests created by the Mortgage constitute valid
     Liens thereon free and clear of all liens, defects and encumbrances other
     than Permitted Liens, and such policies will also include, to the extent
     available, a revolving credit endorsement and such other endorsements as
     the Collateral Agent will reasonably request and will be accompanied by
     evidence of the payment in full of all premiums thereon; and

          (3) we will deliver to the Collateral Agent, with respect to each of
     the covered Premises, filings, surveys, local counsel opinions and fixture
     filings, along with such other documents, instruments, certificates and
     agreements as the Collateral Agent and its counsel will reasonably request.

     Leasehold Mortgages and Filings.  We and each of our Restricted
Subsidiaries will deliver Mortgages with respect to our leasehold interests in
the premises (the "Leased Premises") occupied by us pursuant

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to leases entered into after the Issue Date (collectively, the "Leases," and
individually, a "Lease"), other than renewals of leases existing on the Issue
Date.

     Prior to the effective date of any Lease, we and such Restricted
Subsidiaries will provide to the trustee all of the items described in clauses
(2) and (3) of "-- Real Estate Mortgages and Filings" above and in addition will
use its reasonable commercial efforts to obtain an agreement executed by the
lessor of the Lease, whereby the lessor consents to the Mortgage and waives or
subordinates its landlord Lien (whether granted by the instrument creating the
leasehold estate or by applicable law), if any, and which will be entered into
by the Collateral Agent.

     Conduct of Business.  We and our Restricted Subsidiaries will not engage in
any businesses which are not the same, similar, reasonably related or ancillary
to the businesses in which we and our Restricted Subsidiaries are engaged on the
Issue Date.

     Reports to Holders.  Whether or not required by the rules and regulations
of the SEC, so long as any notes are outstanding, we will furnish the trustee
and, upon request, to the holders of notes:

          (1) all quarterly and annual financial information that would be
     required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
     we were required to file such Forms, including a "Management's Discussion
     and Analysis of Financial Condition and Results of Operations" that
     describes the financial condition and results of operations of us and our
     consolidated Subsidiaries (showing in reasonable detail, either on the face
     of the financial statements or in the footnotes thereto and in Management's
     Discussion and Analysis of Financial Condition and Results of Operations,
     the financial condition and results of operations of us and our Restricted
     Subsidiaries separate from the financial condition and results of
     operations of our Unrestricted Subsidiaries, if any, but only to the extent
     such Unrestricted Subsidiaries are material to our or Holdings', as
     applicable, consolidated results of operations or financial condition) and,
     with respect to the annual information only, a report thereon by our
     certified independent accounts; and

          (2) all current reports that would be required to be filed with the
     SEC on Form 8-K if we were required to file such reports;

          in each case within the time periods specified in the SEC's rules and
     regulations; provided, however, that so long as Holdings is a Guarantor of
     the notes and complies with the requirements of Rule 3-10 of Regulation S-X
     promulgated by the SEC (or any successor provision), the reports,
     information and other documents required to be filed and provided as
     described hereunder may, at our option, be filed by and be those of
     Holdings rather than us.

     In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the SEC, we will file a copy of all such information and reports
with the SEC for public availability within the time periods specified in the
SEC's rules and regulations (unless the SEC will not accept such a filing). In
addition, we have agreed that, prior to the consummation of the Exchange Offer,
for so long as any notes remain outstanding, we will furnish to the holders upon
their request, the information required to be delivered pursuant to Rule
144(A)(d)(4) under the Securities Act.

POSSESSION, USE AND RELEASE OF COLLATERAL

     Unless an Event of Default will have occurred and be continuing, we will
have the right to remain in possession and retain exclusive control of the
Collateral (other than as set forth in the Collateral Agreements), to freely
operate the Collateral and to collect, invest and dispose of any income
therefrom.

     Release of Collateral.  Upon compliance by us with the conditions set forth
below in respect of any release of items of Collateral, and upon delivery by us
to the Collateral Agent of an opinion of counsel to the effect that such
conditions have been met, the Collateral Agent will release the Released
Interests (as hereinafter defined) from the Lien of the Collateral Agreements
and reconvey the Released Interests to us.

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     Asset Sale Release.  We have the right to obtain a release of Liens
securing the notes with respect to items of Collateral (the "Released
Interests") subject to an Asset Sale permitted hereunder upon delivery to the
Collateral Agent of the following:

          (1) notice from us requesting the release of Released Interests: (i)
     describing the proposed Released Interests; (ii) specifying the value of
     such Released Interests on a date within 60 days of such notice (the
     "Valuation Date"); (iii) stating that the purchase price received is at
     least equal to the Fair Market Value of the Released Interests; (iv)
     stating that the release of such Released Interests would not be expected
     to interfere in any material respect with the Collateral Agent's ability to
     realize the value of the remaining Collateral and will not impair in any
     material respect the maintenance and operation of the remaining Collateral;
     and (v) certifying that such Asset Sale complies with the terms and
     conditions of the indenture with respect thereto; and

          (2) an officers' certificate stating that: (i) such Asset Sale covers
     only the Released Interests and complies with the terms and conditions of
     the indenture with respect to Asset Sales; (ii) there is no Default or
     Event of Default in effect or continuing on the date thereof, the Valuation
     Date or the date of such Asset Sale; (iii) the release of the Collateral
     will not result in a Default or Event of Default under the indenture; and
     (iv) all conditions precedent in the indenture relating to the release in
     question have been or will be complied with.

     Release of Inventory and Accounts Receivable Collateral.  Notwithstanding
any provision to the contrary in the indenture, Collateral comprised of accounts
receivable, inventory or (prior to an Event of Default) the proceeds of the
foregoing will be subject to release upon sales of such inventory and collection
of the proceeds of such receivables in the ordinary course of business. If we
request in writing, the Collateral Agent or the Sub-Collateral Agent will
execute and deliver such documents, instruments or statements and to take such
other action as we may reasonably request to evidence or confirm that the
Collateral falling under this "-- Release of Inventory and Accounts Receivable
Collateral" provision has been released from the Liens of each of the Security
Documents.

EVENTS OF DEFAULT

     The following events are defined in the indenture as "Events of Default":

          (1) the failure to pay premium, if any, interest on or any other
     amount (other than principal of the notes which is covered by clause (2)
     below) on any notes when the same becomes due and payable and the default
     continues for a period of 30 days;

          (2) the failure to pay the principal on any notes, when such principal
     becomes due and payable, at maturity, upon optional or mandatory
     redemption, required purchase or otherwise;

          (3) a default under the covenants described above under "Repurchase
     upon Change of Control" (other than a failure to purchase notes validly
     tendered which is covered by clause (2) above), "Excess Cash Flow Offer"
     (other than a failure to purchase notes validly tendered which is covered
     by clause (2) above) or under "-- Certain Covenants" (other than a failure
     to purchase notes validly tendered pursuant to "-- Limitation on Asset
     Sales" which is covered by clause (2) above), which default continues for a
     period of 30 days after we receive written notice specifying the default
     (and demanding that such default be remedied) from the trustee or the
     holders of at least 25% of the outstanding principal amount at maturity of
     the notes (except in the case of a default with respect to the "-- Merger,
     Consolidation and Sale of Assets" covenant, which will constitute an Event
     of Default with such notice requirement but without such passage of time
     requirement);

          (4) a default under any other agreement contained in the indenture or
     any Collateral Agreement, which default continues for a period of 60 days
     after we receive written notice specifying the default (and demanding that
     such default be remedied) from the trustee or the holders of at least 25%
     of the outstanding principal amount at maturity of the notes;

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          (5) the failure to pay at final maturity (giving effect to any
     applicable grace periods and any extensions thereof) the principal amount
     of any Indebtedness of ours or any Restricted Subsidiary, or the
     acceleration of the final stated maturity of any such Indebtedness (which
     acceleration is not rescinded, annulled or otherwise cured within 20 days
     from the date of acceleration) if the aggregate principal amount of such
     Indebtedness, together with the principal amount of any other such
     Indebtedness in default for failure to pay principal at final maturity or
     which has been accelerated (in each case with respect to which the 20-day
     period described above has elapsed), aggregates $5.0 million or more at any
     one time;

          (6) one or more judgments in an aggregate amount in excess of $5.0
     million (which are not covered by a reputable and solvent third party
     insurer as to which such insurer has not disclaimed coverage) will have
     been rendered against us or any of our Restricted Subsidiaries and such
     judgments remain undischarged, unbonded, unpaid or unstayed for a period of
     60 days after such judgment or judgments become final and non-appealable;

          (7) certain events of bankruptcy affecting us or any of our
     Significant Subsidiaries;

          (8) any Collateral Agreement at any time for any reason will cease to
     be in full force and effect (other than as provided by the terms of the
     Collateral Agreements and the indenture), or ceases to give the Collateral
     Agent the Liens, rights, powers and privileges purported to be created
     thereby, superior to and prior to the rights of all third Persons other
     than the Lenders and other than the holders of Permitted Liens and subject
     to no other Liens except as expressly permitted by the applicable
     Collateral Agreement;

          (9) we or any of our Subsidiaries, directly or indirectly, contest in
     any manner the effectiveness, validity, binding nature or enforceability of
     any Collateral Agreement; or

          (10) any Guarantee of a Significant Subsidiary ceases to be in full
     force and effect or any Guarantee of a Significant Subsidiary is declared
     to be null and void and unenforceable or any Guarantee of a Significant
     Subsidiary is found to be invalid or any Guarantor that is a Significant
     Subsidiary denies its liability under its Guarantee (in each case, other
     than by reason of release of a Guarantor in accordance with the terms of
     the indenture).

     If an Event of Default (other than an Event of Default specified in clause
(7) above with respect to the us) will occur and be continuing and has not been
waived, the trustee or the holders of at least 25% in principal amount at
maturity of outstanding notes may declare the Accreted Value of and accrued and
unpaid interest on all the notes to be due and payable by notice in writing to
us and the trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same will become
immediately due and payable.

     If an Event of Default specified in clause (7) above with respect to us
occurs and is continuing, then the Accreted Value of and accrued and unpaid
interest on all of the outstanding notes will become immediately due and payable
without any declaration or other act on the part of the trustee or any holder.

     At any time after a declaration of acceleration with respect to the notes
as described in the preceding paragraph, the holders of a majority in principal
amount at maturity of the notes may rescind and cancel such declaration and its
consequences if:

          (1) the rescission would not conflict with any judgment or decree;

          (2) all existing Events of Default have been cured or waived except
     nonpayment of principal or interest that has become due solely because of
     the acceleration;

          (3) to the extent the payment of such interest is lawful, interest on
     overdue installments of interest and overdue principal and premium, if any,
     which has become due otherwise than by such declaration of acceleration,
     has been paid;

          (4) we have paid the trustee its reasonable compensation and
     reimbursed the trustee for its expenses, disbursements and advances; and
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          (5) in the event of the cure or waiver of an Event of Default of the
     type described in clause (7) of the description above of Events of Default,
     the trustee will have received an officers' certificate and an opinion of
     counsel that such Event of Default has been cured or waived.

     No such rescission will affect any subsequent Default or impair any right
consequent thereto.

     The holders of a majority in principal amount at maturity of the notes may
waive any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes or in respect of a covenant or provision which under the indenture
cannot be modified or amended without the consent of the holder of each note
then outstanding.

     Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the trustee, the trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders, unless such
holders have offered to the trustee reasonable indemnity. Subject to the
provisions of the indenture and applicable law, the holders of a majority in
aggregate principal amount at maturity of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.

     If a default or an Event of Default exists and is known to the trustee, the
trustee will mail to each holder of the notes notices of the default or Event of
Default within 10 days after the occurrence thereof. Except in the case of a
payment default, the trustee may withhold the notice to the holders of such
notes if a committee of its trust officers in good faith determines that
withholding the notice is in the interests of the holders of the notes.

     Under the indenture, we must furnish to the trustee annual statements as to
the performance by our company and the Guarantors of their respective
obligations under the indenture and as to any default in such performance. We
also must notify the trustee promptly of the occurrence of any default or Event
of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

     No past, present or future director, officer, employee, incorporator, or
stockholder of our company, as such, will have any liability for any obligations
of our company or the Guarantors under the notes, the Guarantees or the
indenture or for any claim based on, in respect of, such obligations or their
creation. Each holder, by accepting a note, waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

     We may, at our option and at any time, elect to have our obligations and
the obligations of the Guarantors discharged with respect to the outstanding
notes ("Legal Defeasance"). Such Legal Defeasance means that we will be deemed
to have paid and discharged the entire indebtedness represented by the
outstanding notes, except for:

          (1) the rights of holders to receive payments in respect of the
     principal of, premium, if any, and interest on the notes when such payments
     are due;

          (2) our obligations with respect to the notes concerning issuing
     temporary notes, registration of notes, replacing mutilated, destroyed,
     lost or stolen notes and the maintenance of an office or agency for
     payments;

          (3) the rights, powers, trusts, duties and immunities of the trustee
     and our obligations in connection therewith; and

          (4) the Legal Defeasance provisions of the indenture.

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     In addition, we may, at our option and at any time, elect to have our and
our Restricted Subsidiaries' obligations released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations will not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.

     In order to exercise either Legal Defeasance or Covenant Defeasance:

          (1) we must irrevocably deposit with the trustee, in trust, for the
     benefit of the holders cash in U.S. dollars, non-callable U.S. government
     obligations, or a combination thereof, in such amounts and at such times as
     will be sufficient, in the opinion of a nationally recognized firm of
     independent public accountants, to pay the principal of, premium, if any,
     and interest on the notes on the stated dates for payment or redemption, as
     the case may be;

          (2) in the case of Legal Defeasance, we must have delivered to the
     trustee an opinion of counsel in the United States reasonably acceptable to
     the trustee confirming that:

             (a) we have received from, or there has been published by, the
        Internal Revenue Service a ruling; or

             (b) since the date of the indenture, there has been a change in the
        applicable federal income tax law,

     in either case to the effect that, and based thereon such opinion of
     counsel will confirm that, the holders will not recognize income, gain or
     loss for federal income tax purposes as a result of such Legal Defeasance
     and will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Legal
     Defeasance had not occurred;

          (3) in the case of Covenant Defeasance, we must have delivered to the
     trustee an opinion of counsel reasonably acceptable to the trustee
     confirming that the holders will not recognize income, gain or loss for
     federal income tax purposes as a result of such Covenant Defeasance and
     will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Covenant
     Defeasance had not occurred;

          (4) no Default or Event of Default will have occurred and be
     continuing on the date of such deposit or insofar as Events of Default from
     bankruptcy or insolvency events are concerned, at any time in the period
     ending on the 91st day after the date of deposit (other than a Default or
     Event of Default resulting from the incurrence of Indebtedness, all or a
     portion of which will be used to defease the notes concurrently with such
     incurrence);

          (5) such Legal Defeasance or Covenant Defeasance will not result in a
     breach or violation of, or constitute a default under any material
     agreement or instrument (other than the indenture) to which we or any of
     our Subsidiaries is a party or by which the we or any of our Subsidiaries
     is bound;

          (6) we must have delivered to the trustee an officers' certificate
     stating that the deposit was not made by us with the intent of preferring
     the holders over any other of our creditors or with the intent of
     defeating, hindering, delaying or defrauding any other of our creditors or
     others;

          (7) we must have delivered to the trustee an officers' certificate and
     an opinion of counsel, each stating that all conditions precedent provided
     for or relating to the Legal Defeasance or the Covenant Defeasance have
     been complied with;

          (8) we must have delivered to the trustee an opinion of counsel to the
     effect that (A) the trust funds will not be subject to the rights of
     holders of our Indebtedness other than the notes and (B) assuming no
     intervening bankruptcy of our company between the date of deposit and the
     91st day following the date of deposit and that no holder is an insider of
     our company, after the 91st day following the date of deposit, the trust
     funds will not be subject to the effect of any
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     applicable bankruptcy, insolvency, reorganization or similar laws affecting
     creditors' rights generally; and

          (9) certain other customary conditions precedent must be satisfied.

     Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all notes
not theretofore delivered to the trustee for cancellation (x) have become due
and payable or (y) will become due and payable on the maturity date within one
year under arrangements satisfactory to the trustee for the giving of notice of
redemption by the trustee in our name, and at our expense.

SATISFACTION AND DISCHARGE

     The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when:

          (1) either:

             (a) all the notes theretofore authenticated and delivered (except
        lost, stolen or destroyed notes which have been replaced or paid and
        notes for whose payment money has theretofore been deposited in trust or
        segregated and held in trust by us and thereafter repaid to us or
        discharged from such trust) have been delivered to the trustee for
        cancellation; or

             (b) all notes not theretofore delivered to the trustee for
        cancellation (i) have become due and payable, (ii) will become due and
        payable at their stated maturity within one year or (iii) are to be
        called for redemption within one year under arrangement satisfactory to
        the trustee, and we have irrevocably deposited or caused to be deposited
        with the trustee funds in an amount sufficient to pay and discharge the
        entire Indebtedness on the notes not theretofore delivered to the
        trustee for cancellation, for principal of, premium, if any, and
        interest on the notes to the date of deposit together with irrevocable
        instructions from us directing the trustee to apply such funds to the
        payment thereof at maturity or redemption, as the case may be;

          (2) we or any Guarantor have paid all other sums payable under the
     indenture by us; and

          (3) we have delivered to the trustee an officers' certificate and an
     opinion of counsel stating that all conditions precedent under the
     indenture relating to the satisfaction and discharge of the indenture have
     been complied with.

MODIFICATION OF THE INDENTURE

     From time to time, we, the Guarantors and the trustee, without the consent
of the holders, may amend the indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the trustee, adversely affect the rights of any of
the holders in any material respect. In formulating its opinion on such matters,
the trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the indenture may be made with the consent of
the holders of a majority in principal amount at maturity of the then
outstanding notes issued under the indenture, except that, without the consent
of each holder affected thereby, no amendment may:

          (1) reduce the principal amount at maturity of notes whose holders
     must consent to an amendment, supplement or waiver of any provision of the
     indenture or the notes;

          (2) reduce the rate of or change or have the effect of changing the
     time for payment of interest, including defaulted interest, on any notes;

          (3) reduce the principal of or change or have the effect of changing
     the fixed maturity of any notes, or change the date on which any notes may
     be subject to redemption or reduce the redemption price therefor;
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          (4) make any notes payable in money other than that stated in the
     notes;

          (5) make any change in provisions of the indenture protecting the
     right of each holder to receive payment of principal of and interest on
     such note on or after the due date thereof or to bring suit to enforce such
     payment, or permitting holders of a majority in principal amount at
     maturity of notes to waive Defaults or Events of Default;

          (6) after our obligation to purchase notes arises thereunder, amend,
     change or modify in any material respect our obligation to make and
     consummate a Change of Control offer in the event of a Change of Control or
     make and consummate an offer with respect to any Asset Sale that has been
     consummated or, after such Change of Control has occurred or such Asset
     Sale has been consummated, modify any of the provisions or definitions with
     respect thereto;

          (7) modify or change any provision of the indenture or the related
     definitions affecting the ranking of the notes or any Guarantee in a manner
     which adversely affects the holders;

          (8) release any Guarantor that is a Significant Subsidiary from any of
     its obligations under its Guarantee or the indenture otherwise than in
     accordance with the terms of the indenture;

          (9) release all or substantially all of the Collateral; or

          (10) make any change in the preceding amendment and waiver provisions.

GOVERNING LAW

     The indenture provides that it, the notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law, of another jurisdiction would be
required thereby.

THE TRUSTEE

     The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.

     The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the trustee, should it become a creditor of ours,
to obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
Trust Indenture Act, the trustee will be permitted to engage in other
transactions; provided that if the trustee acquires any conflicting interest as
described in the Trust Indenture Act, it must eliminate such conflict or resign.

CERTAIN DEFINITIONS

     Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

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<PAGE>

     "Accreted Value" means, as of any date (the "Specified Date"), with respect
to each $1,000 principal amount at maturity of notes:

          (1) if the Specified Date is one of the following dates (each, a
     "Semi-Annual Accrual Date"), the amount set forth opposite such date below:

<Table>
<Caption>
SEMI-ANNUAL ACCRUAL DATE                                       ACCRETED VALUE
------------------------                                       --------------
<S>                                                            <C>
Issue Date..................................................     $  800.00
March 1, 2003...............................................     $  809.64
September 1, 2003...........................................     $  822.64
March 1, 2004...............................................     $  835.86
September 1, 2004...........................................     $  849.28
March 1, 2005...............................................     $  862.93
September 1, 2005...........................................     $  876.79
March 1, 2006...............................................     $  890.87
September 1, 2006...........................................     $  905.18
March 1, 2007...............................................     $  919.72
September 1, 2007...........................................     $  934.49
March 1, 2008...............................................     $  949.51
September 1, 2008...........................................     $  964.76
March 1, 2009...............................................     $  980.25
September 1, 2009...........................................     $  996.00
October 15, 2009............................................     $1,000.00
</Table>

          (2) if the Specified Date occurs between two Semi-Annual Accrual
     Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
     immediately preceding the Specified Date and (B) an amount equal to the
     product of (a) the difference of (x) the Accreted Value for the immediately
     following Semi-Annual Accrual Date and (y) the Accreted Value for the
     immediately preceding Semi-Annual Accrual Date and (b) a fraction, the
     numerator of which is the number of days actually elapsed from the
     immediately preceding Semi-Annual Accrual Date to the Specified Date and
     the denominator of which is the number of days between the two Semi-Annual
     Accrual Dates.

     "Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with or into us or any of our Subsidiaries
or assumed in connection with the acquisition of assets from such Person and in
each case not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, and which Indebtedness is without recourse to us or any of our
Restricted Subsidiaries or to any of their respective properties or assets other
than the Person or the assets to which such Indebtedness related prior to the
time such Person becomes a Restricted Subsidiary or the time of such
acquisition, merger or consolidation. Acquired Indebtedness shall be deemed to
be incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Restricted Subsidiary.

     "Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

     "Asset Acquisition" means (1) an Investment by us or any Restricted
Subsidiary in any other Person pursuant to which such Person will become a
Restricted Subsidiary, or will be merged with or into us or

                                        96
<PAGE>

any Restricted Subsidiary, or (2) the acquisition by us or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprise any division or line of business of such Person or any other properties
or assets of such Person other than in the ordinary course of business.

     "Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by us or any of our
Restricted Subsidiaries (including any Sale/Leaseback Transaction) to any Person
other than our company or a Subsidiary Guarantor of: (1) any Capital Stock of
any Restricted Subsidiary; or (2) any other property or assets of our company or
any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that the term "Asset Sale" will not include: (a) a
transaction or series of related transactions for which we or our Restricted
Subsidiaries receive aggregate consideration of less than $2,500,000; (b) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of our company as permitted under "-- Merger, Consolidation
and Sale of Assets"; (c) any Restricted Payment permitted by the "-- Limitation
on Restricted Payments" covenant or that constitutes a Permitted Investment; (d)
the sale of cash or Cash Equivalents, (e) the sale of used, worn out, damaged,
obsolete or surplus assets; (f) the lease, assignment or sublease of any real or
personal property in the ordinary course of business; and (g) any sale or
disposition deemed to occur in connection with creating, granting or exercising
remedies in respect of any Liens permitted pursuant to the indenture.

     "Capital Expenditure Basket" means, in any four fiscal quarter period, (x)
$7.0 million plus (y) the amount, if any, of the Excess Cash Flow offer made and
not accepted by the holders during the previous four fiscal quarter period
ending immediately prior to such four fiscal quarter period plus (z) any Capital
Expenditure Basket amounts (not to exceed $1.0 million) not previously applied
by us as Capital Expenditures.

     "Capital Expenditures" means for any period all direct or indirect (by way
of acquisition of securities of a Person or the expenditure of cash or the
transfer of Property or the incurrence of Indebtedness) expenditures in respect
of the purchase or other acquisition of fixed or capital assets determined in
conformity with accounting principles generally accepted in the United States,
or GAAP, excluding (i) normal replacement and maintenance programs properly
charged to current operations, and (ii) the purchase price of equipment to the
extent that the consideration therefor consists of used, worn out, damaged,
obsolete or surplus equipment being traded in at such time or the proceeds of a
concurrent sale of such used, worn out, damaged, obsolete or surplus equipment.

     "Capital Stock" means, with respect to any Person:

          (1) any and all shares, interests, participations, rights in or other
     equivalents (however designated) of such Person's capital stock, other
     equity interests, whether now outstanding or issued after the date of the
     indenture, partnership interests (whether general or limited), any other
     interest or participation that confers on a Person the right to receive a
     share of the profits and losses of, or distributions of assets of, the
     issuing Person; and

          (2) any warrants, options or other rights (other than debt securities
     exchangeable for or convertible into any such Capital Stock referred to in
     the previous bullet point) exchangeable for or convertible into such
     Capital Stock.

     "Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date will be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

     "Cash Equivalents" means:

          (1) securities issued or directly and fully guaranteed by the United
     States government or any agency or instrumentality thereof (provided that
     the full faith and credit of the United States is

                                        97
<PAGE>

     pledged in support thereof) having a maturity of not more than one year
     from the date of acquisition thereof;

          (2) securities issued or directly and fully guaranteed by any state of
     the United States of America or the District of Columbia, or any political
     subdivision of any such state or the District of Columbia or any public
     instrumentality thereof, having a maturity of not more than one year from
     the date of acquisition thereof and, at the time of acquisition, having one
     of the two highest ratings obtainable from either Standard & Poor's Ratings
     Group ("S&P") or Moody's Investors Service, Inc. ("Moody's");

          (3) commercial paper maturing no more than one year after the date of
     acquisition thereof and, at the time of acquisition, having a rating of at
     least A-1 from S&P or at least P-1 from Moody's;

          (4) certificates of deposit or bankers' acceptances having a maturity
     of not more than one year from the date of acquisition thereof issued by
     any bank organized under the laws of the United States of America or any
     state thereof or the District of Columbia or any U.S. branch of a foreign
     bank having at the date of acquisition thereof combined capital and surplus
     of not less than $250.0 million;

          (5) repurchase obligations with a term of not more than seven days for
     underlying securities of the types described in clauses (1), (2) and (4)
     above entered into with any bank meeting the qualifications specified in
     clause (4) above; and

          (6) investments in money market funds which invest substantially all
     their assets in securities of the types described in clauses (1) through
     (5) above.

     "Change of Control" means the occurrence of one or more of the following
events:

          (1) prior to the earlier to occur of the first public offering of
     common stock (an "IPO") of our company or Holdings, the Permitted Holders
     cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
     under the Exchange Act), directly or indirectly, of a majority in the
     aggregate of the total voting power of the voting stock of our company,
     whether as a result of issuance of securities of the Parent or our company,
     any merger, consolidation, liquidation or dissolution of Holdings or our
     company, or any direct or indirect transfer of securities by Holdings or
     otherwise (for purposes of this clause (1) and clause (2) below, the
     Permitted Holders will be deemed to beneficially own any voting stock of a
     Person (the "specified person") held by any other Person (the "parent
     entity") so long as the Permitted Holders beneficially own (as so defined),
     directly or indirectly, in the aggregate a majority of the voting power of
     the voting stock of the parent entity);

          (2) following an IPO of our company or Holdings, any "person" (as such
     term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
     one or more Permitted Holders, is or becomes the beneficial owner (as
     defined in clause (1) above, except that for purposes of this clause (2)
     such person will be deemed to have "beneficial ownership" of all shares
     that any such person has the right to acquire, whether such right is
     exercisable immediately or only after the passage of time), directly or
     indirectly, of more than 45% of the total voting power of the voting stock
     of our company; provided, however, that the Permitted Holders beneficially
     own (as defined in clause (1) above), directly or indirectly, in the
     aggregate a lesser percentage of the total voting power of the voting stock
     of our company than such other person and do not have the right or ability
     by voting power, contract or otherwise to elect or designate for election a
     majority of our board of directors (for the purposes of this clause (2),
     such other person will be deemed to beneficially own any voting stock of a
     specified person held by a parent entity, if such other person is the
     beneficial owner (as defined in this clause (2)), directly or indirectly,
     of more than 35% of the voting power of the voting stock of such parent
     entity and the Permitted Holders beneficially own (as defined in clause (1)
     above), directly or indirectly, in the aggregate a lesser percentage of the
     voting power of the voting stock of such parent entity and do not have the
     right or ability by voting power, contract or otherwise to elect or
     designate for election a majority of the board of directors of such parent
     entity);

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<PAGE>

          (3) during any consecutive two-year period, individuals who at the
     beginning of the period constituted our board of directors or the board of
     directors of Holdings (together with any new directors whose election by
     our board of directors or the board of directors of Holdings, as the case
     may be, or whose nomination for election by the stockholders of such Person
     was approved by a vote of a majority of the directors then in office who
     were either directors at the beginning of the period or whose election or
     nomination for election was previously so approved or approved by the
     Permitted Holders) cease for any reason to constitute a majority of our
     board of directors or the board of directors of Holdings then in office;

          (4) the adoption of a plan relating to the liquidation or dissolution
     of our company; or

          (5) the merger or consolidation of Holdings or our company with or
     into another Person or the merger of another Person with or into Holdings
     or our company, or the sale of all or substantially all the assets of
     Holdings or our company (determined on a consolidated basis) to another
     Person (other than, in all such cases, a Person that is controlled by the
     Permitted Holders), other than a transaction following which (A) in the
     case of a merger or consolidation transaction, holders of securities that
     represented 100% of the voting stock of Holdings or our company, as
     applicable, immediately prior to such transaction (or other securities into
     which such securities are converted as part of such merger or consolidation
     transaction) own directly or indirectly at least a majority of the voting
     power of the voting stock of the surviving Person in such merger or
     consolidation transaction immediately after such transaction and in
     substantially the same proportion as before the transaction and (B) in the
     case of a sale of assets transaction, each transferee becomes an obligor in
     respect of the notes and a Subsidiary of the transferor of such assets.

     "Collateral" means collateral as such term is defined in the security
agreement, all property mortgaged under the Mortgages and any other property,
whether now owned or hereafter acquired, upon which a Lien securing the
Obligations is granted or purported to be granted under any Collateral
Agreement.

     "Collateral Agent" means the collateral agent appointed pursuant to the
Indenture. The trustee is the initial Collateral Agent.

     "Collateral Agreements" means, collectively, the security agreement and
each Mortgage and each other contract, agreement or instrument creating or
purporting to create a lien, security interest, charge or similar encumbrance on
Collateral in favor of the Collateral Agent for the benefit of the holders of
the notes, in each case, as the same may be in force from time to time.

     "Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.

     "Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:

          (1) Consolidated Net Income; and

          (2) to the extent Consolidated Net Income has been reduced thereby:

             (a) all income taxes of such Person and our Restricted Subsidiaries
        paid or accrued in accordance with GAAP for such period;

             (b) Consolidated Interest Expense, amortization expense and
        depreciation expense; and

             (c) Consolidated Non-cash Charges less any non-cash items
        increasing Consolidated Net Income for such period,

all as determined on a consolidated basis for such Person and our Restricted
Subsidiaries in accordance with GAAP.

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<PAGE>

     "Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction or event giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio for which financial statements are available (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" will be calculated after giving effect on a pro forma basis for the
period of such calculation to:

          (1) the incurrence or repayment of any Indebtedness of such Person or
     any of our Restricted Subsidiaries (and the application of the proceeds
     thereof) giving rise to the need to make such calculation and any
     incurrence or repayment of other Indebtedness (and the application of the
     proceeds thereof), other than the incurrence or repayment of Indebtedness
     in the ordinary course of business for working capital purposes pursuant to
     working capital facilities, occurring during the Four Quarter Period or at
     any time subsequent to the last day of the Four Quarter Period and on or
     prior to the Transaction Date, as if such incurrence or repayment, as the
     case may be (and the application of the proceeds thereof), occurred on the
     first day of the Four Quarter Period; and

          (2) any Asset Sale or other disposition or Asset Acquisition
     (including, without limitation, any Asset Acquisition giving rise to the
     need to make such calculation as a result of such Person or one of our
     Restricted Subsidiaries (including any Person who becomes a Restricted
     Subsidiary as a result of any such Asset Acquisition) incurring, assuming
     or otherwise being liable for Acquired Indebtedness during the Four Quarter
     Period or at any time subsequent to the last day of the Four Quarter Period
     and on or prior to the Transaction Date), as if such Asset Sale or other
     disposition or Asset Acquisition (including the incurrence, assumption or
     liability for any such Indebtedness or Acquired Indebtedness and also
     including any Consolidated EBITDA associated with such Asset Acquisition)
     occurred on the first day of the Four Quarter Period; provided that the
     Consolidated EBITDA of any Person acquired will be included only to the
     extent that it would be includible pursuant to the definition of
     "Consolidated Net Income." If such Person or any of our Restricted
     Subsidiaries directly or indirectly guarantees Indebtedness of a third
     Person, the preceding sentence will give effect to the incurrence of such
     guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
     such Person had directly incurred or otherwise assumed such guaranteed
     Indebtedness.

     Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":

          (1) interest on outstanding Indebtedness determined on a fluctuating
     basis as of the Transaction Date (including Indebtedness actually incurred
     on the Transaction Date) and which will continue to be so determined
     thereafter will be deemed to have accrued at a fixed rate per annum equal
     to the average rate of interest on such Indebtedness during the Four
     Quarter Period ending on or prior to the Transaction Date; and

          (2) notwithstanding clause (1) above, interest on Indebtedness
     determined on a fluctuating basis, to the extent such interest is covered
     by agreements relating to Interest Swap Obligations, will be deemed to
     accrue at the rate per annum resulting after giving effect to the operation
     of such agreements.

     "Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:

          (1) Consolidated Interest Expense (excluding amortization or write-off
     of deferred financing costs and debt issuance costs of such Person and its
     consolidated Restricted Subsidiaries during such period and any premium or
     penalty paid in connection with redeeming or retiring Indebtedness of such
     Person and its consolidated Restricted Subsidiaries prior to the stated
     maturity thereof pursuant to the agreements governing such Indebtedness);
     plus

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<PAGE>

          (2) the product of (x) the amount of all dividend payments on any
     series of Preferred Stock of such Person (other than dividends paid in
     Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
     during such period times (y) a fraction, the numerator of which is one and
     the denominator of which is one minus the then current effective
     consolidated federal, state and local tax rate of such Person, expressed as
     a decimal.

     "Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense of such Person and our Restricted
Subsidiaries for such period, on a consolidated basis, as determined in
accordance with GAAP, and including, without duplication, (a) all amortization
of original issue discount; (b) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and our Restricted Subsidiaries during such period; and (c) net cash costs under
all Interest Swap Obligations (including amortization of fees), other than any
cash costs paid to unwind Interest Rate Obligations existing on and prior to the
Issue Date.

     "Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and our Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there will be excluded therefrom:

          (1) after-tax gains and losses from Asset Sales or abandonments or
     reserves relating thereto;

          (2) after-tax items classified as extraordinary or nonrecurring gains
     or losses;

          (3) the net income (but not loss) of any Restricted Subsidiary of the
     referent Person to the extent that the declaration of dividends or similar
     distributions by that Restricted Subsidiary of that income is restricted by
     a contract, operation of law or otherwise;

          (4) the net income of any Person, other than a Restricted Subsidiary
     of the referent Person, except to the extent of cash dividends or
     distributions paid to the referent Person or to a Wholly-Owned Subsidiary
     of the referent Person by such Person;

          (5) income or loss attributable to discontinued operations (including,
     without limitation, operations disposed of during such period whether or
     not such operations were classified as discontinued);

          (6) all gains and losses realized on or because of the purchase or
     other acquisition by such Person or any of our Restricted Subsidiaries of
     any securities of such Person or any of our Restricted Subsidiaries; and

          (7) in the case of a successor to the referent Person by consolidation
     or merger or as a transferee of the referent Person's assets, any earnings
     of the successor corporation prior to such consolidation, merger or
     transfer of assets.

     "Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and our Restricted Subsidiaries reducing Consolidated Net Income of
such Person and our Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
requires an accrual of or a reserve for cash charges for any future period).

     "Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among Holdings, us, the borrowers, the Lenders and the Lender Agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended, supplemented or otherwise modified from time to time, including any
agreement (and related documents) adding Restricted Subsidiaries as additional
borrowers or guarantors thereunder, or extending the maturity of, refinancing,
replacing or otherwise restructuring or adding Restricted Subsidiaries as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders, in each case
as certified by us to the Collateral Agent.

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     "Currency Agreement" means any spot or forward foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect us or any Restricted Subsidiary against or manage fluctuations in
currency values.

     "Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.

     "Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except in each case, upon the occurrence of a Change of Control) on or
prior to the first final maturity date of the notes for cash or is convertible
into or exchangeable for debt securities of our company or our Subsidiaries at
any time prior to such anniversary.

     "Domestic Restricted Subsidiary" means any Restricted Subsidiary of our
company other than a Foreign Restricted Subsidiary.

     "Excess Cash Flow" means, for any fiscal year, our Consolidated EBITDA for
such year, adjusted as follows: (i) minus the cash portion of our Consolidated
Interest Expense (net of interest income) for such year, (ii) minus all federal,
state and foreign income taxes accrued or paid (without duplication) by us and
our Subsidiaries during such year, (iii) minus all Capital Expenditures made
during such year by us and our Subsidiaries and (iv) minus any net increase in
the difference between (x) current assets, other than cash and Cash Equivalents,
and (y) current liabilities of our company and our Subsidiaries for such year.

     "Exchange Offer" means the offer that may be made by us, pursuant to the
Registration Rights Agreement, to exchange for any and all the notes a like
aggregate principal amount at maturity of notes registered under the Securities
Act having substantially identical terms to the notes (except that the exchange
notes will not contain terms with respect to transfer restrictions or interest
rate increases as described herein).

     "Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value will
be determined by our board of directors acting reasonably and in good faith and
will be evidenced by a Board Resolution of our board of directors delivered to
the trustee.

     "Foreign Restricted Subsidiary" means any Restricted Subsidiary of our
company which is organized under the laws of a jurisdiction other than the
United States of America, any state thereof or the District of Columbia.

     "Indebtedness" means, with respect to any Person, without duplication:

          (1) all Obligations of such Person for borrowed money;

          (2) all Obligations of such Person evidenced by bonds, debentures,
     notes or other similar instruments;

          (3) all Capitalized Lease Obligations of such Person;

          (4) all Obligations of such Person issued or assumed as the deferred
     purchase price of property, all conditional sale obligations and all
     Obligations under any title retention agreement (but excluding trade
     accounts payable and other accrued liabilities arising in the ordinary
     course of business that are not overdue by 90 days or more or are being
     contested in good faith by appropriate proceedings promptly instituted and
     diligently conducted and any deferred purchase price represented by earn
     outs consistent with our past practice);

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          (5) all Obligations for the reimbursement of any obligor on any letter
     of credit, banker's acceptance or similar credit transaction;

          (6) guarantees and other contingent obligations in respect of
     Indebtedness referred to in clauses (1) through (5) above and clause (8)
     below;

          (7) all Obligations of any other Person of the type referred to in
     clauses (1) through (6) which are secured by any lien on any property or
     asset of such Person, the amount of such Obligation being deemed to be the
     lesser of the Fair Market Value of such property or asset or the amount of
     the Obligation so secured;

          (8) all Interest Swap Obligations and all Obligations under Currency
     Agreements of such Person; and

          (9) all Disqualified Capital Stock issued by such Person with the
     amount of Indebtedness represented by such Disqualified Capital Stock being
     equal to the greater of its voluntary or involuntary liquidation preference
     and its maximum fixed repurchase price, but excluding accrued dividends, if
     any.

     For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
will be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value will be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock.

     "Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of national standing: (1) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in our company; and (2) which, in the judgment of
our board of directors, is otherwise independent and qualified to perform the
task for which it is to be engaged.

     "Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
will include, without limitation, interest rate swaps, caps, floors, collars and
similar agreements.

     "Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition for value by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" will exclude direct or indirect
advances to customers or suppliers in the ordinary course of business that are,
in conformity with GAAP, recorded as accounts receivable, prepaid expenses or
deposits on our or any Restricted Subsidiary's balance sheet, endorsements for
collection or deposit arising in the ordinary course of business and extensions
of trade credit by our company and our Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of our company or
such Restricted Subsidiary, as the case may be. For the purposes of the
"-- Limitation on Restricted Payments" covenant, the amount of any Investment
will be the original cost of such Investment plus the cost of all additional
Investments by our company or any of our Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts will reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If we
or any Restricted Subsidiary sell or otherwise dispose of any Common Stock of
any direct or indirect Restricted Subsidiary such that,
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after giving effect to any such sale or disposition, we no longer own, directly
or indirectly, 100% of the outstanding Common Stock of such Restricted
Subsidiary, we will be deemed to have made an Investment on the date of any such
sale or disposition equal to the Fair Market Value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.

     "Issue Date" means the date of original issuance of the notes.

     "Lender Agent" means General Electric Capital Corporation, as agent for the
Lenders, or any successor in that capacity.

     "Lenders" means the lenders party from time to time to the Credit
Agreement.

     "Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
security interest).

     "Mortgages" means the mortgages, deeds of trust, deeds to secure debt or
other similar documents creating liens in favor of the Collateral Agent upon the
owned or leased real property constituting Collateral of our company or any of
our Domestic Restricted Subsidiaries from time to time.

     "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
our company or any of our Restricted Subsidiaries from such Asset Sale net of:

          (1) reasonable out-of-pocket expenses and fees relating to such Asset
     Sale (including, without limitation, legal, accounting and investment
     banking fees and sales commissions);

          (2) all taxes and other costs and expenses actually paid or estimated
     by us (in good faith) to be payable in cash in connection with such Asset
     Sale;

          (3) repayment of Indebtedness that is secured by the property or
     assets that are the subject of such Asset Sale and is required to be repaid
     in connection with such Asset Sale;

          (4) amounts required to be paid to any Person (other than us or any
     Restricted Subsidiary) owning a beneficial interest in or having a Lien on
     the assets subject to the Asset Sale;

          (5) all distributions and other payments required to be made to
     non-majority interest holders in Subsidiaries as a result of such Asset
     Sale; and

          (6) appropriate amounts to be provided by our company or any
     Restricted Subsidiary, as the case may be, as a reserve, in accordance with
     GAAP, against any liabilities associated with such Asset Sale and retained
     by our company or any Restricted Subsidiary, as the case may be, after such
     Asset Sale, including, without limitation, pension and other
     post-employment benefit liabilities, liabilities related to environmental
     matters and liabilities under any indemnification obligations associated
     with such Asset Sale.

provided, however, that if, after the payment of all taxes with respect to such
Asset Sale, the amount of estimated taxes, if any, pursuant to clause (2) above
exceeded the tax amount actually paid in cash in respect of such Asset Sale, the
aggregate amount of such excess will, at such time, constitute Net Cash
Proceeds.

     "Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.

     "Permitted Holders" means (i) Atlantic Equity Partners III, L.P., a fund
sponsored by First Atlantic Capital, Ltd., (ii) First Atlantic Capital, Ltd., or
(iii) any Affiliate thereof.

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     "Permitted Indebtedness" means, without duplication, each of the following:

          (1) Indebtedness under the notes issued on the Issue Date (and
     exchange notes issued in exchange therefor) in an aggregate outstanding
     principal amount at maturity not to exceed $93.75 million or of any
     Guarantor pursuant to a Guarantee thereof;

          (2) Indebtedness incurred pursuant to the Credit Agreement in an
     aggregate principal amount at any one time outstanding not to exceed $10.0
     million;

          (3) other Indebtedness of us and our Restricted Subsidiaries
     outstanding on the Issue Date;

          (4) Interest Swap Obligations of our company or any Restricted
     Subsidiary covering Indebtedness of us or of any of our Restricted
     Subsidiaries; provided, however, that such Interest Swap Obligations are
     entered into for the purpose of fixing or hedging interest rates with
     respect to any fixed or variable rate Indebtedness that is permitted by the
     indenture to be outstanding to the extent that the notional amount of any
     such Interest Swap Obligation does not exceed the principal amount of
     Indebtedness to which such Interest Swap Obligation relates;

          (5) Indebtedness under Currency Agreements; provided that in the case
     of Currency Agreements which relate to Indebtedness, such Currency
     Agreements do not increase the Indebtedness of us and our Restricted
     Subsidiaries outstanding other than as a result of fluctuations in foreign
     currency exchange rates or by reason of fees, indemnities and compensation
     payable thereunder;

          (6) Indebtedness of a Restricted Subsidiary to us or to another
     Restricted Subsidiary for so long as such Indebtedness is held by us or a
     Restricted Subsidiary, in each case subject to no Lien held by a Person
     other than us or a Restricted Subsidiary; provided that (a) any such
     Indebtedness is unsecured and subordinated, pursuant to a written
     agreement, to such Restricted Subsidiary's obligations under the indenture
     and its Guarantee, if applicable, (b) if as of any date any Person other
     than us or a Restricted Subsidiary owns or holds any such Indebtedness or
     holds a Lien in respect of such Indebtedness, such date will be deemed the
     incurrence of Indebtedness not constituting Permitted Indebtedness by the
     issuer of such Indebtedness and (c) the aggregate amount of Indebtedness of
     Restricted Subsidiary that is not a Guarantor incurred pursuant to this
     clause (6) may not exceed $3.0 million at any one time outstanding;

          (7) our Indebtedness to a Restricted Subsidiary for so long as such
     Indebtedness is held by a Restricted Subsidiary, in each case subject to no
     Lien; provided that (a) any such Indebtedness is unsecured and
     subordinated, pursuant to a written agreement, to our obligations under the
     indenture and the notes and (b) if as of any date any Person other than a
     Restricted Subsidiary owns or holds any such Indebtedness or any Person
     holds a Lien in respect of such Indebtedness, such date will be deemed the
     incurrence of Indebtedness not constituting Permitted Indebtedness;

          (8) Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument inadvertently
     (except in the case of daylight overdrafts) drawn against insufficient
     funds in the ordinary course of business; provided, however, that such
     Indebtedness is extinguished within five business days of incurrence;

          (9) Indebtedness of us or any of our Restricted Subsidiaries
     represented by letters of credit for the account of us or such Restricted
     Subsidiary, as the case may be, in order to provide security for workers'
     compensation claims, payment obligations in connection with self-insurance
     or similar requirements in the ordinary course of business;

          (10) Indebtedness represented by Capitalized Lease Obligations and
     Purchase Money Indebtedness of us and our Restricted Subsidiaries incurred
     in the ordinary course of business (including Refinancings thereof that do
     not result in an increase in the aggregate principal amount of Indebtedness
     of such Person as of the date of such proposed Refinancing (plus the amount
     of any premium required to be paid under the terms of the instrument
     governing such Indebtedness and plus

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     the amount of reasonable expenses incurred by us in connection with such
     Refinancing)) not to exceed $3.0 million at any one time outstanding;

          (11) Refinancing Indebtedness;

          (12) Guarantees by our company or a Restricted Subsidiary of
     Indebtedness incurred by our company or a Restricted Subsidiary so long as
     the incurrence of such Indebtedness by our company or any such Restricted
     Subsidiary is otherwise permitted by the terms of the indenture;

          (13) Indebtedness arising from agreements of our company or a
     Subsidiary providing for indemnification, adjustment of purchase price or
     similar obligations, in each case, incurred in connection with the
     disposition of any business, assets or Subsidiary, other than guarantees of
     Indebtedness incurred by any person acquiring all or any portion of such
     business, assets or Subsidiary for the purpose of financing such
     acquisition; provided that the maximum aggregate liability in respect of
     all such Indebtedness will at no time exceed the gross proceeds actually
     received by our company and the Subsidiary in connection with such
     disposition;

          (14) Indebtedness of our company or any Restricted Subsidiary to the
     extent the net proceeds thereof are promptly deposited to defease all
     outstanding notes as described below under "-- Legal Defeasance and
     Covenant Defeasance"; and

          (15) additional Indebtedness of our company and our Restricted
     Subsidiaries in an aggregate principal amount not to exceed $2.5 million at
     any one time outstanding.

     For purposes of determining compliance with the "-- Limitation on
Incurrence of Additional Indebtedness" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (1) through (15) above or is entitled to be
incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of
such covenant, we will, in our sole discretion, classify (or later reclassify)
such item of Indebtedness in any manner that complies with this covenant.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, and the payment of dividends on Disqualified Capital Stock
in the form of additional shares of the same class of Disqualified Capital Stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Capital Stock for purposes of the "-- Limitations on Incurrence of
Additional Indebtedness" covenant.

     "Permitted Investments" means:

          (1) Investments by our company or any Restricted Subsidiary in any
     Person that is or will become immediately after such Investment a
     Subsidiary Guarantor or that will merge or consolidate into our company or
     a Subsidiary Guarantor;

          (2) Investments in our company by any Restricted Subsidiary; provided
     that any Indebtedness evidencing such Investment is unsecured (except to
     the extent permitted by clause (14) of the definition of Permitted Liens),
     and subordinated pursuant to a written agreement, to our obligations under
     the notes and the indenture;

          (3) Investments in cash and Cash Equivalents;

          (4) loans and advances to employees, officers and directors of our
     company and our Restricted Subsidiaries in the ordinary course of business
     for bona fide business purposes not in excess of $1.0 million at any one
     time outstanding;

          (5) Currency Agreements and Interest Swap Obligations entered into in
     the ordinary course of our or our Restricted Subsidiaries' businesses and
     otherwise in compliance with the indenture;

          (6) Investments in the notes;

          (7) Investments in trade creditors or customers received pursuant to
     any plan of reorganization or similar arrangement upon the bankruptcy or
     insolvency of such trade creditors or customers;
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          (8) Investments made by our company or our Restricted Subsidiaries as
     a result of consideration received in connection with any Asset Sale made
     in compliance with the "-- Limitation on Asset Sales" covenant;

          (9) any Investment existing on the Issue Date;

          (10) Investments in prepaid expenses, negotiable instruments held for
     collection and lease, utility and workers' compensation, performance and
     other similar deposits made in the ordinary course of business;

          (11) any Investment to the extent that the consideration therefor is
     our Qualified Capital Stock;

          (12) Investments in Foreign Restricted Subsidiaries in an amount not
     to exceed $3.0 million at any one time outstanding; and

          (13) additional Investments not to exceed $2.5 million at any one time
     outstanding.

     "Permitted Liens" means the following types of Liens:

          (1) Liens for taxes, assessments or governmental charges or claims
     either (a) not delinquent or (b) contested in good faith by appropriate
     proceedings and as to which our company or our Restricted Subsidiaries will
     have set aside on its books such reserves as may be required pursuant to
     GAAP;

          (2) statutory Liens of landlords and Liens of carriers, warehousemen,
     mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
     or pursuant to customary reservations or retentions of title incurred in
     the ordinary course of business for sums not yet delinquent or being
     contested in good faith, if such reserve or other appropriate provision, if
     any, as will be required by GAAP will have been made in respect thereof;

          (3) Liens incurred or deposits made in the ordinary course of business
     in connection with workers' compensation, unemployment insurance and other
     types of social security, including any Lien securing letters of credit
     issued in the ordinary course of business consistent with past practice in
     connection therewith, or to secure the performance of tenders, statutory
     obligations, surety and appeal bonds, bids, leases, government contracts,
     performance and return-of-money bonds and other similar obligations
     (exclusive of obligations for the payment of borrowed money);

          (4) judgment Liens not giving rise to an Event of Default so long as
     such Lien is adequately bonded and any appropriate legal proceedings which
     may have been duly initiated for the review of such judgment will not have
     been finally terminated or the period within which such proceedings may be
     initiated will not have expired;

          (5) easements, rights-of-way, zoning restrictions and other similar
     charges or encumbrances in respect of real property not interfering in any
     material respect with the ordinary conduct of the business of our company
     or any of our Restricted Subsidiaries;

          (6) any interest or title of a lessor under any Capitalized Lease
     Obligation permitted pursuant to clause (10) of the definition of
     "Permitted Indebtedness;" provided that such Liens do not extend to any
     property or assets which is not leased property subject to such Capitalized
     Lease Obligation;

          (7) Liens securing Capitalized Lease Obligations and Purchase Money
     Indebtedness permitted pursuant to clause (10) or clause (15) of the
     definition of "Permitted Indebtedness"; provided, however, that in the case
     of Purchase Money Indebtedness (a) the Indebtedness will not exceed the
     cost of such property or assets and will not be secured by any property or
     assets of our company or any Restricted Subsidiary other than the property
     and assets so acquired or constructed and (b) the Lien securing such
     Indebtedness will be created within 180 days of such acquisition or
     construction or, in the case of a refinancing of any Purchase Money
     Indebtedness, within 180 days of such refinancing;

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          (8) Liens upon specific items of inventory or other goods and proceeds
     of any Person securing such Person's obligations in respect of bankers'
     acceptances issued or created for the account of such Person to facilitate
     the purchase, shipment or storage of such inventory or other goods;

          (9) Liens securing reimbursement obligations with respect to
     commercial letters of credit which encumber documents and other property
     relating to such letters of credit and products and proceeds thereof;

          (10) Liens encumbering deposits made to secure obligations arising
     from statutory, regulatory, contractual, or warranty requirements of our
     company or any of our Restricted Subsidiaries, including rights of offset
     and set-off;

          (11) Liens securing Interest Swap Obligations, which Interest Swap
     Obligations relate to Indebtedness that is otherwise permitted under the
     indenture;

          (12) Liens securing Indebtedness under Currency Agreements that are
     permitted under the indenture;

          (13) Liens securing Acquired Indebtedness incurred in accordance with
     the "-- Limitation on Incurrence of Additional Indebtedness" covenant;
     provided that:

             (a) such Liens secured such Acquired Indebtedness at the time of
        and prior to the incurrence of such Acquired Indebtedness by our company
        or a Restricted Subsidiary and were not granted in connection with, or
        in anticipation of, the incurrence of such Acquired Indebtedness by our
        company or a Restricted Subsidiary; and

             (b) such Liens do not extend to or cover any property or assets of
        our company or of any of our Restricted Subsidiaries other than the
        property or assets that secured the Acquired Indebtedness prior to the
        time such Indebtedness became Acquired Indebtedness of our company or a
        Restricted Subsidiary and are no more favorable to the lienholders than
        those securing the Acquired Indebtedness prior to the incurrence of such
        Acquired Indebtedness by our company or a Restricted Subsidiary;

          (14) Liens existing as of the Issue Date and securing Indebtedness
     permitted to be outstanding under clause (3) of the definition of
     "Permitted Indebtedness" to the extent and in the manner such Liens are in
     effect on the Issue Date;

          (15) Liens securing the notes and the Guarantees;

          (16) Liens securing Indebtedness under the Credit Agreement to the
     extent such Indebtedness is permitted under clause (2) or clause (15) of
     the definition of "Permitted Indebtedness";

          (17) any interest of third parties in any escrow account established
     pursuant to the Merger Agreement;

          (18) Liens for the benefit of our company or a Subsidiary Guarantor on
     assets of any Restricted Subsidiary;

          (19) Liens securing Refinancing Indebtedness which is incurred to
     Refinance any Indebtedness which has been secured by a Lien permitted under
     this paragraph and which has been incurred in accordance with the
     "-- Limitation on Incurrence of Additional Indebtedness" provisions of the
     indenture; provided, however, that such Liens: (i) are no less favorable to
     the holders and are not more favorable to the lienholders with respect to
     such Liens than the Liens in respect of the Indebtedness being Refinanced;
     and (ii) do not extend to or cover any property or assets of our company or
     any of our Restricted Subsidiaries not securing the Indebtedness so
     Refinanced; and

          (20) Liens incurred in the ordinary course of business securing assets
     of our company in addition to that described in clauses (1) through (19)
     above, so long as the obligations secured by such Liens do not exceed $1.0
     million at any one time outstanding and such obligations are not incurred
     in

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     connection with the borrowing of money or the obtaining of advances or
     credit (other than trade credit in the ordinary course of business).

     "Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.

     "Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

     "Purchase Money Indebtedness" means Indebtedness of our company and our
Restricted Subsidiaries incurred for the purpose of financing all or any part of
the purchase price, or the cost of installation, construction or improvement, of
property or equipment (including Indebtedness incurred within 180 days following
such purchase, construction or improvement), including Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed by us or a
Subsidiary in connection with the acquisition of assets from such Person;
provided, however, that any Lien on such Indebtedness shall not extend to any
property other than the property so acquired or constructed.

     "Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

     "Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
will have correlative meanings.

     "Refinancing Indebtedness" means any Refinancing by our company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the
"-- Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clauses (1), (2), and (11) of the definition of Permitted
Indebtedness), in each case that does not:

          (1) result in an increase in the aggregate principal amount of
     Indebtedness of such Person as of the date of such proposed Refinancing
     (plus the amount of any premium required to be paid under the terms of the
     instrument governing such Indebtedness and plus the amount of reasonable
     expenses incurred by our company in connection with such Refinancing); or

          (2) create Indebtedness with: (a) a Weighted Average Life to Maturity
     that is less than the Weighted Average Life to Maturity of the Indebtedness
     being Refinanced; or (b) a final maturity earlier than the final maturity
     of the Indebtedness being Refinanced; provided that (x) if such
     Indebtedness being Refinanced is Indebtedness of our company, then such
     Refinancing Indebtedness will be Indebtedness solely of our company or a
     Guarantor and (y) if such Indebtedness being Refinanced is subordinate or
     junior to the notes, then such Refinancing Indebtedness will be subordinate
     to the notes at least to the same extent and in the same manner as the
     Indebtedness being Refinanced;

          (3) change any of the respective obligors on such Refinancing
     Indebtedness;

          (4) affect the security, if any, for such Refinancing Indebtedness
     (except to the extent that less security is granted to holders of such
     Refinancing Indebtedness); or

          (5) afford the holders of such Refinancing Indebtedness covenants,
     defaults, rights or remedies more burdensome to the obligors than those
     contained in the Indebtedness being refinanced.

     "Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, between our company, the Guarantors and the Initial
Purchaser, as the same may be amended or modified from time to time in
accordance with the terms thereof.

     "Replacement Assets" means, with respect to any Asset Sale, properties and
assets (including Capital Stock of a Person) that replace the properties and
assets that were the subject of such Asset Sale or properties and assets
(including Capital Stock of a Person) that will be used in the business of our
company and the Restricted Subsidiaries or in businesses reasonably related or
ancillary thereto.

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     "Restricted Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which at the time of determination is not an Unrestricted
Subsidiary.

     "Sale/Leaseback Transaction" means any direct or indirect arrangement with
any Person or to which any such Person is a party, providing for the leasing to
our company or a Restricted Subsidiary of any property, whether owned by our
company or any Restricted Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by our company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.

     "Significant Subsidiary" with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1-02(w) of Regulation S-X under the Exchange Act.

     "Subsidiary" means, with respect to any Person:

          (1) any corporation of which the outstanding Capital Stock having at
     least a majority of the votes entitled to be cast in the election of
     directors under ordinary circumstances will at the time be owned, directly
     or indirectly, by such Person; or

          (2) any other Person of which at least a majority of the voting
     interest under ordinary circumstances is at the time, directly or
     indirectly, owned by such Person.

     "Subsidiary Guarantor" means (1) all existing Domestic Restricted
Subsidiaries and (2) each of our Restricted Subsidiaries that in the future
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of the indenture as a Subsidiary Guarantor; provided that
any Person constituting a Subsidiary Guarantor as described above will cease to
constitute a Subsidiary Guarantor when its respective Guarantee is released in
accordance with the terms of the indenture.

     "Unrestricted Subsidiary" of any Person means:

          (1) any Subsidiary of such Person that at the time of determination
     will be or continue to be designated an Unrestricted Subsidiary by our
     board of directors of such Person in the manner provided below; and

          (2) any Subsidiary of an Unrestricted Subsidiary.

     Our board of directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, our company or any other Subsidiary that is not a Subsidiary of the
Subsidiary to be so designated, provided that:

          (1) we certify to the trustee that such designation complies with the
     "-- Limitation on Restricted Payments" covenant; and

          (2) each Subsidiary to be so designated and each of its Subsidiaries
     has not at the time of designation, and does not thereafter, create, incur,
     issue, assume, guarantee or otherwise become directly or indirectly liable
     with respect to any Indebtedness pursuant to which the lender has recourse
     to any of the assets of our company or any of our Restricted Subsidiaries.

     Our board of directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if:

          (1) all Liens and Indebtedness of such Unrestricted Subsidiary
     outstanding immediately following such designation would, after giving
     effect to the designation of the Subsidiary as an Unrestricted Subsidiary,
     have been permitted to be incurred for all purposes of the indenture; and

          (2) immediately before and immediately after giving effect to such
     designation, no Default or Event of Default will have occurred and be
     continuing.

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     Any such designation by the board of directors will be evidenced to the
trustee by promptly filing with the trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.

     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

     "Wholly-Owned Subsidiary" means, with respect to any Person, any Restricted
Subsidiary of such Person of which all the outstanding Capital Stock (other than
in the case of a foreign Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by such Person or any Wholly-Owned Subsidiary of such
Person.

     "Working Capital Collateral" means that portion of the Collateral
consisting of cash, deposit accounts, receivables and inventory, together with
all documents of title, letters of credit, books, records and files (whether in
physical or electronic form) relating to the foregoing.

EXCHANGE OFFER; REGISTRATION RIGHTS

     As part of the sale of the notes to the Initial Purchaser pursuant to the
Purchase Agreement, we, the Guarantors and the Initial Purchaser entered into
the Registration Rights Agreement dated October 15, 2002. Pursuant to our
obligations under the Registration Rights Agreement, on July 29, 2003, we
consummated an exchange offer in which we exchanged notes that were registered
under the Securities Act for all unregistered notes that were tendered and not
validly withdrawn in the exchange offer. As our affiliate, Atlantic Equity
Partners III, L.P. was not eligible to participate in the exchange offer. All of
the notes, other than the $7,250,000 aggregate principal amount at maturity
beneficially owned by Atlantic Equity Partners III, L.P., were exchanged for
registered notes in the exchange offer.

BOOK-ENTRY; DELIVERY AND FORM

  THE GLOBAL NOTES

     The notes were initially issued in the form of one or more global
securities registered in the name of The Depository Trust Company, which we
refer to as "DTC," or its nominee. We expect that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount at maturity
of the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the initial
purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Holders may hold their interests in the
Global Notes directly through DTC if they are participants in such system, or
indirectly through organizations that are participants in such system.

     So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by such Global Notes for all purposes
under the indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the indenture with respect to the notes.

     Payments of the principal of, premium (if any), interest (including
additional interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of
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us, the trustee or any paying agent will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.

     We expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including additional interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
at maturity of the Global Notes as shown on the records of DTC or its nominee.
We also expect that payments by participants to owners of beneficial interests
in the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.

     Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell notes to persons in
states which require physical delivery of the notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture.

     DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount at maturity of notes as to which such
participant or participants has or have given such direction. However, if there
is an event of default under the indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.

     DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.

     Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the trustee nor we will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

  CERTIFICATED SECURITIES

     Certificated Securities will be issued in exchange for beneficial interests
in the Global Notes (i) if requested by a holder of such interests or (ii) if
DTC is at any time unwilling or unable to continue as a depositary for the
Global Notes and a successor depositary is not appointed by us within 90 days.

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             MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the material U.S. federal income tax
consequences of the ownership and disposition of notes. Unless otherwise stated
under the heading "Non-U.S. holders," below, this summary deals only with notes
held as capital assets by U.S. holders, as defined below. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currency or tax-exempt investors. This summary also does not
address the tax consequences to U.S. holders that have a functional currency
other than the U.S. Dollar, partnerships or other entities treated as
partnerships that hold notes, persons that hold notes as part of a straddle,
hedging, constructive sale or conversion transaction, or shareholders, partners
or beneficiaries of a holder of notes. It also does not include any description
of any tax consequences under the tax laws of any state or local government or
of any foreign government that may be applicable to the notes. This summary is
based on the Internal Revenue Code of 1986, as amended, which we refer to in
this prospectus as the Code, Treasury regulations under the Code, which we refer
to in this prospectus as the Treasury Regulations, and administrative and
judicial interpretations of the Code, as of the date of this prospectus, all of
which are subject to change, possibly on a retroactive basis.

     As used in this section, the term "U.S. holder" means any beneficial owner
of notes that is, for United States federal income tax purposes,

     - a citizen or resident of the United States,

     - a corporation (or other entity taxable as a corporation) created or
       organized in or under the laws of the United States, any state thereof or
       the District of Columbia,

     - an estate the income of which is subject to United States federal income
       taxation regardless of its source, or

     - a trust if (1) a court within the United States is able to exercise
       primary supervision over the administration of the trust and one or more
       United States persons have the authority to control all substantial
       decisions of the trust or (2) the trust has in effect a valid election to
       be treated as a domestic trust for United States federal income tax
       purposes.

     As used in this discussion, the term Non-U.S. holder means a beneficial
owner of notes that is not a U.S. holder and is not an entity organized in or
under the laws of the United States, any state thereof or the District of
Columbia.

     YOU SHOULD CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS WITH RESPECT TO AN INVESTMENT IN THE
NOTES.

U.S. HOLDERS

     Interest Income.  Stated interest on a note will be includible in a U.S.
holder's gross income as ordinary interest income at the time it is accrued or
received in accordance with the U.S. holder's method of accounting for United
States federal income tax purposes.

     Original Issue Discount.  The notes were issued with original issue
discount in an amount equal to the difference between the principal amount of
the notes and the original offering price of the notes. A U.S. holder of a note
must include original issue discount in income as ordinary interest income for
United States federal income tax purposes as it accrues under a constant yield
method in advance of receipt of the cash payments attributable to such income,
regardless of such U.S. holder's regular method of tax accounting. In general,
the amount of original issue discount included in income by the holder of a note
will be the sum of the daily portions of original issue discount with respect to
such note for each day during the taxable year (or portion of the taxable year)
on which such U.S. holder held such note. The "daily portion" of original issue
discount on a note is determined by allocating to each day in any accrual period
a ratable portion of the original issue discount allocable to that accrual
period. An "accrual period" may be of any length and the accrual periods may
vary in length over the term of the note, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs
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either on the final day of an accrual period or on the first day of an accrual
period. The amount of original issue discount allocable to each accrual period
is generally equal to the difference between:

     - the product of the note's adjusted issue price at the beginning of such
       accrual period and its yield to maturity (determined on the basis of
       compounding at the close of each accrual period and appropriately
       adjusted to take into account the length of the particular accrual
       period), and

     - the amount of any qualified stated interest payments allocable to such
       accrual period.

The "adjusted issue price" of a note at the beginning of any accrual period is
the sum of the issue price of the note plus the amount of original issue
discount allocable to all prior accrual periods minus the amount of any prior
payments on the note that were not stated interest payments. Under these rules,
U.S. holders generally will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods.

     As described in more detail under "Description of the Notes," we are
obligated to redeem 20% of the principal amount at maturity of each note, plus
accrued and unpaid interest to the redemption date, on October 15, 2007 and an
additional 10% of the original principal amount at maturity of each note on
October 15, 2008. This redemption of the principal amount at maturity will be
treated for federal income tax purposes as a payment of original issue discount
to the extent of any accrued but unpaid original issue discount and thereafter
as a repayment of principal. While these payments do not affect the total amount
of original issue discount on the notes, they will be taken into account in the
determination of the yield to maturity calculation used in determining the
amount of original issue discount allocable to any accrual period. We intend to
take the position that the yield to maturity on the notes will initially be
determined assuming that these redemption payments will be made in the full
amount of 20% and 10% of the original principal amount at maturity of the notes,
plus accrued and unpaid interest to the redemption date, on October 15, 2007 and
October 15, 2008, respectively, subject to readjustment during the period that
the notes are outstanding to the extent that we may reduce our obligation to
make these redemptions on account of redemptions of the notes pursuant to an
Excess Cash Flow offer, as described under "Description of the Notes -- Excess
Cash Flow Offer" and "Description of the Notes -- Redemption -- Mandatory
Redemption."

     We also have various optional redemption rights, some of which are subject
to contingencies and some of which are unrestricted. You also have the option to
require us to purchase all or a portion of your notes upon the occurrence of a
Change of Control. We do not believe that these redemption options will affect
the determination of the yield or deemed maturity date of the notes or otherwise
affect the amount or timing or accrual of original issue discount on the notes.
If this belief or our belief regarding the effect of mandatory redemption
payments described in the preceding paragraph is incorrect, the amount and
timing of original issue discount required to be taken into account by you may
be affected. You should consult your tax advisor regarding the possible effects,
if any, of these redemption rights on the calculation of original issue discount
on any notes that you buy.

     Sale, Exchange or Retirement of Notes.  Upon sale, exchange or retirement
of a note, a U.S. holder generally will recognize gain or loss equal to the
difference between the U.S. holder's adjusted tax basis in the note and the
amount realized on the sale, exchange, or retirement (less any accrued but
previously unpaid interest, which would be treated as a payment of previously
accrued interest on the notes). A U.S. holder's adjusted tax basis in a note
will generally equal the issue price of such note, increased by the amount of
original issue discount previously included in income by such holder with
respect to such note and reduced by any principal payments received by the U.S.
holder. Gain or loss so recognized will be capital gain or loss and will be
long-term capital gain or loss if, at the time of the sale, exchange, or
retirement, the note was held for more than one year. Under current law, net
capital gains of non-corporate taxpayers, under certain circumstances, are taxed
at lower rates than items of ordinary income. The deduction of capital losses is
subject to certain limitations.

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NON-U.S. HOLDERS

     Interest Income.  Generally, interest income (including original issue
discount) of a Non-U.S. holder that is not effectively connected with a United
States trade or business will be subject to a withholding tax at a 30% rate or,
if applicable, a lower tax rate specified by a treaty. However, interest income
(including original issue discount) earned on the notes by a Non-U.S. holder may
qualify for the "portfolio interest" exemption and therefore not be subject to
United States federal income tax or withholding tax, if such interest income is
not effectively connected with a United States trade or business of the Non-U.S.
holder and if:

     - the Non-U.S. holder does not actually or constructively own 10% or more
       of the total combined voting power of all classes of our stock entitled
       to vote,

     - the Non-U.S. holder is not a controlled foreign corporation that is
       related to us through stock ownership,

     - the Non-U.S. holder certifies to us or our agent, under penalties of
       perjury, that it is not a U.S. holder and provides its name and address
       or otherwise satisfies applicable identification requirements, and

     - neither we nor our paying agent knows or has reason to know that the
       conditions of the exemption are, in fact, not satisfied.

     In the case of notes held by partnerships, the certification described
above must be provided by the partners, rather than by the partnerships and the
partnership must provide certain information, including a U.S. taxpayer
identification number. A look through rule applies in the case of tiered
partnerships.

     Unless an applicable treaty otherwise provides, a Non-U.S. holder generally
will be taxed in the same manner as a U.S. holder with respect to interest
(including original issue discount) if the interest income is effectively
connected with a United States trade or business of the Non-U.S. holder and, in
the case of a Non-U.S. holder that is eligible for benefits of an income tax
treaty with the United States, is attributable to a permanent establishment
maintained by the Non-U.S. holder in the United States. Such effectively
connected interest received or accrued by a corporate Non-U.S. holder may also,
under certain circumstances, be subject to an additional "branch profits" tax at
a 30% rate or, if applicable, a lower tax rate specified by a treaty. Even
though such effectively connected interest is subject to U.S. income tax and may
be subject to the branch profits tax, it is not subject to U.S. withholding tax
if the holder delivers a properly executed IRS Form W-8ECI (or a suitable
substitute form) to us or our paying agent and neither we nor our paying agent
knows or has reason to know that the information on the form is incorrect.

     Sale, Exchange, or Retirement of Notes.  A Non-U.S. holder generally will
not be subject to United States federal income tax or withholding tax on any
gain realized on the sale, exchange, or retirement of notes unless

     - the gain is effectively connected with a United States trade or business
       of the Non-U.S. holder, or

     - in the case of a Non-U.S. holder who is an individual, such holder is
       present in the United States for a period or periods aggregating 183 days
       or more during the taxable year of the disposition, and either such
       holder has a "tax home" in the United States or the disposition is
       attributable to an office or other fixed place of business maintained by
       such holder in the United States.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

     In general, information reporting on IRS Form 1099 will apply to payments
to a U.S. Holder of principal, premium, if any, and interest on a note and the
proceeds of the sale of a note. Backup withholding tax may apply to such
payments to a non-corporate U.S. holder if that U.S. holder:

     - fails to furnish or certify its correct taxpayer identification number to
       us or our paying agent in the manner required,
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<PAGE>

     - is notified by the IRS that it has failed to report payments of interest
       or dividends properly, or

     - under certain circumstances, fails to certify that it has not been
       notified by the IRS that it is subject to backup withholding for failure
       to report interest or dividend payments.

     Information reporting on IRS Form 1099 and backup withholding tax will not
apply to payments of interest on notes to a Non-U.S. holder if the certification
or identification requirements described in "-- Non-U.S. Holders -- Interest
Income" are satisfied by the holder, unless the payor knows or has reason to
know that the holder is not entitled to an exemption from information reporting
or backup withholding tax. However, we may report payments of interest on the
notes to a Non-U.S. holder on IRS Form 1042-S regardless of whether a Non-U.S.
holder provides the certification or identification requirements described
above.

     Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of notes effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless the broker is a United States person or has
certain connections to the United States. Payment of the proceeds of any such
sale effected outside the United States by a foreign office of a broker
described in the preceding sentence will not be subject to backup withholding
tax, but will be subject to information reporting requirements, unless the
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale to
or through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of the
notes provides the certification described in "Non-U.S. Holders -- Interest
Income" or otherwise establishes an exemption.

     Any amounts withheld under the backup withholding rules will be allowed as
a credit against that holder's United States federal income tax liability and
may entitle the holder to a refund, provided that the required information is
furnished to the I.R.S. The rate for backup withholding tax is 28% for tax years
beginning in 2003 and 2004.

     You are urged to consult with your own tax advisor with regard to the U.S.
federal income tax consequences of an investment in the notes as well as the
consequences under state, local and foreign income tax law. Non-U.S. holders are
urged to consult their own tax advisors as to the effect of income tax treaties
and reporting requirements with regard to an investment in the notes.

EFFECT OF HYDO PAYMENTS ON OUR ABILITY TO DEDUCT INTEREST ON THE NOTES

     On each payment date beginning March 1, 2008, in addition to accrued
interest due on that date, we will make a payment, which we call a HYDO payment,
on each note in cash in an amount equal to the excess, if any, of:

     - the total amount of interest and original issue discount accrued on the
       note through that date, over

     - the sum of:

      - all amounts of interest and original issue discount paid in cash with
        respect to such note through and including that date;

      - all HYDO payments previously made by us on the note; and

      - the annual "yield to maturity" applicable for purposes of the accrual of
        original issue discount multiplied by the original principal amount of
        the note.

     As a result of making these HYDO payments, we will not be subject to
special rules that would otherwise limit the amount of interest expense we could
deduct on the notes for U.S. federal income tax purposes. If the notes did not
provide for HYDO payments, the special rules would apply. If these rules were to
apply, we would not be allowed a deduction for the "disqualified portion" of the
original issue discount on the notes and would not be allowed a deduction with
respect to the remainder of such original issue discount until it was paid.
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<PAGE>

     The "disqualified portion" of the original issue discount on a note would
be calculated as the lesser of:

     - the amount of such original issue discount, or

     - the portion of the "total return" on the note which bears the same ratio
       to such total return as the "disqualified yield" on the note bears to the
       yield to maturity on the note.

For this purpose,

     - the term "total return" is the amount that would have been the original
       issue discount on the note if the stated interest on the note were
       included in its stated redemption price at maturity, and

     - the term "disqualified yield" means (i) the excess of the yield to
       maturity on the note over (ii) the sum of (A) the applicable Federal rate
       in effect under section 1274(d) of the Code for the calendar month in
       which the note is issued and (B) six percentage points.

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                              PLAN OF DISTRIBUTION

     Holdings will sell the notes directly to purchasers at the offering price
that appears on the cover page of this prospectus. Holdings may be deemed to be
an "underwriter" within the meaning of the Securities Act. To our knowledge,
there are currently no plans, arrangements or understandings between Holdings
and any underwriter, broker-dealer or agent regarding the sale of the notes by
Holdings.

     In order to comply with the securities laws of particular states, the notes
covered by this prospectus may be sold in certain states only through registered
or licensed brokers or dealers. In addition, in particular states, the notes may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

     Certain persons that participate in the distribution of the notes may
engage in transactions that stabilize, maintain or otherwise affect the price of
the notes, including over allotment, stabilizing and short-covering transactions
in such notes, and the imposition of penalty bids, in connection with an
offering. Any person participating in the distribution of the notes registered
under the registration statement that includes this prospectus will be subject
to applicable provisions of the Exchange Act and the applicable SEC rules and
regulations, including, among others, Regulation M, which may limit the timing
of purchases and sales of any of the notes by any such person. Furthermore,
Regulation M may restrict the ability of any person engaged in the distribution
of the notes to engage in market-making activities with respect to the notes.
These restrictions may affect the marketability of the notes and the ability of
any person or entity to engage in market-making activities with respect to the
notes.

     The notes are not listed and we do not intend to list the notes on any
securities exchange or to include the notes in any automated quotation system.
Currently, there is no public market for the notes.

     Holdings and Atlantic Equity Partners III have agreed that the aggregate
value of the shares of common stock to be issued by Holdings to Atlantic Equity
Partners III in the private transaction described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder"
will be reduced by the amount of the expenses related to this offering. Subject
to the preceding sentence, Holdings has agreed to pay all of the expenses
incidental to the registration, offering and sale by Holdings of the notes to
the public, including any expenses relating to the filing of the registration
statement of which this prospectus is a part. We estimate these expenses to be
approximately $200,000.

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                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission, which we refer
to as the SEC, a registration statement on Form S-1 under the Securities Act of
1933, which we refer to as the Securities Act, with respect to the offering of
the notes. This prospectus does not contain all the information included in the
registration statement and the exhibits and schedules thereto. You will find
additional information about us and the notes in the registration statement. We
also file annual, quarterly and special reports with the SEC. The registration
statement and the exhibits and schedules thereto and the other materials we file
with the SEC are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N. W., Washington,
D. C. 20549, 233 Broadway, New York, New York 10279 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can also
obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D. C. 20549.
Please call the SEC at l-800-SEC-0330 for further information on the operation
of the public reference facilities. Statements made in this prospectus about
legal documents may not necessarily be complete and you should read the
documents which are filed as exhibits to the registration statement or otherwise
filed with the SEC.

     You may also request a copy of these filings at no cost, by writing or
calling us at the following address:

     Golfsmith International, Inc.
     11000 N. IH-35
     Austin, Texas 78753-3195
     (512) 837-8810
     Attention: Chief Executive Officer

     In addition, while any notes remain outstanding, we will make available,
upon request, to any holder and any prospective purchaser of notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act during
any period in which we are not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, which we refer to as the Exchange Act.

                                 LEGAL MATTERS

     Certain matters relating to the notes will be passed upon for us by King &
Spalding LLP, New York, New York.

                                    EXPERTS

     Ernst & Young LLP, independent auditors, have audited our consolidated
balance sheets as of January 3, 2004 and December 28, 2002, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 29, 2001, the period from December 30, 2001 through
October 15, 2002, the period from October 16, 2002 through December 28, 2002,
and the year ended January 3, 2004, as set forth in their report. We have
included our financial statements in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

                                       119
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Registered Public Accounting Firm.....   F-2
Consolidated Balance Sheets at January 3, 2004 and December
  28, 2002..................................................   F-3
Consolidated Statements of Operations for the fiscal year
  ended January 3, 2004 (Successor), for the period from
  October 16, 2002 through December 28, 2002 (Successor),
  for the period from December 30, 2001 through October 15,
  2002 (Predecessor), and for the fiscal year ended December
  29, 2001 (Predecessor)....................................   F-4
Consolidated Statements of Stockholders' Equity and
  Comprehensive Income for the fiscal year ended January 3,
  2004 (Successor), for the period from October 16, 2002
  through December 28, 2002 (Successor), for the period from
  December 30, 2001 through October 15, 2002 (Predecessor),
  and for the fiscal year ended December 29, 2001
  (Predecessor).............................................   F-5
Consolidated Statements of Cash Flows for the fiscal year
  ended January 3, 2004 (Successor), for the period from
  October 16, 2002 through December 28, 2002 (Successor),
  for the period from December 30, 2001 through October 15,
  2002 (Predecessor), and for the fiscal year ended December
  29, 2001 (Predecessor)....................................   F-6
Notes to Consolidated Financial Statements..................   F-7
Consolidated Balance Sheets at April 3, 2004 (unaudited) and
  January 3, 2004...........................................  F-31
Consolidated Statements of Operations for the three months
  ended April 3, 2004 and March 29, 2003 (unaudited)........  F-32
Consolidated Statements of Cash Flows for the three months
  ended April 3, 2004 and March 29, 2003 (unaudited)........  F-33
Notes to Consolidated Financial Statements (unaudited)......  F-34
</Table>

                                       F-1
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Golfsmith International Holdings, Inc.

     We have audited the accompanying consolidated balance sheets of Golfsmith
International Holdings, Inc. (Successor to Golfsmith International Inc.) as of
January 3, 2004 and December 28, 2002 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year ended January 3,
2004, the period from December 30, 2001 through October 15, 2002 (representing
Golfsmith International Inc., or the "Predecessor"), the period from October 16,
2002 through December 28, 2002 (representing Golfsmith International Holdings,
Inc., or the "Successor") and for the year ended December 29, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Golfsmith International Holdings, Inc. ("Successor") at January 3, 2004 and
December 28, 2002, and the consolidated results of their operations and their
cash flows for the year ended January 3, 2004, the period from December 30, 2001
through October 15, 2002 ("Predecessor"), the period from October 16, 2002
through December 28, 2002 ("Successor") and for the year ended December 29,
2001, in conformity with U.S. generally accepted accounting principles.

                                          /s/ ERNST & YOUNG LLP

Austin, Texas
February 21, 2004

                                       F-2
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                               JANUARY 3,    DECEMBER 28,
                                                                  2004           2002
                                                              ------------   ------------
<S>                                                           <C>            <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................  $  2,928,109   $ 11,412,460
  Receivables, net of allowances of $176,667 at January 3,
    2004 and $242,643 at December 28, 2002..................     2,689,815      1,639,120
  Inventories, net of reserves of $821,618 at January 3,
    2004 and $818,816 at December 28, 2002..................    51,212,544     32,351,880
  Deferred tax assets.......................................     1,437,922         67,905
  Prepaid and other current assets..........................     1,845,546      2,119,390
                                                              ------------   ------------
Total current assets........................................    60,113,936     47,590,755
Property and equipment:
  Land and buildings........................................    21,040,387     21,017,551
  Equipment, furniture, fixtures and autos..................    12,234,869      9,270,340
  Leasehold improvements and construction in progress.......    10,907,168      7,015,985
                                                              ------------   ------------
                                                                44,182,424     37,303,876
  Less: accumulated depreciation and amortization...........    (6,100,047)    (1,258,676)
                                                              ------------   ------------
Net property and equipment..................................    38,082,377     36,045,200
Goodwill....................................................    42,035,545     34,948,016
Tradename...................................................    11,158,000     11,158,000
Trademarks..................................................    15,459,038     15,093,396
Customer database, net of accumulated amortization of
  $472,111 at January 3, 2004 and $94,422 at December 28,
  2002......................................................     2,927,094      3,304,783
Deferred tax assets.........................................     2,724,174      4,274,161
Debt issuance costs, net of accumulated amortization of
  $1,087,499 at January 3, 2004 and $178,744 at December 28,
  2002......................................................     6,770,216      7,596,561
Other long-term assets......................................        56,333             --
                                                              ------------   ------------
Total assets................................................  $179,326,713   $160,010,872
                                                              ============   ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 23,604,647   $ 17,822,015
  Accrued expenses and other current liabilities............    16,762,870     12,822,302
  Lines of credit...........................................     1,417,039             --
                                                              ------------   ------------
Total current liabilities...................................    41,784,556     30,644,317
Long-term debt, less current maturities.....................    77,482,469     75,380,045
Deferred rent...............................................     1,083,511        513,324
                                                              ------------   ------------
Total liabilities...........................................   120,350,536    106,537,686
Stockholders' Equity:
  Common stock -- $.001 par value; 40,000,000 shares
    authorized; 21,594,597 and 20,077,931 shares issued and
    outstanding at January 3, 2004 and December 28, 2002,
    respectively............................................        21,594         20,078
  Restricted common stock units -- $.001 par value; 755,935
    and 839,268 shares issued and outstanding at January 3,
    2004 and December 28, 2002, respectively................           756            839
  Additional capital........................................    60,288,607     55,990,042
  Other comprehensive income................................       186,877         48,148
  Accumulated deficit.......................................    (1,521,657)    (2,585,921)
                                                              ------------   ------------
Total stockholders' equity..................................    58,976,177     53,473,186
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $179,326,713   $160,010,872
                                                              ============   ============
</Table>

                            See accompanying notes.
                                       F-3
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                    SUCCESSOR                    PREDECESSOR
                                           ---------------------------   ---------------------------
                                                            FOR THE        FOR THE
                                                          PERIOD FROM    PERIOD FROM
                                                          OCTOBER 16,    DECEMBER 30,
                                           FISCAL YEAR        2002           2001       FISCAL YEAR
                                              ENDED         THROUGH        THROUGH         ENDED
                                            JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                               2004           2002           2002           2001
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>
Net revenues.............................  $257,744,780   $37,830,540    $180,315,163   $221,438,496
Cost of products sold....................   171,083,110    25,146,178     117,206,594    143,117,798
                                           ------------   -----------    ------------   ------------
Gross profit.............................    86,661,670    12,684,362      63,108,569     78,320,698
Selling, general and administrative......    73,400,271    13,580,912      48,308,301     64,081,753
Store pre-opening expenses...............       599,603        92,792         121,686             --
Amortization of deferred compensation....            --            --       6,033,273        457,722
                                           ------------   -----------    ------------   ------------
Total operating expenses.................    73,999,874    13,673,704      54,463,260     64,539,475
                                           ------------   -----------    ------------   ------------
Operating income.........................    12,661,796      (989,342)      8,645,309     13,781,223
Interest expense.........................   (11,156,792)   (2,210,304)     (5,205,859)    (6,825,356)
Interest income..........................        39,776         7,119         330,587        597,595
Other income.............................       210,707        13,725       2,365,551      1,181,538
Other expense............................       (46,270)         (133)                      (150,000)
Minority interest........................            --            --        (844,378)      (580,798)
Loss on debt extinguishment..............            --            --      (8,046,552)            --
                                           ------------   -----------    ------------   ------------
Income (loss) from continuing operations
  before income taxes....................     1,709,217    (3,178,935)     (2,755,342)     8,004,202
Income tax (expense) benefit.............      (644,953)      632,934        (708,374)      (251,147)
                                           ------------   -----------    ------------   ------------
Income (loss) from continuing
  operations.............................     1,064,264    (2,546,001)     (3,463,716)     7,753,055
Loss from discontinued operations,
  including loss on disposal of $285,886
  for the year ended December 28, 2002
  (see Note 6)...........................            --       (39,920)       (229,880)      (589,881)
                                           ------------   -----------    ------------   ------------
Income (loss) before extraordinary
  item...................................     1,064,264    (2,585,921)     (3,693,596)     7,163,174
Extraordinary gain -- negative goodwill
  arising from purchase of minority
  interest (see Note 4)..................            --            --       4,121,927             --
                                           ------------   -----------    ------------   ------------
Net income (loss)........................  $  1,064,264   $(2,585,921)   $    428,331   $  7,163,174
                                           ============   ===========    ============   ============
</Table>

                            See accompanying notes.
                                       F-4
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
<Table>
<Caption>
                                                                    COMMON STOCK
                                                   ----------------------------------------------   RESTRICTED STOCK
                                                                                  GOLFSMITH         UNITS GOLFSMITH
                                                          GOLFSMITH             INTERNATIONAL        INTERNATIONAL
                                                     INTERNATIONAL, INC.        HOLDINGS, INC.       HOLDINGS, INC.
                                                   -----------------------   --------------------   ----------------    ADDITIONAL
                                                     SHARES       AMOUNT       SHARES     AMOUNT    SHARES    AMOUNT     CAPITAL
                                                   -----------   ---------   ----------   -------   -------   ------   ------------
<S>                                                <C>           <C>         <C>          <C>       <C>       <C>      <C>
Balance at December 30, 2000 (Predecessor).......   10,000,000   $ 100,000           --   $   --         --    $ --    $ 10,512,226
 Stock compensation -- variable employee
   options.......................................           --          --           --       --         --      --       2,374,254
 Amortization of deferred compensation...........           --          --           --       --         --      --              --
 Amortization of deferred interest...............           --          --           --       --         --      --              --
 Comprehensive income:
   Translation adjustments, cumulative
     translation loss of $(337,392) at December
     29, 2001....................................           --          --           --       --         --      --              --
   Net income....................................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
     Total comprehensive income..................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at December 29, 2001 (Predecessor).......   10,000,000     100,000           --       --         --      --      12,886,480
 Dividends paid..................................           --          --           --       --         --      --              --
 Stock compensation -- variable employee
   options.......................................           --          --           --       --         --      --       4,116,741
 Amortization of deferred compensation...........           --          --           --       --         --      --              --
 Amortization of deferred interest...............           --          --           --       --         --      --              --
 Pre merger net income...........................           --          --           --       --         --      --              --
 Merger of Golfsmith International, Inc. into
   Golfsmith International Holdings, Inc.........  (10,000,000)   (100,000)          --       --         --      --     (17,003,221)
 Issuance of Holdings common stock net of
   issuance costs of $6,740,637..................           --          --   20,077,931   20,078         --      --      53,473,079
 Issuance of Holdings restricted stock units.....           --          --           --       --    839,268     839       2,516,963
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance October 15, 2002 (Predecessor)...........           --   $      --   20,077,931   $20,078   839,268    $839    $ 55,990,042
                                                   ===========   =========   ==========   =======   =======    ====    ============
-----------------------------------------------------------------------------------------------------------------------------------
Balance October 16, 2002 (Successor).............           --   $      --   20,077,931   $20,078   839,268    $839    $ 55,990,042
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $48,148 at December 28,
     2002........................................           --          --           --       --         --      --              --
   Net loss of Holdings..........................           --          --           --       --         --      --              --
     Total comprehensive loss....................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at December 28, 2002 (Successor).........           --          --   20,077,931   20,078    839,268     839      55,990,042
 Issuance of common stock........................           --          --    1,433,333    1,433         --      --       4,298,565
 Conversion of restricted stock..................           --          --       83,333       83    (83,333)    (83)             --
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $186,877 at January 3,
     2004........................................           --          --           --       --         --      --              --
   Net income of Holdings........................           --          --           --       --         --      --              --
       Total comprehensive income................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at January 3, 2004 (Successor)...........           --   $      --   21,594,597   $21,594   755,935    $756    $ 60,288,607
                                                   ===========   =========   ==========   =======   =======    ====    ============

<Caption>

                                                                                                RETAINED
                                                                                  OTHER         EARNINGS
                                                   DEFERRED      DEFERRED     COMPREHENSIVE   (ACCUMULATED   STOCKHOLDERS'
                                                   INTEREST    COMPENSATION      INCOME         DEFICIT)        EQUITY
                                                   ---------   ------------   -------------   ------------   -------------
<S>                                                <C>         <C>            <C>             <C>            <C>
Balance at December 30, 2000 (Predecessor).......  $(175,548)  $        --      $(275,865)    $14,760,558    $ 24,921,371
 Stock compensation -- variable employee
   options.......................................         --    (2,374,254)            --              --              --
 Amortization of deferred compensation...........         --       457,722             --              --         457,722
 Amortization of deferred interest...............     38,358            --             --              --          38,358
 Comprehensive income:
   Translation adjustments, cumulative
     translation loss of $(337,392) at December
     29, 2001....................................         --            --        (61,527)             --         (61,527)
   Net income....................................         --            --             --       7,163,174       7,163,174
                                                   ---------   -----------      ---------     -----------    ------------
     Total comprehensive income..................         --            --             --              --       7,101,647
                                                   ---------   -----------      ---------     -----------    ------------
Balance at December 29, 2001 (Predecessor).......   (137,190)   (1,916,532)      (337,392)     21,923,732      32,519,098
 Dividends paid..................................         --            --             --      (3,237,500)     (3,237,500)
 Stock compensation -- variable employee
   options.......................................         --    (4,116,741)            --              --              --
 Amortization of deferred compensation...........         --     6,033,273             --              --       6,033,273
 Amortization of deferred interest...............    137,190            --             --              --         137,190
 Pre merger net income...........................         --            --             --         428,331         428,331
 Merger of Golfsmith International, Inc. into
   Golfsmith International Holdings, Inc.........         --            --        337,392     (19,114,563)    (35,880,392)
 Issuance of Holdings common stock net of
   issuance costs of $6,740,637..................         --            --             --              --      53,493,157
 Issuance of Holdings restricted stock units.....         --            --             --              --       2,517,802
                                                   ---------   -----------      ---------     -----------    ------------
Balance October 15, 2002 (Predecessor)...........  $      --   $        --      $      --     $        --    $ 56,010,959
                                                   =========   ===========      =========     ===========    ============
-----------------------------------------------------------------------------------------------------------------------------------
Balance October 16, 2002 (Successor).............  $      --   $        --      $      --     $        --    $ 56,010,959
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $48,148 at December 28,
     2002........................................         --            --         48,148              --          48,148
   Net loss of Holdings..........................         --            --             --      (2,585,921)     (2,585,921)
     Total comprehensive loss....................         --            --             --              --      (2,537,773)
                                                   ---------   -----------      ---------     -----------    ------------
Balance at December 28, 2002 (Successor).........         --            --         48,148      (2,585,921)     53,473,186
 Issuance of common stock........................         --            --             --              --       4,299,998
 Conversion of restricted stock..................         --            --             --              --              --
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $186,877 at January 3,
     2004........................................         --            --        138,729              --         138,729
   Net income of Holdings........................         --            --             --       1,064,264       1,064,264
       Total comprehensive income................         --            --             --              --       1,202,993
                                                   ---------   -----------      ---------     -----------    ------------
Balance at January 3, 2004 (Successor)...........  $      --   $        --      $ 186,877     $(1,521,657)   $ 58,976,177
                                                   =========   ===========      =========     ===========    ============
</Table>

                            See accompanying notes.

                                       F-5
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                       SUCCESSOR                    PREDECESSOR
                                                              ---------------------------   ---------------------------
                                                                               FOR THE        FOR THE
                                                                             PERIOD FROM    PERIOD FROM
                                                                             OCTOBER 16,    DECEMBER 30,
                                                              FISCAL YEAR        2002           2001       FISCAL YEAR
                                                                 ENDED         THROUGH        THROUGH         ENDED
                                                               JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                                                  2004           2002           2002           2001
                                                              ------------   ------------   ------------   ------------
<S>                                                           <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
Net income (loss)...........................................  $  1,064,264   $(2,585,921)   $   428,331    $  7,163,174
 Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Depreciation.............................................     4,850,711     1,255,251      4,776,431       6,455,080
   Amortization of intangible assets........................       377,689        94,422         31,959         261,835
   Amortization of debt issue costs and debt discount.......     3,011,179       558,788      1,821,074       2,000,700
   Interest paid with issuance of in-kind debt..............            --            --             --         954,810
   Minority interest........................................            --            --        844,378         580,798
   Stock compensation to non-employee.......................            --            --         30,284          38,358
   Stock compensation -- variable employee options..........            --            --      6,033,273         457,722
   Net loss (gain) on sale of real estate and other
     assets.................................................         3,069            --     (2,215,735)       (980,233)
   Loss on extinguishment of debt...........................            --            --      8,046,552              --
   Extraordinary gain -- negative goodwill arising from
     purchase of minority interest..........................            --            --     (4,121,927)             --
   Changes in operating assets and liabilities:
     Accounts receivable....................................    (1,109,008)      462,403        959,130       6,001,531
     Inventories............................................   (14,196,793)      799,837      1,512,546      10,621,937
     Prepaid and other assets...............................       323,305      (475,753)      (457,688)        992,458
     Deferred income taxes..................................       179,970      (439,814)            --              --
     Accounts payable.......................................     3,346,528     4,767,312     (5,884,333)      6,597,510
     Accrued expenses and other current liabilities.........     2,632,298     3,861,433         15,363          11,586
     Deferred rent..........................................       570,187       404,817       (304,597)        373,870
                                                              ------------   -----------    ------------   ------------
Net cash provided by operating activities...................     1,053,399     8,702,775     11,515,041      41,531,136
INVESTING ACTIVITIES
Purchase of property, plant and equipment...................    (5,759,429)   (1,126,683)    (2,086,323)     (1,344,843)
Proceeds from sale of real estate and other assets..........        18,046            --      3,313,022       1,395,736
Purchase of assets and other................................      (956,676)           --             --              --
Purchase of business, net of cash received..................    (8,585,560)           --             --              --
                                                              ------------   -----------    ------------   ------------
Net cash provided by (used in) investing activities.........   (15,283,619)   (1,126,683)     1,226,699          50,893
FINANCING ACTIVITIES
Principal payments on lines of credit.......................   (27,178,727)           --     (9,840,843)    (20,115,977)
Proceeds from lines of credit...............................    28,595,766            --      9,807,280      12,977,194
Principal payments on term note.............................            --            --    (41,698,481)     (5,999,996)
Proceeds from issuance of common stock......................     4,299,998            --     43,243,157              --
Payments to satisfy debt and minority interest
 obligations................................................            --            --    (10,634,165)             --
Distributions to shareholders...............................            --            --    (35,880,392)             --
Dividends paid..............................................            --            --     (3,237,500)             --
Dividends paid to minority interest owners..................            --            --       (262,500)             --
Debt issuance costs.........................................       (82,410)           --             --              --
Other.......................................................       (23,264)           --             --              --
                                                              ------------   -----------    ------------   ------------
Net cash provided by (used in) financing activities.........     5,611,363            --    (48,503,444)    (13,138,779)
Effect of exchange rate changes on cash.....................       134,506        48,148             --         (42,475)
                                                              ------------   -----------    ------------   ------------
Change in cash and cash equivalents.........................    (8,484,351)    7,624,240    (35,761,704)     28,400,775
Cash and cash equivalents, beginning of period..............    11,412,460     3,788,220     39,549,924      11,149,149
                                                              ------------   -----------    ------------   ------------
Cash and cash equivalents, end of period....................  $  2,928,109   $11,412,460    $ 3,788,220    $ 39,549,924
                                                              ============   ===========    ============   ============
Supplemental cash flow information:
 Interest payments..........................................  $  7,130,032   $     6,529    $ 4,078,658    $  4,322,284
 Tax payments...............................................       699,198        15,325        493,392         250,591
 Amortization of discount on senior subordinated notes......            --            --      1,369,447       1,620,349
 Amortization of discount on senior secured notes...........     2,102,424       380,045             --              --
 Issuance of common stock units in connection with business
   combination..............................................            --            --      2,517,802              --
 Management rollover of Golfsmith International, Inc. equity
   into Golfsmith International Holdings, Inc. equity.......            --            --     10,250,000              --
 Issuance of senior secured notes in business combination...            --            --     75,000,000              --
</Table>

                            See accompanying notes.
                                       F-6
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 3, 2004

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION AND CHANGE IN REPORTING ENTITY

     The accompanying consolidated financial statements include the accounts of
Golfsmith International Holdings, Inc. ("Holdings", the "Company", or
"Successor") and its wholly owned subsidiary Golfsmith International, Inc.
("Golfsmith" or "Predecessor"). Holdings was formed on September 4, 2002 as a
Delaware corporation to acquire all of the outstanding shares of common stock of
Golfsmith. Holdings acquired Golfsmith on October 15, 2002 (See Note 2).
Holdings has no assets or liabilities other than its investment in its wholly
owned subsidiary Golfsmith and did not have operations prior to the acquisition
of Golfsmith; accordingly these consolidated financial statements represent the
operations of Golfsmith and its subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.

     For purposes of presentation, the accompanying statements of operations and
cash flows for the period from December 30, 2001 through October 15, 2002 and
for the year ended December 29, 2001 reflect the operating results and cash
flows of Golfsmith prior to its acquisition by Holdings on October 15, 2002. The
accompanying statements of operations and cash flows for the year ended January
3, 2004 and for the period from October 16, 2002 through December 28, 2002
reflect the sum of the consolidated operating results and cash flows of
Golfsmith and Holdings.

  NATURE OF OPERATIONS

     The Company is a multi-channel, specialty retailer of golf equipment and
related accessories and is a designer and marketer of golf equipment. Golfsmith
offers equipment from leading manufacturers, including Callaway(R), Cobra(R),
FootJoy(R), Nike(R), Ping(R), Taylor Made(R) and Titleist(R). In addition, the
Company offers its own proprietary brands, including Golfsmith(R), Lynx(R),
Snake Eyes(R), Killer Bee(R) and Zevo(R). The Company markets its products
through 38 superstores as well as through its direct-to-consumer channel, which
includes its clubmaking and accessory catalogs and its Internet site. The
Company also operates the Harvey Penick Golf Academy, an instructional school
incorporating the techniques of the well-known golf instructor, Harvey Penick.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and use assumptions that affect certain reported amounts and
disclosures. Although management uses the best information available, it is
reasonably possible that the estimates used by the Company will be materially
different from the actual results. These differences could have a material
effect on the Company's future results of operations and financial position. The
Company uses estimates when accounting for depreciation and amortization,
allowance for doubtful accounts, income taxes, allowance for obsolete inventory
and allowance for sales returns.

  CASH EQUIVALENTS

     Cash equivalents consist of commercial paper and other investments that are
readily convertible into cash and have maturities when purchased of three months
or less.

  INVENTORIES

     Inventories consist primarily of finished goods (i.e., golf equipment and
accessories) and are stated at the lower of cost (weighted average) or market.
Inbound freight charges, import fees and vendor discount

                                       F-7
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

charges are capitalized into inventory upon receipt of the purchased goods.
These costs are included in cost of products sold upon the sale of the
respective inventory item.

  CONCENTRATION OF FOREIGN SUPPLIERS

     The Company derives a significant portion of its sales from products
supplied by manufacturers located outside the United States (primarily China).
While the Company is not dependent on any single manufacturer outside the U.S.,
the Company could be adversely affected by political or economic disruptions
affecting the business or operations of third-party manufacturers located
outside the U.S.

  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost net of accumulated depreciation
and amortization. Depreciation and amortization are computed primarily using the
straight-line method over the estimated useful lives of the related assets,
generally 5 to 10 years for equipment, furniture, and fixtures and 40 years for
buildings. Leasehold improvements are amortized on a straight-line basis over
the shorter of the term of the related lease or estimated life of the leasehold
improvement. The Company capitalizes eligible internal-use software development
costs incurred subsequent to the completion of the preliminary project stage.
Development costs are amortized over the expected useful life of the software.
Repair and maintenance costs are expensed as incurred.

  LONG-LIVED ASSETS

     The Company evaluates its long-lived assets in accordance with SFAS No.
144, Accounting for the Impairment of Long-Lived Assets. Long-lived assets held
and used by the Company are reviewed for impairment whenever events or changes
in circumstances indicate that their net book value may not be recoverable. When
such factors and circumstances exist, the Company compares the projected
undiscounted future cash flows associated with the related asset or group of
assets over their estimated useful lives against their respective carrying
amounts. Impairment, if any, is based on the excess of the carrying amount over
the fair value of those assets and is recorded in the period in which the
determination was made and is recorded in continuing operations.

     Long-lived assets to be disposed of by sale are classified as held-for-sale
in the period in which the established criteria of SFAS No. 144 are met.

     Long-lived asset to be disposed of other than by sale are classified as
held-and-used until the disposal occurs. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets and is
recorded in the period in which the determination was made and is recorded in
continuing operations until the related assets are disposed of. The Company
recorded a loss from discontinued operations of $0.2 million during the period
from December 30, 2001 through October 15, 2002 and $0.1 million during the
period from October 16, 2002 through December 28, 2002 related to the disposal
of assets.

  FOREIGN CURRENCY TRANSLATION

     In accordance with Financial Accounting Standards No. 52, Foreign Currency
Translation, the financial statements of the Company's international operations
are translated into U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities, the historical exchange rate for stockholders'
equity, and a weighted average exchange rate for each period for revenues,
expenses, and gains and losses. Foreign currency translation adjustments are
recorded as a separate component of stockholders' equity as the local currency
is the functional currency. Gains and losses from foreign

                                       F-8
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currency denominated transactions are included in "Other income" in the
consolidated statement of operations and were not significant for the years
presented.

  CONCENTRATIONS OF CREDIT RISK

     Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash, cash equivalents and accounts
receivable. Excess cash is invested in high-quality, short-term, liquid money
instruments issued by highly rated financial institutions. Concentration of
credit risk with respect to the Company's receivables is minimized due to the
large number of customers, individually small balances, and short payment terms.

     The Company maintains an allowance for estimated losses resulting from
non-collection of customer receivables based on: historical collection
experience, age of the receivable balance, both individually and in the
aggregate, and general economic conditions. The Company generally does not
require collateral.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Fair value and carrying amounts for financial instruments may differ due to
instruments that provide fixed interest rates or contain fixed interest rate
elements. Such instruments are subject to fluctuations in fair value due to
subsequent movements in interest rates. The carrying value of the Company's
financial instruments approximates fair value, except for differences with
respect to long-term, fixed rate debt, which are not significant. Fair value for
such instruments is based on estimates using present value or other valuation
techniques.

  REVENUE RECOGNITION

     The Company recognizes retail sales at the time the customer takes
possession of the merchandise and purchases are paid for, primarily with either
cash or credit card.

     Catalog and e-commerce sales are recorded upon shipment of merchandise.
This policy is based on: (1) the customer has already paid for the goods with a
credit card, thus minimal collectibility risk exists, (2) the equipment being
shipped is complete and ready for shipment at the time of shipment, (3) the date
of delivery is within a reasonable time of the order, generally within one week,
(4) the Company has no further obligations once the product is shipped, (5) the
Company's custodial risks are insured by a third party shipping company, and (6)
the Company records an allowance for estimated returns in the period of sale.

     The Company recognizes revenue from the Harvey Penick Golf Academy
instructional school at the time the services are performed.

     Revenues from the sale of gift certificates are recorded upon the
redemption of the gift certificate for the purchase of tangible products at the
time the customer takes possession of the merchandise. At the purchase of a gift
certificate, a liability is recorded until the redemption of the certificate for
merchandise occurs.

     For all merchandise sales, the Company reserves for sales returns in the
period of sale through estimates based on historical experience.

  SHIPPING AND HANDLING COSTS

     Amounts billed to customers in sales transactions related to shipping and
handling, if any, are included in revenues. Shipping and handling costs incurred
by the Company are included in cost of products sold.

                                       F-9
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  VENDOR REBATES AND PROMOTIONS

     The Company receives income from certain merchandise suppliers in the form
of rebates and promotions. Agreements are made with each individual supplier and
income is earned as buying levels are met and/or cooperative advertising is
placed. Rebate income is recorded as a reduction of cost of products sold and
cooperative promotional income is recorded as a reduction of selling, general
and administrative expenses. The uncollected amounts of vendor rebate and
promotional income remaining in receivables in the accompanying consolidated
balance sheets as of January 3, 2004, and December 28, 2002 were approximately
$0.7 million and $0.3 million, respectively. Cooperative promotional income
received and recorded as a reduction of selling, general and administrative
expenses was approximately $1.2 million for the fiscal year ended January 3,
2004, $0.2 million for the period from October 16, 2002 through December 28,
2002, $0.7 million for the period from December 30, 2001 through October 15,
2002, and $1.0 million for the fiscal year ended December 29, 2001. Vendor
rebate income received and recorded as a reduction of cost of products sold was
$0.8 million for the year ended January 3, 2004, $0.1 million for the period
from October 16, 2002 through December 28, 2002, $0.4 million for the period
from December 30, 2001 through October 15, 2002, and $0.5 million for the fiscal
year ended December 29, 2001.

  STORE PRE-OPENING AND CLOSING EXPENSES

     Costs associated with the opening of a new store, which include costs
associated with hiring and training personnel, supplies and certain occupancy
and miscellaneous costs related to new locations, are expensed as incurred. When
the Company decides to close a store, the Company recognizes an expense related
to the future net lease obligation, non-recoverable investments in related fixed
assets and other expenses directly related to the discontinuance of operations
in accordance with SFAS No. 146, Accounting For Costs Associated With Exit or
Disposal Activities. These charges require the Company to make judgments about
exit costs to be incurred for employee severance, lease terminations, inventory
to be disposed of, and other liabilities. The ability to obtain agreements with
lessors, to terminate leases or to assign leases to third parties can materially
affect the accuracy of these estimates.

  INCOME TAXES

     Prior to October 15, 2002, Golfsmith elected to be treated as a Subchapter
S Corporation under the Internal Revenue Code of 1986 as amended, whereby
federal income taxes are the responsibility of the individual stockholders.
Accordingly, Golfsmith did not provide for federal income taxes. Effective
October 15, 2002, Golfsmith merged with BGA Acquisition Corporation, a wholly
owned subsidiary of Holdings, with the surviving entity (Holdings' subsidiary)
being Golfsmith International, Inc. As part of the merger, Golfsmith's
Subchapter S status was terminated; thus, the Company became subject to
corporate income taxes beginning October 15, 2002.

     In accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, deferred income taxes were provided for all
temporary differences existing at the date of Golfsmith's termination of its
Subchapter S status. Deferred taxes are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to be recovered or settled.

  CATALOG COSTS AND ADVERTISING

     Catalog costs are amortized over the expected revenue stream, which
typically ranges between two and twelve months from the date the catalogs are
mailed. The Company capitalized approximately $0.7 million and $0.8 million in
catalog costs at January 3, 2004 and December 28, 2002, respectively.
Advertising costs are expensed as incurred. Advertising costs totaled
approximately $14.4 million for the
                                       F-10
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fiscal year ended January 3, 2004, $3.2 million for the period from October 16,
2002 through December 28, 2002, $10.0 million for the period from December 30,
2001 through October 15, 2002, and $12.8 million for the fiscal year ended
December 29, 2001. These amounts include amortization of catalog costs of
approximately $8.6 million for the fiscal year ended January 3, 2004, $2.0
million for the period from October 16, 2002 through December 28, 2002, $6.4
million for the period from December 30, 2001 to October 15, 2002, and $8.6
million for the fiscal year ended December 29, 2001.

  DEBT ISSUANCE COSTS

     Issuance costs are deferred and amortized to interest expense using the
interest method over the terms of the related debt. Amortization of such costs
for the fiscal year ended January 3, 2004, for the period from October 16, 2002
through December 28, 2002, the period from December 30, 2001 through October 15,
2002, and for the fiscal year ended 2001 totaled approximately $0.9 million,
$0.5 million, $0.2 million, and $0.4 million, respectively. Approximately $1.7
million of debt issuance costs were written off on October 15, 2002 (the merger
date) because the debt was paid off. Of this expense approximately $1.5 million
is included in the loss on debt extinguishment in the accompanying statement of
operations for the period from December 30, 2001 through October 15, 2002.

  GOODWILL AND INTANGIBLE ASSETS

     Goodwill represents the excess purchase price over the fair value of net
assets acquired, or net liabilities assumed, in a business combination.
Beginning in 2002, the Company adopted Statement of Financial Accounting
Standard 142, Goodwill and Other Intangible Assets ("Statement 142"). In
accordance with Statement 142, the Company periodically assesses its intangible
assets, including goodwill, for indications of impairment annually, or more
frequently if events or changes in circumstances indicate that the carrying
amount of goodwill may not be recoverable based on our projections of estimated
future discounted cash flows and other valuation methodologies. Factors that are
considered by management in performing this assessment include, but are not
limited to, our performance relative to our projected or historical results, our
intended use of the assets and our strategy for our overall business, as well as
industry and economic trends. In the event that the book value of intangibles
and goodwill is determined to be impaired, such impairments are measured using a
combination of a discounted cash flow valuation, with a discount rate determined
to be commensurate with the risk inherent in our current business model, and
other valuation methodologies. To the extent these future projections or our
strategies change, our estimates regarding impairment may differ from our
current estimates. The Company performs its annual test for goodwill impairment
on the first day of the fourth fiscal quarter of each year. Goodwill is
allocated to one enterprise-level reporting unit for impairment testing.

     Identifiable intangible assets consist of trademarks, the Golfsmith
tradename and customer databases acquired. The customer database intangible
asset is considered a definite lived intangible asset in accordance with
Statement 142 and is being amortized using the straight-line method over its
estimated useful life of 9 years. Both the trademark and tradename intangible
assets are considered indefinite lived intangible assets under Statement 142. As
such, amortization for these indefinite lived assets is replaced with periodic
impairment review.

     It is the Company's policy to value intangible assets at the lower of
unamortized cost or fair value. Management reviews the valuation and
amortization of intangible assets on a periodic basis, taking into consideration
any events or circumstances that might result in diminished fair value. The
Company periodically reviews the estimated useful lives of its identifiable
intangible assets, taking into consideration any events or circumstances which
might result in a diminished fair value or revised useful life.

                                       F-11
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  INSURANCE AND SELF-INSURANCE RESERVES

     The Company is primarily self-insured for employee health benefits. The
Company records its self-insurance liability based on claims filed and an
estimate of claims incurred but not yet reported. If more claims are made than
were estimated or if the costs of actual claims increases beyond what was
anticipated, reserves recorded may not be sufficient and additional accruals may
be required in future periods.

  STOCK-BASED COMPENSATION

     SFAS No. 123, Accounting for Stock-Based Compensation, prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by SFAS No. 123, the Company has
elected to continue to account for its employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB No. 25").

     In December 2002, the FASB issued SFAS No. 148, Accounting For Stock-Based
Compensation -- Transition and Disclosure, An Amendment of FASB Statement No.
123. This Statement amends SFAS No. 123, Accounting For Stock-Based
Compensation, to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of that
Statement to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation. Since the Company is continuing to account for
stock-based compensation according to APB 25, adoption of SFAS No. 148 requires
the Company to provide prominent disclosures about the affects of FASB No. 123
on reported net income (loss).

     In June 2003, the Company issued 1,840,500 options to purchase common stock
under the Golfsmith International Holdings, Inc. 2002 Incentive Stock Plan. The
options were issued with an exercise price of $3.00 per share and have a ten
year term.

     The following table illustrates the effect on net income (loss), if the
Company had applied the fair value recognition provisions of SFAS No. 123:

<Table>
<Caption>
                                                    SUCCESSOR                    PREDECESSOR
                                            --------------------------   ---------------------------
                                                            FOR THE        FOR THE
                                                          PERIOD FROM    PERIOD FROM
                                                          OCTOBER 16,    DECEMBER 30,
                                            FISCAL YEAR       2002           2001       FISCAL YEAR
                                               ENDED        THROUGH        THROUGH         ENDED
                                            JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                               2004           2002           2002           2001
                                            -----------   ------------   ------------   ------------
<S>                                         <C>           <C>            <C>            <C>
Net Income (loss) as reported.............  $1,064,264    $(2,585,921)   $   428,331     $7,163,174
Total stock-based compensation cost, net
  of related tax effects included in the
  determination of net income (loss) as
  reported................................          --             --      6,063,557        496,080
The stock-based employee compensation
  cost, net of related tax effects, that
  would have been included in the
  determination of net income (loss) if
  the fair value based method had been
  applied to all awards...................     (97,585)            --     (6,078,057)            --
                                            ----------    -----------    -----------     ----------
Pro forma net income (loss)...............  $  966,679    $(2,585,921)   $   413,831     $7,659,254
                                            ==========    ===========    ===========     ==========
</Table>

                                       F-12
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  SEGMENTS

     The Company applies Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, and
considers its business activities to constitute a single segment.

  FISCAL YEAR

     The Company's fiscal year ends on the Saturday closest to December 31.
Fiscal year 2003 consisted of 53 weeks. The combined predecessor and successor
fiscal year ended December 28, 2002 and the predecessor fiscal year ended
December 29, 2001 each consisted of 52 weeks.

  RECENTLY ISSUED ACCOUNTING STANDARDS

  Variable Interest Entities

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 requires that if an entity has a
controlling financial interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest entity should be
included in the consolidated financial statements of the entity. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after December 31, 2003. The adoption of FIN
46 is not expected to have a material impact on the Company's results of
operations or financial position.

  Financial Instruments with Characteristics of Both Liabilities and Equity

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS No. 150 did not have a material impact on the Company's
results of operations or financial position.

2.  BUSINESS COMBINATIONS

  GOLFSMITH INTERNATIONAL, INC.

     On October 15, 2002, the Company acquired all of the issued and outstanding
shares of Golfsmith. The total purchase price was $121.0 million including
related acquisition costs of $6.7 million. Atlantic Equity Partners III, L.P.,
the Company's majority stockholder, acquires profitable companies that it
believes to be leaders in their respective markets and that it believes will
increase in value over time. The Company believed that Golfsmith satisfied these
criteria based on its profitable business, its investment in infrastructure to
support additional growth, and its private label brands. The Company believed
that these attributes would allow Golfsmith opportunities to increase in value,
and therefore justified the purchase price that exceeded the fair market value
of the assets.

     In conjunction with the acquisition of Golfsmith, the Company issued
20,077,931 shares of common stock and 839,268 restricted stock units to
investors for approximately $62.8 million, excluding related issuance costs.
Golfsmith International, Inc., being the surviving wholly owned subsidiary of
the Company, issued Senior Secured Notes at a 20% discount off of face value for
consideration of $75.0 million (see

                                       F-13
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Note 5). The proceeds from the issuance of common stock and restricted stock
units and the new Senior Secured Notes were utilized to fund the acquisition of
Golfsmith.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including identifiable intangible assets, based on
their respective fair values at the date of acquisition as determined by an
independent valuation obtained by the Company. Such allocation resulted in
goodwill of $34.9 million. Goodwill is assigned at the enterprise level and is
deductible for income tax purposes. Subsequent to the acquisition, the purchase
price, and related goodwill, was adjusted by $0.7 million for additional
transaction costs incurred.

     The consolidated financial statements have been prepared giving effect to
the recapitalization of the Company in accordance with EITF 88-16, Basis in
Leveraged Buyout Transactions, as a partial purchase. Under EITF 88-16, the
Company was revalued at the merger date to fair value to the extent of the
majority stockholder's 79.7% controlling interest in the Company. The remaining
20.3% is accounted for at the continuing stockholders' carryover basis in the
Company. The excess of the purchase price over the historical basis of the net
assets acquired has been applied to adjust net assets to their fair values to
the extent of the majority stockholder's 79.7% ownership.

     Contingent consideration of $6,250,000 was placed in an escrow account by
the selling stockholders to secure certain indemnification obligations of the
sellers. In accordance with the merger agreement, on May 20, 2003, the parties
determined that an adjustment in the merger consideration of $25,000 was payable
to the Company based on the post-merger review of Golfsmith's working capital.
This amount was paid out of the escrow account on June 20, 2003. The Company has
adjusted the purchase price allocation accordingly. On July 24, 2003, $1,107,579
was paid to the Company from the selling stockholders escrow account for the
repayment of certain obligations owed by the selling stockholders that were paid
by the Company. On April 15, 2004, any remaining escrow funds will be dispersed.
Concurrent with the acquisition, Golfsmith changed status from a Subchapter S
Corporation to a C Corporation that is subject to federal income taxes.

  DON SHERWOOD GOLF SHOP

     On July 24, 2003, the Company acquired all issued and outstanding shares of
Don Sherwood Golf Shop ("Sherwood") for a total purchase price of $9.2 million,
including related acquisition costs of $0.4 million. The Company believes that
the Sherwood acquisition supports the Company's goals of expanding its national
presence while gaining exposure to one of the country's top golf markets in San
Francisco, California. The Company acquired all six Sherwood retail stores as
part of the acquisition. The operations of Sherwood stores are included in the
Company's consolidated statement of operations and cash flows as of July 25,
2003.

     In conjunction with the acquisition of Sherwood, the Company issued
1,433,333 shares of common stock to existing stockholders, including its
majority stockholder, for consideration of $4.3 million. The proceeds from the
issuance of common stock were used to fund a portion of the acquisition of
Sherwood. The issuance of these additional shares increased the majority
stockholder's 79.7% controlling interest in the Company to an 80.9% controlling
interest, including issued restricted common stock units, which entitle the
holders to shares of the Company's common stock, and excluding outstanding stock
options.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. Such allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

     Contingent consideration of $1.3 million has been placed in an escrow
account by the Company to secure certain indemnification obligations of the
selling shareholder. The escrow funds will be released on
                                       F-14
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the earlier of one year from the acquisition date or 90 days after the Company's
audited financial statements for fiscal 2003 are completed.

3.  ASSET ACQUISITION

     On May 22, 2003, the Company acquired the assets and technology of Zevo
Golf Co., Inc. ("Zevo"). The total purchase consideration has been allocated to
the assets acquired, including identifiable intangible assets, based on their
respective fair values at the date of acquisition. As a result of the
acquisition, Golfsmith has obtained additional technology through the patented
"PreLoaded" technology for drivers and "Flying Buttress" design for irons as
well as an additional proprietary label.

4.  INTANGIBLE ASSETS

     In July 2001, Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("SFAS No. 142") was issued. SFAS No. 142 requires
that ratable amortization of intangible assets with indefinite lives, including
goodwill, be replaced with periodic review and analysis for possible impairment.
Intangible assets with definite lives must be amortized over their estimated
useful lives. On January 1, 2002, the Company adopted SFAS No. 142. As a result,
the Company no longer amortizes its acquired trademarks, thereby eliminating
estimated amortization of approximately $144,000, for the combined fiscal year
ended December 28, 2002.

     As required by Statement 142, prior period results are not restated;
however, the following presents the Company's reported net income (loss) and
income (loss) as adjusted for the exclusion of trademark amortization:

<Table>
<Caption>
                                             SUCCESSOR                    PREDECESSOR
                                     --------------------------   ---------------------------
                                                     FOR THE        FOR THE
                                                   PERIOD FROM    PERIOD FROM
                                                   OCTOBER 16,    DECEMBER 30,
                                     FISCAL YEAR       2002           2001       FISCAL YEAR
                                        ENDED        THROUGH        THROUGH         ENDED
                                     JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                        2004           2002           2002           2001
                                     -----------   ------------   ------------   ------------
<S>                                  <C>           <C>            <C>            <C>
Net income (loss):
  As Reported......................  $1,064,264    $(2,585,921)     $428,331      $7,163,174
     Add: trademark amortization
       expense.....................          --             --            --         261,835
                                     ----------    -----------      --------      ----------
     Adjusted net income (loss)....  $1,064,264    $(2,585,921)     $428,331      $7,425,009
                                     ==========    ===========      ========      ==========
</Table>

  INTANGIBLE ASSETS WITH DEFINITE LIVES

     Following is a summary of the Company's intangible assets that are subject
to amortization:

<Table>
<Caption>
                                                 GROSS CARRYING   ACCUMULATED    NET CARRYING
                                                     AMOUNT       AMORTIZATION      AMOUNT
                                                 --------------   ------------   ------------
<S>                                              <C>              <C>            <C>
Customer databases.............................    $3,399,205      $(472,111)     $2,927,094
</Table>

     The net carrying amount of customer databases intangible assets relates
solely to the merger transaction between Golfsmith and Holdings discussed in
Note 2. Total amortization expense was $377,689 for the fiscal year ended
January 3, 2004, $94,422 for the period from October 16, 2002 through December
28, 2002, and $0 for the period from December 30, 2001 through October 15, 2002,
and is recorded in selling, general, and administration costs on the
consolidated statement of operations.

                                       F-15
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Estimated future annual amortization expense is as follows:

<Table>
<S>                                                           <C>
2004........................................................  $  377,689
2005........................................................     377,689
2006........................................................     377,689
2007........................................................     377,689
2008........................................................     377,689
Thereafter..................................................   1,038,649
                                                              ----------
                                                              $2,927,094
                                                              ==========
</Table>

5.  DEBT

     Long-term debt at January 3, 2004 and December 28, 2002 consisted of the
following:

<Table>
<Caption>
                                                            JANUARY 3,    DECEMBER 28,
                                                               2004           2002
                                                           ------------   ------------
<S>                                                        <C>            <C>
Senior secured notes due October 15, 2009 (see discussion
  below).................................................  $ 93,750,000   $ 93,750,000
                                                           ------------   ------------
Total long-term debt.....................................    93,750,000     93,750,000
Less current maturities..................................            --             --
Long-term portion........................................    93,750,000     93,750,000
Unamortized discount on senior secured notes.............   (16,267,531)   (18,369,955)
                                                           ------------   ------------
Long-term debt, net of discount..........................  $ 77,482,469   $ 75,380,045
                                                           ============   ============
</Table>

     As of January 3, 2004, the annual maturities of long-term debt were as
follows:

<Table>
<S>                                                           <C>
2004........................................................  $        --
2005........................................................           --
2006........................................................           --
2007........................................................   18,750,000
2008........................................................    9,375,000
Thereafter..................................................   65,625,000
                                                              -----------
                                                              $93,750,000
                                                              ===========
</Table>

  SENIOR SECURED NOTES

     On October 15, 2002, concurrent with the acquisition of Golfsmith by
Holdings, Golfsmith completed an offering of $93.75 million aggregate principal
amount at maturity of 8.375% senior secured notes (the "notes") due in 2009 at a
discount of 20%, or $18.75 million. Interest payments are required semi-
annually on March 1 and September 1, beginning on March 1, 2003. The notes rank
equal in right with any other senior indebtedness, including indebtedness under
Golfsmith's senior credit facility. The notes are fully and unconditionally
guaranteed by both Holdings and all existing and future Golfsmith domestic
subsidiaries. As of January 3, 2004 and December 28, 2002, the notes were
guaranteed by all Golfsmith subsidiaries.

     The notes and each guarantee is secured by all of Golfsmith's real
property, equipment and proceeds thereof as well as by substantially all of
Golfsmith's other assets.

                                       F-16
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Golfsmith has the option to redeem some or all of the notes at any time
prior to October 15, 2006 at a make-whole redemption price. On or after October
15, 2006, Golfsmith has the option to redeem some or all of the notes at a
redemption price that will decrease ratably from 106.5% of accreted value to
100.0% of accreted value on October 15, 2008, in all cases plus accrued but
unpaid interest. Prior to October 15, 2005, Golfsmith also has the option, under
certain circumstances, to redeem up to 35% of the aggregate principal amount of
the notes at a redemption price equal to 113% of accreted value plus accrued but
unpaid interest.

     The terms of the notes require Golfsmith to make partial pro rata
redemptions of the principal amount at maturity of each note, plus accrued but
unpaid interest to the redemption date as follows:

<Table>
<Caption>
                                                              PERCENTAGES OF
                                                              NOTES REQUIRED
MANDATORY REDEMPTION DATE                                     TO BE REDEEMED
-------------------------                                     --------------
<S>                                                           <C>
October 15, 2007............................................       20%
October 15, 2008............................................       10%
</Table>

     The redemption requirements may be reduced by the aggregate principal
amount at maturity of any notes Golfsmith has previously repurchased.

     Additionally, subsequent to fiscal 2003, Golfsmith is required under the
notes to (i) offer to repurchase a portion of the notes at 100% of their
accreted value within 120 days after the end of each fiscal year with 50% of
Golfsmith's excess cash flow, as defined in the agreement; (ii) under certain
circumstances, Golfsmith is required to repurchase the notes at specified
redemption prices in the event of a change in control.

     Additionally, the terms of the notes limit the ability of Golfsmith to,
among other things, incur additional indebtedness, dispose of assets, make
acquisitions, make other investments, pay dividends and make various other
payments. The terms of the notes also contain certain other restrictive
covenants. As of January 3, 2004 and December 28, 2002, Golfsmith was in
compliance with the covenants imposed by the notes.

     In July 2003, Golfsmith conducted an exchange offer in which it offered to
exchange new senior secured notes registered under the Securities Act of 1933
for all of its eligible existing senior secured notes. The terms of the new
notes are substantially identical as those issued in the private placement,
except the new notes are freely tradable. The notes are recorded on the January
3, 2004 and December 28, 2002 balance sheets net of an original issuance
discount of $18.75 million that is being amortized to interest expense over the
term of the notes using the interest method.

  SENIOR CREDIT FACILITY

     On October 15, 2002, concurrent with the acquisition of Golfsmith by
Holdings, the Company entered into a new senior credit facility with a third
party for up to $10.0 million in available revolver funds. Additionally, the
senior credit facility allows for up to $1.0 million in authorized letters of
credit. Borrowings under the senior credit facility are secured by substantially
all of Golfsmith's current and future assets, excluding real property, equipment
and proceeds thereof owned by Golfsmith, Holdings, or Golfsmith's subsidiaries,
and all of Golfsmith's stock and equivalent equity interest in any subsidiaries.
The senior credit facility is fully guaranteed by Holdings.

     The senior credit facility has a term of 4.5 years and available amounts
under the facility are based on a borrowing base. The borrowing base is limited
to 85% of the net amount of eligible receivables, as defined in the agreement,
plus the lesser of (i) 65% of the value of eligible inventory and (ii) 60% of
the net orderly liquidation value of eligible inventory.

                                       F-17
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The senior credit facility contains covenants which, among other things,
limit: (i) additional indebtedness; (ii) dividends; (iii) capital expenditures;
and (iv) acquisitions, mergers, and consolidations. The facility also contains
certain additional covenants, including financial covenants. As of January 3,
2004 and December 28, 2002, the Company was in compliance with these covenants.

     Borrowings under the credit facility may be made, at the Company's option,
as either an index rate loan or a LIBOR rate loan. Index rate loans bear
interest at the higher of (1) the Wall Street Journal posted base rate on
corporate loans or (2) the federal funds rate, in each case plus 1%. LIBOR rate
loans bear interest at a rate based on LIBOR plus 2.5%. A fee of 2.5% per annum
of the amount available under outstanding letters of credit is due and payable
monthly. The weighted-average interest rate on borrowings under the senior
credit facility during fiscal 2003 was 5.1%. The Company is required to pay
commitment fees of 0.50% of the undrawn availability as calculated under the
agreement. These fees were not significant for all years presented for which the
senior credit facility as effective. At January 3, 2004, the Company had $1.4
million outstanding under the senior credit facility. There were no outstanding
amounts under the senior credit facility at December 28, 2002.

     In January 2003, the senior credit facility was amended to extend the
period of time permitted to obtain certain waivers from landlords of leased
premises in connection with collateral under the senior credit facility. In
September 2003, the senior credit facility was amended to clarify certain
definitions contained in the agreement relating to minimum levels of EBITDA (as
defined in the senior credit facility) for each of the three fiscal quarters
ending on or about December 31, 2002, March 31, 2003,and June 30, 2003.

     In February 2004, the senior credit facility was amended in order to
increase the borrowing availability from $10 million to $12.5 million. In March
2004, the senior credit facility was amended to decrease the minimum levels of
EBITDA (as defined in the senior credit facility) for the fiscal quarters ending
on or about March 31, 2004 and June 30, 2004 and to decrease the minimum
interest coverage ratios for the three fiscal quarters of 2004. Due to a higher
retail store base than was in existence at the origination of the facility as
well as accelerated growth plans, the Company believes the increased
availability and the modification of certain short-term financial covenants
better matches its currently projected cash needs.

  SENIOR SUBORDINATED NOTES

     On August 17, 1998, Golfsmith issued in a private placement $30.0 million
senior subordinated pay-in-kind notes (the "Subordinated Notes") and partnership
interests that may be converted into warrants to purchase 810,811 shares of
Golfsmith's common stock for $.01 per share, under certain circumstances. In
1998, the partnership interests for 7.5% of Golfsmith Holdings (a wholly-owned
subsidiary of Golfsmith International, Inc.) were valued at $12.0 million. Since
the interests are related to a Golfsmith subsidiary that is consolidated, the
value of the interests were recorded as minority interest on the consolidated
balance sheet. The value of the minority interest was offset as a discount to
the Subordinated Notes. Immediately prior to the merger, Golfsmith repurchased
the minority interest which had a carrying value of $13.1 million for cash
consideration of $9.0 million resulting in negative goodwill of $4.1 million. In
accordance with FAS 141, this is recorded in the period from December 30, 2001
through October 15, 2002, as an extraordinary item in the consolidated statement
of operations.

     Holders of the Subordinated Notes were entitled to receive interest,
payable quarterly, at Golfsmith's option in cash, or in-kind, through the
issuance of additional Subordinated Notes, both at 12% per annum. The
Subordinated Notes were to mature on August 1, 2005, representing a yield to
maturity of 22.6%. During the period from December 30, 2001 through October 15,
2002, the period from October 16, 2002 through December 28, 2002 and fiscal year
2001, Golfsmith issued $0, $0 and $1.0 million, respectively, in additional
Subordinated Notes for the payment of interest.
                                       F-18
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On October 15, 2002, immediately prior to the merger of Golfsmith with
Holdings, the Subordinated Notes were repaid in full. During the period from
December 30, 2001 through October 15, 2002, Golfsmith recorded a loss on this
extinguishment of senior subordinated debt of $8.0 million.

  OLD BANK DEBT

     In 2000, Golfsmith entered into a loan agreement (the "Loan Agreement")
providing for term loan ("Term Loan") borrowings of $15.0 million and revolver
borrowings up to $40.0 million ("Revolver"), subject to certain limitations.
This Loan Agreement replaced a 1997 credit agreement that provided for
borrowings up to $46.0 million that expired in 2000 and certain mortgage notes
totaling $2.8 million as of November 13, 2000. The Term Loan was secured by a
pledge of Golfsmith's land and buildings. The Revolver was secured by a pledge
of Golfsmith's inventory, receivables, and certain other assets and contained
significant covenants and restrictions. On October 15, 2002 Golfsmith's existing
line of credit was terminated.

6.  STORE CLOSURE AND ASSET IMPAIRMENTS

     A summary of the Company's store closures and asset impairments is as
follows:

<Table>
<Caption>
                                                         REVENUES         CASH FLOWS
                                                       GENERATED BY      GENERATED BY
                                          NUMBER OF     THE CLOSED        THE CLOSED      TOTAL STORE
                                           STORES      STORES IN THE     STORES IN THE      CLOSURE
PERIOD                                     CLOSED     YEAR OF CLOSURE   YEAR OF CLOSURE      COSTS
------                                    ---------   ---------------   ---------------   -----------
<S>                                       <C>         <C>               <C>               <C>
Fiscal 2003.............................       0        $       --         $      --       $     --
October 16, 2002 through December 28,
  2002 (Successor)......................       0                --           (39,920)        39,920
December 30, 2001 through October 15,
  2002 (Predecessor)....................       2         1,987,226          (208,396)       229,880
Fiscal 2001 (Predecessor)...............       1         3,350,000          (419,672)       655,130
</Table>

     The Company has closed five retail locations since its inception due to
poor operating performance and the lack of market penetration being derived from
these single-market stores. Store closure costs include writedowns of leasehold
improvements and store equipment to estimated fair values and lease termination
costs. These store-closing expenses in the period from December 30, 2001 through
October 15, 2002 and in the period from October 16, 2002 through December 28,
2002 are reported in discontinued operations under the accounting guidance of
SFAS No. 144, Impairment of Long-Lived Assets. All related assets and
liabilities for these closed locations have been eliminated from the
consolidated balance sheet as the net assets were disposed of prior to December
28, 2002. There were no store closures in fiscal 2003.

7.  COMMITMENTS

  LEASE COMMITMENTS

     The Company leases certain store locations under operating leases that
provide for annual payments that, in some cases, increase over the life of the
lease. The aggregate of the minimum annual payments is expensed on a
straight-line basis over the term of the related lease without consideration of
renewal option periods. The lease agreements contain provisions that require the
Company to pay for normal repairs and maintenance, property taxes, and
insurance. Rent expense was $9.5 million for the fiscal year ended January 3,
2004, $1.5 million for the period from October 16, 2002 through December 28,
2002, $5.9 million for the period from December 30, 2001 through October 15,
2002, and $8.1 million for the fiscal year ended December 29, 2001.

                                       F-19
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At January 3, 2004, future minimum payments due and sublease income to be
received, under non-cancelable operating leases with initial terms of one year
or more are as follows for each of the fiscal years presented below:

<Table>
<Caption>
                                                               OPERATING
                                                                 LEASE       SUBLEASE
                                                              OBLIGATIONS     INCOME
                                                              -----------   ----------
<S>                                                           <C>           <C>
2004........................................................  $11,970,283   $  537,265
2005........................................................   11,782,791      518,550
2006........................................................   11,384,045      532,575
2007........................................................   10,931,243      537,250
2008........................................................    9,966,439      362,250
Thereafter..................................................   40,397,611    1,446,913
                                                              -----------   ----------
  Total minimum lease payments..............................  $96,432,412
                                                              ===========
  Total minimum sublease rentals............................                $3,934,803
                                                                            ==========
</Table>

     Deferred rent consists of the step-rent accrual related to the Company's
store leases. In accordance with FASB Statement No. 13, Accounting for Leases,
rental expense for the Company's store leases is recognized on a straight-line
basis even though a majority of the store leases contain escalation clauses.

     Golfsmith has entered into certain sublease agreements with third parties
to sublease retail space previously occupied by Golfsmith. The sublease terms
ending dates range from 2004 to 2013. Sublease income recorded as a reduction of
rent expense was $0.3 million in fiscal 2003, $0.1 million for the period from
October 16, 2002 through December 28, 2002, $0.2 million for the period from
December 30, 2001 through October 15, 2002 and $0 in fiscal 2001. Future minimum
sublease payments to be received by Golfsmith over the terms of the leases are
noted in the table above.

  EMPLOYMENT AGREEMENTS

     The Company has entered into employment agreements with James D. Thompson,
the Company's president and chief executive officer, and with Virginia Bunte,
the Company's chief financial officer. The Company also entered into employment
agreements with Carl Paul and Franklin Paul to provide advising services. You
should read the information set forth in "Management -- Employment Agreements"
in this prospectus for a description of these agreements.

8.  GUARANTEES

     Holdings fully and unconditionally guarantees both the senior secured notes
issued by Golfsmith in October 2002 and the senior credit facility. The senior
secured notes mature in October 2009 with certain mandatory redemption features.
Interest payments are required on a semi-annual basis on the senior secured
notes at an annual interest rate of 8.375%. At January 3, 2004 there was $1.4
million outstanding under the senior credit facility and $77.5 million
outstanding on the senior secured notes. Holdings' guarantee of Golfsmith's
senior secured notes and senior credit facility is explicitly excluded from the
initial recognition and initial measurement requirements of FASB Interpretation
No. 45 as it meets the definition of an intercompany guarantee.

                                       F-20
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following represents certain stand-alone information for the fiscal
years ended January 3, 2004 and December 28, 2002 for the issuer and certain
guarantors of the senior secured notes and the senior credit facility:

  FISCAL YEAR ENDED JANUARY 3, 2004

<Table>
<Caption>
                                                 GOLFSMITH    GOLFSMITH
                       HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
                       --------   ------------   ----------   ----------   ------------   ------------
<S>                    <C>        <C>            <C>          <C>          <C>            <C>
Assets...............   $  --     $176,974,627   $1,615,054   $2,303,100   $(1,566,068)   $179,326,713
Debt.................      --      (78,899,508)          --           --            --     (78,899,508)
Net revenues.........      --      248,997,549    3,129,311    5,617,920            --     257,744,780
Net income...........      --           22,649      527,162      514,453            --       1,064,264
</Table>

  FISCAL YEAR ENDED DECEMBER 28, 2002

<Table>
<Caption>
                                                 GOLFSMITH    GOLFSMITH
                       HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
                       --------   ------------   ----------   ----------   ------------   ------------
<S>                    <C>        <C>            <C>          <C>          <C>            <C>
Assets...............   $  --     $158,115,783   $1,118,250   $1,555,754    $(778,915)    $160,010,872
Debt.................      --      (75,380,045)          --     (149,832)     149,832      (75,380,045)
Net revenues
  (Predecessor)......      --      173,118,838    2,546,407    4,649,918           --      180,315,163
Net revenues
  (Successor)........      --       36,936,204      273,602      620,734           --       37,830,540
Net income (loss)
  (Predecessor)......      --         (590,619)     372,050      646,900           --          428,331
Net income (loss)
  (Successor)........      --       (3,080,176)     530,048      (35,793)          --       (2,585,921)
</Table>

     The Company offers warranties to its customers depending on the specific
product and terms of the goods purchased. A typical warranty program requires
that the Company replace defective products within a specified time period from
the date of sale. The Company records warranty costs as they are incurred and
historically such costs have not been material. Golfsmith accrued and settled
approximately $0.3 million for product warranties during the period from
December 30, 2001 through October 15, 2002. For all other periods presented,
warranty costs were immaterial.

9.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     The Company's accrued expenses and other current liabilities are comprised
of the following at January 3, 2004 and December 28, 2002, respectively:

<Table>
<Caption>
                                                             JANUARY 3,    DECEMBER 28,
                                                                2004           2002
                                                             -----------   ------------
<S>                                                          <C>           <C>
Salaries and benefits......................................  $ 1,998,142   $ 2,206,568
Interest...................................................    2,675,824     1,660,246
Allowance for returns reserve..............................    1,357,173     1,098,029
Gift certificates..........................................    5,990,485     3,785,669
Taxes......................................................    3,102,040     2,456,960
Other......................................................    1,639,206     1,614,830
                                                             -----------   -----------
  Total....................................................  $16,762,870   $12,822,302
                                                             ===========   ===========
</Table>

                                       F-21
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  OTHER INCOME AND EXPENSE

     Other income was $211,000 in fiscal 2003, $14,000 for the period from
October 16, 2002 through December 28, 2002, $2.4 million for the period from
December 30, 2001 through October 15, 2002, and $1.2 million in fiscal 2001.
During the period from December 30, 2001 through October 15, 2002, Golfsmith
recorded a gain of $2.2 million on the sale of trademark rights to a third
party. The trademark rights were sold for $3.3 million and had a book value of
$1.1 million. During 2001, Golfsmith recorded a gain of $1.0 million on the sale
of property owned in Austin, Texas. The property was sold for gross proceeds of
$1.4 million and had a book value of $0.4 million.

     Other expense was not significant during any of the years presented.

11.  RETIREMENT AND PROFIT SHARING PLANS

     During 1998, the Board of Directors approved a Retirement Savings Plan (the
"Plan"), which permits eligible employees to make contributions to the Plan on a
pretax basis in accordance with the provisions of Section 401(k) of the Internal
Revenue Code. The Company makes a matching contribution of 50% of the employee's
pretax contribution, up to 6% of the employee's compensation, in any calendar
year. The Company contributed approximately $259,000 during the fiscal year
ended January 3, 2004, $35,000 for the period from October 16, 2002 through
December 28, 2002, $243,000 for the period from December 30, 2001 through
October 15, 2002, and $292,000 to the Plan during the fiscal year ended December
29, 2001.

     In 2002, the Company established the 2002 Incentive Plan under which the
Company agreed to pay specified bonuses to eligible management employees based
upon their individual and company-wide performance. The bonuses are payable
within 90 days of the end of the Company's fiscal year.

12.  COMMON STOCK

  GOLFSMITH INTERNATIONAL HOLDINGS, INC.

     Holdings has authorized 40.0 million shares of common stock, par value
$.001 per share, of which 21,594,597 and 20,077,931 shares were issued and
outstanding at January 3, 2004 and December 28, 2002, respectively.

  GOLFSMITH INTERNATIONAL, INC.

     Prior to the merger on October 15, 2002, Golfsmith International, Inc. had
authorized 20.0 million shares of common stock, par value $.01 per share, of
which 10.0 million shares were outstanding at December 29, 2001.

     Subsequent to the merger on October 15, 2002, the surviving operating
entity Golfsmith is authorized to issue 100 shares of its $.01 par value common
stock. All 100 shares were issued and outstanding as of January 3, 2004 and
December 28, 2002. Holdings, the parent of Golfsmith, holds all of Golfsmith's
outstanding common stock.

  DIVIDENDS

     Golfsmith declared and paid cash dividends of $3.5 million and $0 in the
period from December 30, 2001 through October 15, 2002 and fiscal 2001,
respectively, to all common shareholders on the date of record. Holdings has not
declared or paid any dividends.

                                       F-22
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CAPITAL SHARES RESERVED FOR ISSUANCE

     At January 3, 2004, the Company has reserved the following shares of common
stock for issuance:

<Table>
<S>                                                           <C>
Stock options...............................................   2,850,000
Restricted stock units......................................     755,935
Additional authorized common shares.........................  14,799,468
                                                              ----------
  Total unissued authorized common shares...................  18,405,403
                                                              ==========
</Table>

13.  RESTRICTED STOCK UNITS

     In October 2002, concurrent with the merger transaction between Holdings
and Golfsmith, Holdings awarded restricted stock units of Holdings' common stock
to eligible employees of Golfsmith and its subsidiaries. The stock units are
granted with certain restrictions as defined in the agreement. There were
755,935 and 839,268 outstanding shares of restricted stock units at January 3,
2004 and December 28, 2002, respectively, with a value of $2.3 million and $2.5
million, respectively.

     The restricted stock units are fully vested at the grant date and are held
in an escrow account. The stock units become available to the employees as the
restrictions lapse. In general, the restrictions lapse after ten years unless
the occurrence of certain specified events, upon which the restrictions will
lapse earlier.

14.  STOCK OPTION PLAN

  GOLFSMITH INTERNATIONAL, INC. 1997 INCENTIVE PLAN

     For all periods prior to the merger date of October 15, 2002, Golfsmith had
a stock incentive plan (the "1997 Incentive Plan") covering 2.8 million shares
of Golfsmith common stock. Options to acquire 0.22 million and 0.24 million
shares of stock were granted in during the period from December 30, 2001 through
October 15, 2002 and during the fiscal year ended December 29, 2001,
respectively. The exercise price of the options granted was at or above the
value of Golfsmith's common stock on the grant date. All outstanding options
vested on the merger date, and were either canceled in exchange for the right to
receive cash or surrendered in exchange for stock units as part of the merger
transaction discussed in Note 2. The plan was then terminated.

     A summary of the Company's stock option activity and related information
for the 1997 Incentive Plan through the Plan's termination date of October 15,
2002 follows:

<Table>
<Caption>
                                                                        WEIGHTED AVERAGE
                                                            OPTIONS      EXERCISE PRICE
                                                           ----------   ----------------
<S>                                                        <C>          <C>
Outstanding at December 30, 2000 (Predecessor)...........   2,176,205        $4.22
  Granted................................................     241,500         5.50
  Exercised..............................................          --           --
  Forfeited..............................................    (583,698)        4.01
                                                           ----------        -----
Outstanding at December 29, 2001 (Predecessor)...........   1,834,007        $4.45
  Granted................................................     230,120         6.55
  Repurchased in connection with merger..................  (1,673,838)        4.43
  Forfeited..............................................    (390,289)        4.54
                                                           ----------        -----
Outstanding at October 15, 2002 (Predecessor)............          --        $  --
                                                           ==========        =====
</Table>

                                       F-23
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Of the 1.7 million options that vested on the merger date, 612,201 options
with a value of $2.5 million were surrendered in exchange for stock units
entitling the holder thereof to 839,268 shares of common stock of Holdings as
part of the merger transaction discussed in Note 2.

     Cash consideration of $7.4 million was paid to option holders in exchange
for the cancellation of fully vested outstanding options concurrent with the
merger on October 15, 2002 discussed in Note 2.

  GOLFSMITH INTERNATIONAL HOLDINGS, INC. 2002 INCENTIVE STOCK PLAN

     In October 2002, Holdings adopted the 2002 Incentive Stock Plan (the "2002
Plan"). Under the 2002 Plan, certain employees, members of the Board of
Directors and third party consultants may be granted options to purchase shares
of Holdings common stock, stock appreciation rights and restricted stock grants
(collectively referred to as "options"). Options are exercisable and vest in
accordance with each option agreement. The term of each option is no more than
ten years from the date of the grant. There were 2,850,000 shares authorized
under the 2002 Plan at January 3, 2004, of which 1,122,500 are available for
future grant.

     A summary of the Company's stock option activity and related information
for the 2002 Plan through January 3, 2004 follows:

<Table>
<Caption>
                                                                        WEIGHTED AVERAGE
                                                             OPTIONS     EXERCISE PRICE
                                                            ---------   ----------------
<S>                                                         <C>         <C>
Outstanding at October 16, 2002 (Successor)...............         --        $  --
  Granted.................................................         --           --
  Exercised...............................................         --           --
  Forfeited...............................................         --           --
                                                            ---------        -----
Outstanding at December 28, 2002..........................         --        $  --
  Granted.................................................  1,840,500         3.00
  Exercised...............................................         --           --
  Forfeited...............................................   (113,000)        3.00
                                                            ---------        -----
Outstanding at January 3, 2004............................  1,727,500        $3.00
                                                            =========        =====
</Table>

     Options become exercisable as they vest. At January 3, 2004, no options
were vested or exercisable. The weighted-average remaining contractual life for
all outstanding options at January 3, 2004 was 9.5 years.

                                       F-24
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  FAIR VALUE DISCLOSURES

     Pro forma information regarding net income (loss) per share is required by
SFAS No. 123 and has been determined as if the Company had accounted for its
employee stock plans under the fair value method of that Statement. Fair value
was determined using the minimum value option-pricing model with a volatility
factor near zero as the Company's shares are not publicly traded, with the
following assumptions:

<Table>
<Caption>
                                                                         PREDECESSOR
                                                                 ---------------------------
                                                    SUCCESSOR    PERIOD FROM
                                                   -----------   DECEMBER 30,
                                                   FISCAL YEAR       2001       FISCAL YEAR
                                                      ENDED        THROUGH         ENDED
                                                   JANUARY 3,    OCTOBER 15,    DECEMBER 29,
                                                      2004           2002           2001
                                                   -----------   ------------   ------------
<S>                                                <C>           <C>            <C>
Risk-free interest rate..........................       4.0%          2.0%           4.8%
Weighted-average expected life of the options
  (years)........................................      7.00          5.77           5.77
Dividend rate....................................       0.0%          0.0%           0.0%
Weighted-average fair value of options granted
Exercise price equal to fair value of stock on
  date of grant..................................     $0.73         $0.71          $1.39
</Table>

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is disclosed in Note 1. There were no outstanding stock
options during the period from October 15, 2002 through December 28, 2002.

     Option valuation models incorporate highly subjective assumptions. Because
changes in the subjective assumptions can materially affect the fair value
estimate, the existing models do not necessarily provide a reliable single
measure of the fair value of Golfsmith's employee stock options. Because, for
pro forma disclosure purposes, the estimated fair value of Golfsmith's employee
stock options is treated as if amortized to expense over the options' vesting
period, the effects of applying SFAS No. 123 for pro forma disclosures are not
necessarily indicative of future amounts.

  WARRANTS

     In 1997, Golfsmith granted one warrant to purchase 60,000 options to a
third party at an exercise price of $15 per share. The warrant holder's right to
exercise such warrant was dependent upon the occurrence of a certain event. In
October 2002, immediately prior to the merger transaction discussed in Note 2,
the warrant was repurchased by Golfsmith for $0.5 million.

  DEFERRED STOCK COMPENSATION

     Golfsmith recorded deferred interest expense of $194,622 for options issued
to a non-employee creditor during fiscal year 2000. The deferred charge was
being amortized to interest expense over the remaining five-year term of the
related senior subordinated note. For the period from December 30, 2001 through
October 15, 2002 and fiscal 2001, $30,284 and $38,358, respectively, was charged
to interest expense relating to this option grant. On October 15, 2002,
immediately prior to the merger transaction discussed in Note 2, the remaining
unamortized deferred charge of $106,906 was recorded as a loss on the
extinguishment of the senior subordinated note discussed in Note 5.

     Due to the decline in the fair market value of Golfsmith's common stock,
the Board of Directors authorized Golfsmith to reprice stock options granted to
employees and officers with exercise prices in excess of the fair market value
on July 11, 2000. Stock options held by optionees other than non-employees,
which were granted under the incentive stock plans and which had an exercise
price greater

                                       F-25
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

than $4.00 per share, were amended to reduce their exercise price to $4.00 per
share, which was the fair market value of Golfsmith's common stock on July 11,
2000. No other terms were changed. Options to purchase a total of 1,716,780
shares of common stock with a weighted average exercise price of $13.94 were
repriced.

     Under FASB Interpretation No. 44, these repriced options require variable
accounting treatment until exercised or expired. Golfsmith recorded deferred
compensation of $4,116,741 and $2,374,254 related to the repriced options during
the period from December 30, 2001 through October 15, 2002 and fiscal 2001,
respectively. The deferred charge was being amortized over the average remaining
life of the repriced options. For the period from December 30, 2001 through
October 15, 2002 and fiscal 2001, Golfsmith amortized $6,033,273 (including all
remaining amounts as of the merger date) and $457,722 to compensation expense
related to these repriced options. There was no remaining deferred compensation
relating to these repriced options subsequent to October 15, 2002 as all
remaining historical Golfsmith options vested and were either canceled in
exchange for the right to receive cash or surrendered in exchange for stock
units as part of the merger transaction discussed in Note 2.

15.  INCOME TAXES

     From commencement through October 15, 2002, Golfsmith and its subsidiaries
had elected to be treated as a S Corporation under Subchapter S of the Internal
Revenue Code of 1986, as amended. As such, federal income taxes were the
responsibility of the individual stockholders. Accordingly, no provision for
U.S. federal income taxes was included in the financial statements. However,
certain foreign and state taxes were incurred and were recorded as income tax
expense for these periods. Concurrent with the merger transaction with Holdings
(see Note 2) on October 15, 2002, Golfsmith's Subchapter S status was terminated
and the Company became subject to corporate income taxes.

     Significant components of the income tax provision (benefit) attributable
to continuing operations are as follows:

<Table>
<Caption>
                                               SUCCESSOR                    PREDECESSOR
                                       --------------------------   ---------------------------
                                                       FOR THE        FOR THE
                                                     PERIOD FROM    PERIOD FROM
                                                     OCTOBER 16,    DECEMBER 30,
                                       FISCAL YEAR       2002           2001       FISCAL YEAR
                                          ENDED        THROUGH        THROUGH         ENDED
                                       JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                          2004           2002           2002           2001
                                       -----------   ------------   ------------   ------------
<S>                                    <C>           <C>            <C>            <C>
Current:
  Federal............................   $     --      $      --       $     --       $     --
  State..............................     60,000             --        392,019        128,119
  Foreign............................    404,983             --        316,355        123,028
                                        --------      ---------       --------       --------
Total Current........................    464,983             --        708,374        251,147
Deferred:
  Federal............................    165,378       (581,615)            --             --
  State..............................     14,592        (51,319)            --             --
  Foreign............................         --             --             --             --
                                        --------      ---------       --------       --------
Total deferred.......................    179,970       (632,934)            --             --
Income tax provision (benefit).......   $644,953      $(632,934)      $708,374       $251,147
                                        ========      =========       ========       ========
</Table>

                                       F-26
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's provision (benefit) for income taxes differs from the amount
computed by applying the statutory rate to income from continuing operations
before taxes as follows:

<Table>
<Caption>
                                                SUCCESSOR                   PREDECESSOR
                                        -------------------------   ---------------------------
                                                       FOR THE        FOR THE
                                                     PERIOD FROM    PERIOD FROM
                                          FISCAL     OCTOBER 16,    DECEMBER 30,
                                           YEAR          2002           2001       FISCAL YEAR
                                          ENDED        THROUGH        THROUGH         ENDED
                                        JANUARY 3,   DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                           2004          2002           2002           2001
                                        ----------   ------------   ------------   ------------
<S>                                     <C>          <C>            <C>            <C>
Income Tax at U.S. statutory rate.....     34.0%        (34.0)%        (34.0)%         34.0%
State taxes, net of federal income
  tax.................................      3.3%         (3.0)%         14.2%           1.6%
Foreign income taxes..................      0.0%          0.0%          11.5%           1.5%
Permanent differences and other.......      0.4%          0.1%           0.1%           0.0%
Unbenefitted amounts..................      0.0%         17.0%           0.0%           0.0%
S Corporation income not subject to
  tax.................................      0.0%          0.0%          34.0%         (34.0)%
                                           ----         -----          -----          -----
Income tax provision (benefit)........     37.7%        (19.9)%         25.8%           3.1%
                                           ====         =====          =====          =====
</Table>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred taxes as of January 3, 2004 and December 28, 2002 are as
follows:

<Table>
<Caption>
                                                                       SUCCESSOR
                                                            -------------------------------
                                                            AT JANUARY 3,   AT DECEMBER 28,
                                                                2004             2002
                                                            -------------   ---------------
<S>                                                         <C>             <C>
Deferred tax assets:
  Accrued expenses and other..............................   $   76,306       $   45,068
  Inventory basis.........................................      931,272           67,905
  Depreciable/amortizable assets..........................    1,115,712        2,920,142
  Federal tax carryforwards...............................    1,608,462        1,308,951
  Reserves and allowances.................................      430,344               --
                                                             ----------       ----------
Total deferred tax assets.................................   $4,162,096       $4,342,066
                                                             ==========       ==========
</Table>

     Upon the acquisition of Golfsmith by Holdings on October 15, 2002, the
Company recorded a net deferred tax asset of approximately $3.9 million due to
differences between book and tax basis of acquired assets and assumed
liabilities.

     As of January 3, 2004, the Company had federal net operating loss
carryforwards of approximately $3.3 million. The net operating loss
carryforwards will expire in 2023 if not utilized. In addition, the Company has
foreign tax credits of approximately $0.4 million that will expire in 2008 if
not utilized.

                                       F-27
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  FOREIGN AND DOMESTIC OPERATIONS

     The Company has operated in foreign and domestic regions. Information about
these operations is presented below:

<Table>
<Caption>
                                         SUCCESSOR                    PREDECESSOR
                                ---------------------------   ---------------------------
                                                 FOR THE        FOR THE
                                               PERIOD FROM    PERIOD FROM
                                               OCTOBER 16,    DECEMBER 30,
                                FISCAL YEAR        2002           2001       FISCAL YEAR
                                   ENDED         THROUGH        THROUGH         ENDED
                                 JANUARY 3,    DECEMBER 28,   OCTOBER 16,    DECEMBER 29,
                                    2004           2002           2002           2001
                                ------------   ------------   ------------   ------------
<S>                             <C>            <C>            <C>            <C>
Net revenues:
  North America...............  $251,910,857   $37,147,135    $175,392,971   $216,333,270
  International...............     5,833,923       683,405       4,922,192      5,105,226
Operating profit (loss):
  North America...............    11,231,351    (1,326,480)      8,077,197     12,550,336
  International...............     1,430,445       337,138         568,112      1,230,887
Identifiable assets:
  North America...............   177,023,613   158,455,118     151,030,755    109,803,125
  International...............     2,303,100     1,555,754       2,104,283      1,697,238
</Table>

17.  VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>
                                                                AMOUNTS
                                                              CHARGED TO
                                               BALANCE AT     NET INCOME     WRITE-OFFS    BALANCE AT
                                              BEGINNING OF    (LOSS), NET      AGAINST       END OF
                                                 PERIOD      OF RECOVERIES    RESERVES       PERIOD
                                              ------------   -------------   -----------   ----------
<S>                                           <C>            <C>             <C>           <C>
INVENTORY RESERVE:
  Fiscal year ended January 3, 2004.........   $  818,816     $1,688,193     $(1,685,391)  $  821,618
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........    1,219,373        (58,852)       (341,705)     818,816
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,555,107      1,253,856      (1,589,590)   1,219,373
  Fiscal year ended December 29, 2001
     (Predecessor)..........................      867,510      1,745,956      (1,058,359)   1,555,107
ALLOWANCE FOR SALES RETURNS:
  Fiscal year ended January 3, 2004.........    1,098,029      8,111,425      (7,852,281)   1,357,173
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........    1,116,480        640,592        (659,043)   1,098,029
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,220,584      4,240,901      (4,345,005)   1,116,480
  Fiscal year ended December 29, 2001
     (Predecessor)..........................    1,402,614      5,768,877      (5,950,907)   1,220,584
</Table>

                                       F-28
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                AMOUNTS
                                                              CHARGED TO
                                               BALANCE AT     NET INCOME     WRITE-OFFS    BALANCE AT
                                              BEGINNING OF    (LOSS), NET      AGAINST       END OF
                                                 PERIOD      OF RECOVERIES    RESERVES       PERIOD
                                              ------------   -------------   -----------   ----------
<S>                                           <C>            <C>             <C>           <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
  Fiscal year ended January 3, 2004.........      242,643        157,717        (223,693)     176,667
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........      403,088        (94,905)        (65,540)     242,643
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,107,321         27,057        (731,290)     403,088
  Fiscal year ended December 29, 2001
     (Predecessor)..........................    1,564,785      2,129,334      (2,586,798)   1,107,321
</Table>

18.  CONSOLIDATED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<Table>
<Caption>
                                                            SUCCESSOR
                               --------------------------------------------------------------------
                                  FIRST        SECOND         THIRD        FOURTH          FULL
FISCAL 2003(1)                   QUARTER       QUARTER       QUARTER       QUARTER         YEAR
--------------                 -----------   -----------   -----------   -----------   ------------
<S>                            <C>           <C>           <C>           <C>           <C>
Net revenues.................  $45,830,119   $79,256,107   $71,140,692   $61,517,862   $257,744,780
Gross profit.................   14,857,776    25,803,489    23,360,471    22,639,934     86,661,670
Income (loss) from continuing
  operations.................   (1,217,403)    2,221,214     1,011,809      (951,356)     1,064,264
Income (loss) from
  discontinued operations....           --            --            --            --             --
Income from extraordinary
  items......................           --            --            --            --             --
Net income (loss)............   (1,217,403)    2,221,214     1,011,809      (951,356)     1,064,264
</Table>

<Table>
<Caption>
                                                     PREDECESSOR                          SUCCESSOR
                               -------------------------------------------------------   ------------
                                                                          PERIOD FROM    PERIOD FROM
                                                                         SEPTEMBER 29,   OCTOBER 16,
                                                                             2002            2002
                                                                            THROUGH        THROUGH
                                  FIRST        SECOND         THIRD       OCTOBER 15,    DECEMBER 28,
FISCAL 2002(1)                   QUARTER       QUARTER       QUARTER         2002            2002
--------------                 -----------   -----------   -----------   -------------   ------------
<S>                            <C>           <C>           <C>           <C>             <C>
Net revenues.................  $47,460,173   $70,155,932   $55,962,187   $  6,736,871    $37,830,540
Gross profit.................   16,752,162    24,991,205    19,346,101      2,019,101     12,684,362
Income (loss) from continuing
  operations.................    2,583,312     4,253,355     3,432,646    (13,733,029)    (2,546,001)
Income (loss) from
  discontinued
  operations(2)..............       26,208      (270,798)       14,710             --        (39,920)
Income from extraordinary
  items(3)...................           --            --            --      4,121,927             --
Net income (loss)............    2,609,520     3,982,557     3,447,356     (9,611,102)    (2,585,921)
</Table>

---------------

(1) Fiscal 2003 consists of a 53-week period. Week 53 occurred in the fourth
    quarter of fiscal 2003. Fiscal 2002 consists of a 52-week period.

(2) Store-closing expenses in fiscal 2002 are reported in discontinued
    operations under the accounting guidance of SFAS No. 144, Impairment of
    Long-Lived Assets. All comparative periods presented in the above quarterly
    table have been reclassified to reflect the closed stores.

                                       F-29
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) During the period from December 30, 2001 through October 15, 2002, the
    Company recorded an extraordinary gain on the repurchase of minority
    interest obligations immediately prior to the merger transaction discussed
    in Note 2.

19.  RELATED PARTY TRANSACTIONS

     In October 2002, the Company entered into an agreement with its majority
stockholder whereby the Company pays a management fee expense of $600,000 per
year, plus out of pocket expenses, to this majority stockholder of the Company.
During the fiscal year ended January 3, 2004 and during the period from October
16, 2002 through December 28, 2002, the Company paid approximately $812,000 and
$150,000 to this majority stockholder under this agreement. These amounts are
recognized in the consolidated statement of operations in the selling, general
and administrative expense line item. As of January 3, 2004 and December 28,
2002, the Company did not have any material amounts payable to this majority
stockholder.

     On May 28, 2003, the Company issued 83,333 shares of its common stock to
one of the Company's directors, for an aggregate purchase price of $249,999, or
$3.00 per share.

     On July 24, 2003, in conjunction with the Company's acquisition of Don
Sherwood Golf Shop, the Company's majority stockholder, purchased 1,427,623
shares of the Company's common stock for an aggregate purchase price of $4.3
million. Also on July 24, 2003, in conjunction with the Company's acquisition of
Don Sherwood Golf Shop, a director of the Company purchased 5,710 shares of the
Company's common stock for an aggregate purchase price of approximately $17,000.

20.  SUBSEQUENT EVENTS

     In February 2004, the senior credit facility was amended in order to
increase the borrowing availability from $10 million to $12.5 million. In March
2004, the senior credit facility was amended to decrease the minimum levels of
EBITDA (as defined in the senior credit facility) for the fiscal quarters ending
on or about March 31, 2004 and June 30, 2004 and to decrease the minimum
interest coverage ratios for the three fiscal quarters of 2004. Due to a higher
retail store base than was in existence at the origination of the facility as
well as accelerated growth plans, the Company believes the increased
availability and the modification of certain short-term financial covenants
better matches its currently projected cash needs.

                                       F-30
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                APRIL 3,      JANUARY 3,
                                                                  2004           2004
                                                              ------------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................  $  4,176,536   $  2,928,109
  Receivables, net of allowances of $212,389 at April 3,
     2004 and $176,667 at January 3, 2004...................     2,752,964      2,689,815
  Inventories, net of reserves of $1,276,311 at April 3,
     2004 and $821,618 at January 3, 2004...................    65,878,427     51,212,544
  Deferred tax assets.......................................     1,437,922      1,437,922
  Prepaid and other current assets..........................     2,748,243      1,845,546
                                                              ------------   ------------
Total current assets........................................    76,994,092     60,113,936
Property and equipment:
  Land and buildings........................................    21,040,387     21,040,387
  Equipment, furniture, fixtures and autos..................    13,670,395     12,234,869
  Leasehold improvements and construction in progress.......    11,282,679     10,907,168
                                                              ------------   ------------
                                                                45,993,461     44,182,424
  Less: accumulated depreciation............................    (7,342,088)    (6,100,047)
                                                              ------------   ------------
Net property and equipment..................................    38,651,373     38,082,377
Goodwill....................................................    42,021,324     42,035,545
Tradename...................................................    11,158,000     11,158,000
Trademarks..................................................    15,459,038     15,459,038
Customer database, net of accumulated amortization of
  $566,533 at April 3, 2004 and $472,111 at January 3,
  2004......................................................     2,832,672      2,927,094
Deferred tax assets.........................................     2,724,174      2,724,174
Debt issuance costs, net of accumulated amortization of
  $1,323,264 at April 3, 2004 and $1,087,499 at January 3,
  2004......................................................     6,534,451      6,770,216
Other long-term assets......................................        56,333         56,333
                                                              ------------   ------------
Total assets................................................  $196,431,457   $179,326,713
                                                              ============   ============
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 44,397,100   $ 23,604,647
  Accrued expenses and other current liabilities............    12,957,821     16,762,870
  Line of credit............................................     1,075,000      1,417,039
                                                              ------------   ------------
Total current liabilities...................................    58,429,921     41,784,556
Long-term debt..............................................    78,029,386     77,482,469
Deferred rent...............................................     1,161,094      1,083,511
                                                              ------------   ------------
Total liabilities...........................................   137,620,401    120,350,536
Stockholders' equity:
  Common stock -- $.001 par value; 40,000,000 shares
     authorized; 21,594,597 shares issued and outstanding at
     April 3, 2004 and January 3, 2004, respectively........        21,594         21,594
  Restricted common stock units -- $.001 par value; 755,935
     shares issued and outstanding at April 3, 2004 and
     January 3, 2004, respectively..........................           756            756
  Additional capital........................................    60,288,607     60,288,607
  Other comprehensive income................................       224,717        186,877
  Accumulated deficit.......................................    (1,724,618)    (1,521,657)
                                                              ------------   ------------
Total stockholders' equity..................................    58,811,056     58,976,177
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $196,431,457   $179,326,713
                                                              ============   ============
</Table>

                            See accompanying notes.
                                       F-31
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                 THREE MONTHS ENDED
                                                              -------------------------
                                                               APRIL 3,      MARCH 29,
                                                                 2004          2003
                                                              -----------   -----------
                                                                     (UNAUDITED)
<S>                                                           <C>           <C>
Net revenues................................................  $65,782,039   $45,830,119
Cost of products sold.......................................   42,806,857    30,972,343
                                                              -----------   -----------
Gross profit................................................   22,975,182    14,857,776
Selling, general and administrative.........................   20,167,893    14,258,838
Store pre-opening expenses..................................      329,238            --
                                                              -----------   -----------
Total operating expenses....................................   20,497,131    14,258,838
                                                              -----------   -----------
Operating income............................................    2,478,051       598,938
Interest expense............................................   (2,795,405)   (2,638,496)
Interest income.............................................          731         7,477
Other income................................................        2,434         5,693
Other expense...............................................      (13,167)       (2,334)
                                                              -----------   -----------
Loss before income taxes....................................     (327,356)   (2,028,722)
Income tax benefit..........................................      124,395       811,319
                                                              -----------   -----------
Net loss....................................................  $  (202,961)  $(1,217,403)
                                                              ===========   ===========
</Table>

                            See accompanying notes.
                                       F-32
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                  THREE MONTHS ENDED
                                                              ---------------------------
                                                                APRIL 3,      MARCH 29,
                                                                  2004           2003
                                                              ------------   ------------
                                                                      (UNAUDITED)
<S>                                                           <C>            <C>
OPERATING ACTIVITIES
Net loss....................................................  $   (202,961)  $ (1,217,403)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
     Depreciation...........................................     1,240,318      1,216,435
     Amortization of intangible assets......................        94,422         94,422
  Amortization of debt issue costs and debt discount........       782,682        713,393
  Loss on sale of auto......................................         2,257             --
  Changes in operating assets and liabilities:
       Accounts receivable..................................       (63,149)      (990,886)
       Inventories..........................................   (14,665,883)   (11,330,465)
       Prepaid and other assets.............................      (902,697)      (111,740)
       Accounts payable.....................................    20,792,453      6,115,875
       Accrued expenses and other current liabilities.......    (3,789,761)    (4,968,454)
       Deferred rent........................................        77,583        196,744
                                                              ------------   ------------
Net cash provided by (used in) operating activities.........     3,365,264    (10,282,079)

INVESTING ACTIVITIES
Capital expenditures........................................    (1,815,623)      (408,885)
Proceeds from sale of auto..................................         5,000             --
Other.......................................................            --         (1,325)
                                                              ------------   ------------
Net cash used in investing activities.......................    (1,810,623)      (410,210)

FINANCING ACTIVITIES
Principal payments on lines of credit.......................   (19,920,336)    (5,476,478)
Proceeds from lines of credit...............................    19,578,297      7,551,478
Debt issuance costs.........................................            --        (10,530)
Other.......................................................        (1,067)            --
                                                              ------------   ------------
Net cash provided by (used in) financing activities.........      (343,106)     2,064,470
Effect of exchange rate changes on cash.....................        36,892         (9,687)
                                                              ------------   ------------
Change in cash and cash equivalents.........................     1,248,427     (8,637,506)
Cash and cash equivalents, beginning of period..............     2,928,109     11,412,460
                                                              ------------   ------------
Cash and cash equivalents, end of period....................  $  4,176,536   $  2,774,954
                                                              ============   ============
Supplemental cash flow information:
  Interest payments.........................................  $  3,985,290   $  2,979,025
  Tax payments..............................................  $     27,494   $     56,936
  Amortization of discount on senior secured notes..........  $    546,917   $    499,123
</Table>

                            See accompanying notes.
                                       F-33
<PAGE>

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 APRIL 3, 2004

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  DESCRIPTION OF BUSINESS

     Golfsmith International Holdings, Inc., is a multi-channel retailer of golf
equipment, merchandise and training curriculum for consumers and golf clubmaking
businesses. Golfsmith offers equipment from leading manufacturers, including
Callaway(R), Cobra(R), FootJoy(R), Nike(R), Ping(R), Taylor Made(R) and
Titleist(R). In addition, Golfsmith offers its own proprietary brands, including
Golfsmith(R), Lynx(R), Snake Eyes(R), Killer Bee(R) and Zevo(R). The Company
markets its products through 42 superstores as well as through its
direct-to-consumer channel, which includes its clubmaking and accessory catalogs
and its Internet site. The Company also operates the Harvey Penick Golf Academy,
an instructional school incorporating the techniques of the well-known golf
instructor, Harvey Penick.

  BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
Golfsmith International Holdings, Inc. ("Holdings" or the "Company") and its
wholly owned subsidiary Golfsmith International, Inc. ("Golfsmith"). Holdings
was formed on September 4, 2002 as a Delaware corporation to acquire all of the
outstanding shares of common stock of Golfsmith. Holdings acquired Golfsmith on
October 15, 2002. Holdings has no assets or liabilities other than its
investment in its wholly owned subsidiary. Holdings did not have operations
prior to the acquisition of Golfsmith; accordingly these consolidated financial
statements represent the operations of Golfsmith and its subsidiaries. All
significant inter-company accounts and transactions have been eliminated in
consolidation.

     The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States. As information in this report relates to interim financial
information, certain footnote disclosures have been condensed or omitted. In the
Company's opinion, the unaudited interim consolidated financial statements
reflect all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows for the periods presented. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the year ended January 3, 2004
included elsewhere in this prospectus. The results of operations for the three
month period ended April 3, 2004 are not necessarily indicative of results that
may be expected for any other interim period or for the full fiscal year.

     The balance sheet at January 3, 2004 has been derived from audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. For further information,
refer to the audited consolidated financial statements and notes thereto for the
year ended January 3, 2004, included elsewhere in this prospectus.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and use assumptions that affect certain reported amounts and
disclosures. Although management uses the best information available, it is
reasonably possible that the estimates used by the Company will be materially
different from the actual results. These differences could have a material
effect on the Company's future results of operations and financial position. The
Company uses estimates when accounting for depreciation and amortization,
allowance for doubtful accounts, income taxes, allowance for obsolete inventory
and allowance for sales returns.

                                       F-34
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  REVENUE SUBJECT TO SEASONAL VARIATIONS

     The Company's business is seasonal, reflecting peak sales and earnings
during the Father's Day and Christmas holiday selling seasons. A substantial
portion of the Company's total revenues and an even larger portion of the
Company's operating income occur in its second fiscal quarter. The results of
these interim quarters may not be representative of the results for the full
fiscal year.

  FISCAL YEAR

     The Company's fiscal year ends on the Saturday closest to December 31. The
three-month periods ended April 3, 2004 and March 29, 2003 both consist of
thirteen weeks.

  STORE PRE-OPENING AND CLOSING EXPENSES

     Costs associated with the opening of a new store, which include costs
associated with hiring and training personnel, supplies and certain occupancy
and miscellaneous costs related to new locations, are expensed as incurred. When
the Company decides to close a store and meets the applicable accounting
guidance criteria, the Company recognizes an expense related to the future net
lease obligation, non-recoverable investments in related fixed assets and other
expenses directly related to the discontinuance of operations in accordance with
SFAS No. 146, Accounting For Costs Associated With Exit or Disposal Activities.
These charges require the Company to make judgments about exit costs to be
incurred for employee severance, lease terminations, inventory to be disposed
of, and other liabilities. The ability to obtain agreements with lessors, to
terminate leases or to assign leases to third parties can materially affect the
accuracy of these estimates.

  STOCK-BASED COMPENSATION

     The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The following table illustrates the
effect on net loss, if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standard (SFAS) No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting
for Stock-Based Compensation -- Transition and Disclosure, An Amendment of FASB
Statement No. 123:

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                              -----------------------
                                                              APRIL 3,     MARCH 29,
                                                                2004         2003
                                                              ---------   -----------
<S>                                                           <C>         <C>
Net loss -- as reported.....................................  $(202,961)  $(1,217,403)
Total stock-based compensation cost, net of related tax
  effects included in the determination of net loss as
  reported..................................................         --            --
The stock-based employee compensation cost, net of related
  tax effects, that would have been included in the
  determination of net loss if the fair value based method
  had been applied to all awards............................    (44,583)           --
                                                              ---------   -----------
Pro forma net loss..........................................  $(247,544)  $(1,217,403)
                                                              =========   ===========
</Table>

2.  BUSINESS COMBINATIONS

     On July 24, 2003, the Company acquired all issued and outstanding shares of
Don Sherwood Golf Shop ("Sherwood") for a total purchase price of $9.2 million,
including related acquisition costs of $0.4 million. The Company believes that
the Sherwood acquisition supports the Company's goals of expanding its national
presence while gaining exposure to one of the country's top golf markets in
                                       F-35
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

San Francisco, California. The Company acquired all six Sherwood retail stores
as part of the acquisition. The operations of Sherwood stores are included in
the Company's consolidated statements of operations and cash flows as of July
25, 2003.

     In conjunction with the acquisition of Sherwood, the Company issued
1,433,333 shares of common stock to existing stockholders, including its
majority stockholder, for consideration of $4.3 million. The proceeds from the
issuance of common stock were used to fund a portion of the acquisition of
Sherwood. The issuance of these additional shares increased the majority
stockholder's 79.7% controlling interest in the Company to an 80.9% controlling
interest, including issued restricted common stock units, which entitle the
holders to shares of the Company's common stock, and excluding outstanding stock
options. At April 3, 2004, the Company's majority stockholder held a majority
interest of 75.1% of our common stock on a fully diluted basis, including
outstanding stock options.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. Such allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

     Contingent consideration of $1.3 million has been placed in an escrow
account by the Company to secure certain indemnification obligations of the
selling shareholder. Subject to the terms and conditions of the escrow
agreement, any remaining balance of the funds placed in escrow (less any amount
of unresolved claims) will be disbursed to the selling shareholder on June 28,
2004.

3.  INTANGIBLE ASSETS

     In accordance with the adoption provisions of SFAS No. 142, Goodwill and
Other Intangible Assets, the Company is required to perform periodic review and
analysis for possible impairment of intangible assets with indefinite lives,
including goodwill. The Company evaluates its indefinite lived intangible assets
for impairment annually, as well as whenever events or changes in circumstances
indicate that the carrying amounts of these assets may not be recoverable based
on a combination of the Company's projection of estimated future discounted cash
flows and other valuation methodologies. In the event that the book value of
intangibles and goodwill is determined to be impaired, such impairments are
measured using a combination of discounted cash flow valuation, with a discount
rate determined to be commensurate with the risk inherent in the Company's
current business model, and other valuation methodologies. To the extent these
future projections or strategies change, the Company's estimates regarding
impairment may differ from the Company's current estimates. In accordance with
SFAS No. 142, the Company determined that its recorded tradename and trademarks
have indefinite useful lives and therefore are not amortized.

     Intangible assets with definite lives must be amortized over their
estimated useful lives. Following is a summary of the Company's intangible
assets that are subject to amortization as of April 3, 2004:

<Table>
<Caption>
                                                 GROSS CARRYING   ACCUMULATED    NET CARRYING
                                                     AMOUNT       AMORTIZATION      AMOUNT
                                                 --------------   ------------   ------------
<S>                                              <C>              <C>            <C>
Customer databases.............................    $3,399,205      $(566,533)     $2,832,672
</Table>

     The net carrying amount of customer databases intangible assets relates
solely to the merger transaction in October 2002 between Golfsmith and Holdings.
Total amortization expense was $94,222 for each of the three months ended April
3, 2004 and March 29, 2003, and is recorded in selling, general, and
administration costs on the consolidated statements of operations.

                                       F-36
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  GUARANTEES

     Holdings fully and unconditionally guarantees both the senior secured notes
issued by Golfsmith in October 2002 and the senior credit facility. The senior
secured notes mature in October 2009 with certain mandatory redemption features.
Interest payments on the senior secured notes are required on a semi-annual
basis at an annual interest rate of 8.375%. At April 3, 2004 there was $1.1
million of borrowings outstanding under the senior credit facility and $78.0
million aggregate principal amount of the senior secured notes outstanding.
Holdings' guarantee of Golfsmith's senior secured notes and the senior credit
facility is explicitly excluded from the initial recognition and initial
measurement requirements of FASB Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, as it meets the definition of an intercompany guarantee.

     The following represents certain stand-alone information for the three
months ended April 3, 2004 and the fiscal year ended January 3, 2004 for the
issuer and certain guarantors of the senior secured notes and the senior credit
facility:

<Table>
<Caption>
 THREE MONTHS ENDED                              GOLFSMITH    GOLFSMITH
    APRIL 3, 2004      HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
---------------------  --------   ------------   ----------   ----------   ------------   ------------
<S>                    <C>        <C>            <C>          <C>          <C>            <C>
Assets...............   $   --    $193,606,036   $1,716,919   $3,796,186   $(2,687,684)   $196,431,457
Debt.................       --     (79,104,386)          --           --            --     (79,104,386)
Net revenues.........       --      63,626,844      683,393    1,471,802            --      65,782,039
Net income (loss)....       --        (328,684)     102,920       22,803            --        (202,961)
</Table>

<Table>
<Caption>
  FISCAL YEAR ENDED                              GOLFSMITH    GOLFSMITH
   JANUARY 3, 2004     HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
---------------------  --------   ------------   ----------   ----------   ------------   ------------
<S>                    <C>        <C>            <C>          <C>          <C>            <C>
Assets...............   $   --    $176,974,627   $1,615,054   $2,303,100   $(1,566,068)   $179,326,713
Debt.................       --     (78,899,508)          --           --            --     (78,899,508)
Net revenues.........       --     248,997,549    3,129,311    5,617,920            --     257,744,780
Net income...........       --          22,649      527,162      514,453            --       1,064,264
</Table>

     The Company offers warranties to its customers depending on the specific
product and terms of the goods purchased. A typical warranty program requires
that the Company replace defective products within a specified time period from
the date of sale. The Company records warranty costs as they are incurred and
historically such costs have not been material. During the three months ended
April 3, 2004 and March 29, 2003, respectively, no amounts have been accrued or
paid relating to product warranties.

5.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     The Company's accrued expenses and other current liabilities are comprised
of the following at April 3, 2004 and January 3, 2004, respectively:

<Table>
<Caption>
                                                              APRIL 3,     JANUARY 3,
                                                                2004          2004
                                                             -----------   -----------
<S>                                                          <C>           <C>
Salaries and benefits......................................  $ 2,531,203   $ 1,998,142
Interest...................................................      703,256     2,675,824
Allowance for returns reserve..............................    1,161,253     1,357,173
Gift certificates..........................................    5,158,659     5,990,485
Taxes......................................................    1,831,716     3,102,040
Other......................................................    1,571,734     1,639,206
                                                             -----------   -----------
  Total....................................................  $12,957,821   $16,762,870
                                                             ===========   ===========
</Table>

                                       F-37
<PAGE>
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  COMPREHENSIVE INCOME (LOSS)

     The Company's comprehensive income (loss) is composed of net income (loss)
and translation adjustments. The following table presents the calculation of
comprehensive income (loss):

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                              -----------------------
                                                              APRIL 3,     MARCH 29,
                                                                2004         2003
                                                              ---------   -----------
<S>                                                           <C>         <C>
Net loss....................................................  $(202,961)  $(1,217,403)
Translation adjustments.....................................     37,840       (10,273)
                                                              ---------   -----------
  Total comprehensive loss..................................  $(165,121)  $(1,227,676)
                                                              =========   ===========
</Table>

7.  RECENTLY ISSUED ACCOUNTING STANDARDS

  VARIABLE INTEREST ENTITIES

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), which was revised in December 2003 ("FIN
46(R)"). FIN 46(R) requires that companies consolidate a variable interest
entity if they are subject to a majority of the risk of loss from the variable
interest entity's activities or are entitled to receive a majority of the
entity's residual returns, or both. The provisions of FIN 46(R) currently are
required to be applied no later than the first reporting period ending after
March 15, 2004 for variable interest entities. The Company has no special
purpose entities, nor has it acquired a variable interest in an entity where the
Company is the primary beneficiary. The adoption of FIN 46(R) did not have a
material impact on the Company's financial condition, results of operations or
cash flows.

8.  SUBSEQUENT EVENTS

     On April 15, 2004, all remaining escrow funds of $5,117,421 related to the
October 15, 2002 merger transaction between Golfsmith and Holdings were paid to
the selling stockholders in accordance with the merger agreement.

                                       F-38
<PAGE>

     NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF GOLFSMITH SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

                         GOLFSMITH INTERNATIONAL, INC.

                      8.375% Senior Secured Notes Due 2009

                           -------------------------

                                   PROSPECTUS
                           -------------------------

                                           , 2004
<PAGE>

                                    PART II

                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<Table>
<S>                                                           <C>
SEC registration fee........................................  $    919
Blue Sky fees and expenses..................................     5,000
Legal fees and expenses.....................................   100,000
Accounting fees and expenses................................    45,000
Printing expenses...........................................    15,000
Miscellaneous...............................................    34,081
                                                              --------
  Total.....................................................  $200,000
                                                              ========
</Table>

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Golfsmith International, Inc. and Golfsmith International Holdings,
Inc.  Each of Golfsmith International, Inc. ("Golfsmith") and Golfsmith
International Holdings, Inc. ("Holdings") are incorporated under the laws of the
State of Delaware. The Certificate of Incorporation of each of Golfsmith and
Holdings provides that each corporation shall indemnify its officers and
directors to the fullest extent permitted by the General Corporation Law of
Delaware.

     Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify a director, officer, employee, or agent of the corporation (or
other entity if such person is serving in such capacity at the corporation's
request) against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify a director, officer, employee, or agent of the
corporation (or other entity if such person is serving in such capacity at the
corporation's request) against expenses (including attorneys' fees) actually and
reasonably incurred by him if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses as
the court shall deem proper. Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation.

     Consistent with Section 145 of the Delaware General Corporation Law,
Article Eleventh of the Certificate of Incorporation of Golfsmith and Article
Twelfth of the Amended and Restated Certificate of Incorporation of Holdings
provide that each corporation will indemnify its directors, officers, employees
and agents of the corporation against all expenses, liabilities and losses
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection with any action, suit or proceeding and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent.

     In accordance with Section 102(b)(7) of the Delaware General Corporation
Law, Article Eleventh of the Certificate of Incorporation of Golfsmith and
Article Twelfth of the Amended and Restated Certificate of Incorporation of
Holdings provide that directors shall not be personally liable for monetary
damages for breaches of their fiduciary duty as directors except for liability
(i) for any breach of their duty of loyalty to

                                       II-1
<PAGE>

the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violations of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
transactions from which a director derives an improper personal benefit.

     Under Article Eleventh of the Certificate of Incorporation of Golfsmith and
Article Twelfth of the Amended and Restated Certificate of Incorporation of
Holdings, each of Golfsmith and Holdings may maintain insurance, at its expense,
to protect itself and any director, officer, employee, or agent of the
corporation or any other corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law. Golfsmith carries
standard directors and officers liability coverage for its directors and
officers and the directors and officers of its subsidiaries. Subject to certain
limitations and exclusions, the policies reimburse the corporation for
liabilities indemnified under the Certificate of Incorporation and indemnify
directors and officers against additional liabilities not indemnified under the
Certificate of Incorporation.

     Golfsmith entered into indemnification agreements with those individuals
who were directors prior to the merger of BGA Acquisition Corp. with and into
Golfsmith which was completed on October 15, 2002. These agreements provide for
the indemnification, to the full extent permitted by law, of expenses,
judgments, fines, penalties, and amounts paid in settlement incurred by the
director in connection with any threatened, pending or completed action, suit or
proceeding on account of service as a director, officer, employee or agent of
Golfsmith. Golfsmith has not entered into any indemnification agreements with
its current directors or officers. Holdings has not entered into indemnification
agreements with its officers or directors.

     Golfsmith GP Holdings, Inc.  Golfsmith GP Holdings, Inc. ("GP Holdings") is
incorporated under the laws of the State of Delaware. Consistent with Section
145 of the Delaware General Corporation Law, Article VII, Section 7.1 of the
Bylaws of GP Holdings provides that the corporation will indemnify the
directors, advisory directors, officers, employees or agents of the corporation,
or of any entity a majority of the voting stock of which is owned by the
corporation, or any person who is or was serving at the request of the
corporation as a director, advisory director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any action, suit, or proceeding if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation. With respect to a
criminal action or proceeding, such person must also have had no reasonable
cause to believe his conduct was unlawful.

     In accordance with Section 102(b)(7) of the Delaware General Corporation
Law, Article Ten of the Certificate of Incorporation of GP Holdings provides
that a director of GP Holding shall not be liable to the corporation or the
stockholders for monetary damages for any breach of his fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or the stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.

     Under Article VII, Section 7.4 of the Bylaws of GP Holdings, GP Holdings
may purchase and maintain insurance, in such amounts and against such risks as
the board of directors deems appropriate, on behalf of any person who is or was
a director, advisory director, officer, employee or agent of the corporation, or
of any entity a majority of the voting stock of which is owned by the
corporation, or who is or was serving at the request of the corporation as a
director, advisory director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power or would
be required to indemnify him against such liability.

     Golfsmith Holdings, L.P. and Golfsmith International, L.P.  Golfsmith
Holdings, L.P. and Golfsmith International, L.P. are limited partnerships
organized under the laws of the State of Delaware. Section 17-108 of the
Delaware Revised Uniform Limited Partnership Act provides that, subject to such
                                       II-2
<PAGE>

standards and restrictions, if any, as are set forth in its partnership
agreement, a limited partnership may, and shall have the power to, indemnify and
hold harmless any partner or other person from and against any and all claims
and demands whatsoever.

     Article 4, Section 4.7 of the Amended and Restated Limited Partnership
Agreement of Golfsmith Holdings, L.P. provides that to the fullest extent
allowed by the Delaware Revised Uniform Limited Partnership Act, Golfsmith
Holdings, L.P. shall indemnify its general partner and its officers, directors,
shareholders, employees and agents from any expenses, liabilities, claims,
causes of action, losses or damages incurred by reason of any act or omission
performed or omitted by or on behalf of the general partner in good faith on
behalf of the partnership or the limited partners and in a manner reasonably
believed by the general partner or its officers, directors, shareholders,
employees or agents to be within the scope of authority granted to it, or if the
general partner or its officers, directors, shareholders, employees or agents
reasonably believed the act or omission was not opposed to the partnership's
best interests and was not unlawful, regardless of whether such act or omission
constituted the sole, partial or concurrent negligence of the general partner or
its officers, directors, shareholders, employees or agents. In addition, under
Article 7, Section 7.14 of the Amended and Restated Limited Partnership
Agreement of Golfsmith Holdings, L.P., the partnership shall indemnify the
officers to the extent and in the manner described above.

     Article II, Section 2.8 of the Limited Partnership Agreement of Golfsmith
International, L.P. provides that to the full extent permitted by applicable
law, and except for loss or damages incurred by a partner by reason of its gross
negligence, willful misconduct or bad faith, the partnership will indemnify a
partner from, and reimburse a partner for, all judgments, penalties, including
excise and similar taxes, fines, settlements and reasonable expenses, including
attorneys' fees, if such partner was, is or is threatened to be a named
defendant or respondent in a proceeding because the partner is or was a general
partner.

     Golfsmith GP, L.L.C., Golfsmith Delaware, L.L.C., Golfsmith Canada, L.L.C.,
Golfsmith Europe, L.L.C., Golfsmith USA, L.L.C., Golfsmith NU, L.L.C. and
Golfsmith Licensing, L.L.C.  Each of Golfsmith GP, L.L.C., Golfsmith Delaware,
L.L.C., Golfsmith Canada, L.L.C., Golfsmith Europe, L.L.C., Golfsmith USA,
L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing, L.L.C. is a limited
liability company organized under the laws of the State of Delaware. Section
18-108 of the Delaware Limited Liability Company Act provides that, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement, a limited liability company may, and shall have the
power to, indemnify and hold harmless any member or manager or other person from
and against any and all claims and demands whatsoever.

     Consistent with Section 18-108 of the Delaware Limited Liability Company
Act, Article 4, Section 4.7 of the Company Agreement of each of Golfsmith GP,
L.L.C., Golfsmith Delaware, L.L.C., Golfsmith Canada, L.L.C., Golfsmith Europe,
L.L.C., Golfsmith USA, L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing,
L.L.C. provides that to the fullest extent allowed by the Delaware Limited
Liability Company Act and other applicable law, each company will indemnify the
managers from any expenses, liabilities, claims, causes of action, losses or
damages incurred by reason of any act or omission performed or omitted by the
managers in good faith on behalf of the company or the members and in a manner
reasonably believed by such managers to be within the scope of the authority
granted to it by each Company Agreement, regardless of whether such act or
omission constituted the sole, partial or concurrent negligence of such manager.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     On January 29, 2002, Golfsmith issued options to purchase an aggregate of
163,000 shares of its common stock at an exercise price of $6.55 per share to
members of its management under its 1997 Incentive Plan. Golfsmith issued these
options without registration under the Securities Act in reliance on the
exemption provided by Rule 701 under the Securities Act.

     On April 23, 2002, Golfsmith issued options to purchase an aggregate of
67,120 shares of its common stock at an exercise price of $6.55 per share to
members of its management under its 1997 Incentive Plan.
                                       II-3
<PAGE>

Golfsmith issued these options without registration under the Securities Act in
reliance on the exemption provided by Rule 701 under the Securities Act.

     On September 4, 2002, Holdings issued 10 shares of its common stock to
Atlantic Equity Partners III, L.P. for an aggregate purchase price of $1.00, or
$.10 per share. Holdings issued these shares without registration under the
Securities Act of 1933, as amended, in reliance on the exemption provided by
Section 4(2) of the Securities Act as a transaction by an issuer not involving a
public offering.

     On October 15, 2002, Golfsmith issued $93,750,000 aggregate principal
amount at maturity of its 8.375% Senior Secured Notes Due 2009 for gross
proceeds of $75,000,000. Golfsmith issued these notes to Jefferies & Company,
Inc. without registration under the Securities Act as a private offering exempt
from the registration requirements of the Securities Act. The initial purchaser
sold the notes to institutional investors and non-U.S. persons in transactions
exempt from registration.

     On October 15, 2002, in connection with the merger of BGA Acquisition Corp.
with and into Golfsmith, Holdings issued an aggregate of 20,077,921 shares of
its common stock to Atlantic Equity Partners III, L.P. and to the stockholders
of Golfsmith. Holdings issued these shares without registration under the
Securities Act in reliance on the exemption provided by Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.

     On October 15, 2002, Holdings issued units entitling the holders thereof to
an aggregate of 839,268 shares of its common stock to members of its management.
Holdings issued these units without registration under the Securities Act in
reliance on the exemption provided by Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.

     On May 28, 2003, Holdings issued 83,333 shares of its common stock to
Thomas G. Hardy, one of its directors, for an aggregate purchase price of
$249,999, or $3.00 per share. Holdings issued these shares without registration
under the Securities Act in reliance on the exemption provided by Section 4(2)
of the Securities Act as a transaction by an issuer not involving a public
offering.

     On June 16, 2003, Holdings issued options to purchase an aggregate of
1,840,500 shares of its common stock at an exercise price of $3.00 per share to
members of its management under its 2002 Incentive Stock Plan. Holdings issued
these options without registration under the Securities Act in reliance on the
exemption provided by Rule 701 under the Securities Act.

     On July 24, 2003, Holdings issued 1,427,623 shares of its common stock to
Atlantic Equity Partners III, L.P., its majority stockholder, for an aggregate
purchase price of $4,282,869, or $3.00 per share. Holdings issued these shares
without registration under the Securities Act in reliance on the exemption
provided by Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

     On July 24, 2003, Holdings issued 5,710 shares of its common stock to
Thomas G. Hardy, one of its directors, for an aggregate purchase price of
$17,131, or $3.00 per share. Holdings issued these shares without registration
under the Securities Act in reliance on the exemption provided by Section 4(2)
of the Securities Act as a transaction by an issuer not involving a public
offering.

ITEM 16.  EXHIBITS

     See Exhibit Index.

ITEM 17.  UNDERTAKINGS

     The undersigned registrants hereby undertake:

          1. For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this Registration Statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrants pursuant to Rule 424(b)(1)

                                       II-4
<PAGE>

     or (4) or 497(h) under the Securities Act shall be deemed to be part of
     this Registration Statement as of the time it was declared effective.

          2. For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

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

                                       II-5
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>
        /s/ JAMES D. THOMPSON           Chief Executive Officer, President and   July 7, 2004
--------------------------------------  Director (Principal Executive Officer)
          James D. Thompson




          /s/ VIRGINIA BUNTE              Vice President -- Chief Financial      July 7, 2004
--------------------------------------       Officer (Principal Financial
            Virginia Bunte                     and Accounting Officer)




           /s/ CHARLES SHAW                     Chairman of the Board            July 7, 2004
--------------------------------------
             Charles Shaw




           /s/ JAMES GROVER                            Director                  July 7, 2004
--------------------------------------
             James Grover




           /s/ NOEL WILENS                             Director                  July 7, 2004
--------------------------------------
             Noel Wilens
</Table>

                                       II-6
<PAGE>

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>




          /s/ ROBERTO BUARON                           Director                  July 7, 2004
--------------------------------------
            Roberto Buaron




         /s/ THOMAS G. HARDY                           Director                  July 7, 2004
--------------------------------------
           Thomas G. Hardy




            /s/ JAMES LONG                             Director                  July 7, 2004
--------------------------------------
              James Long




           /s/ CARL F. PAUL                            Director                  July 7, 2004
--------------------------------------
             Carl F. Paul
</Table>

                                       II-7
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>
        /s/ JAMES D. THOMPSON           Chief Executive Officer, President and   July 7, 2004
--------------------------------------  Director (Principal Executive Officer)
          James D. Thompson




          /s/ VIRGINIA BUNTE              Chief Financial Officer (Principal     July 7, 2004
--------------------------------------    Financial and Accounting Officer)
            Virginia Bunte




           /s/ CHARLES SHAW                     Chairman of the Board            July 7, 2004
--------------------------------------
             Charles Shaw




           /s/ JAMES GROVER                            Director                  July 7, 2004
--------------------------------------
             James Grover




           /s/ NOEL WILENS                             Director                  July 7, 2004
--------------------------------------
             Noel Wilens




          /s/ ROBERTO BUARON                           Director                  July 7, 2004
--------------------------------------
            Roberto Buaron
</Table>

                                       II-8
<PAGE>

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>




         /s/ THOMAS G. HARDY                           Director                  July 7, 2004
--------------------------------------
           Thomas G. Hardy




            /s/ JAMES LONG                             Director                  July 7, 2004
--------------------------------------
              James Long




           /s/ CARL F. PAUL                            Director                  July 7, 2004
--------------------------------------
             Carl F. Paul
</Table>

                                       II-9
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH HOLDINGS, L.P.

                                          By: Golfsmith GP Holdings, Inc., its
                                          General Partner

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>
        /s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson                 of Golfsmith GP Holdings, Inc.




          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------        and Accounting Officer) of
            Virginia Bunte                   Golfsmith GP Holdings, Inc.




           /s/ JAMES GROVER               Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             James Grover




           /s/ NOEL WILENS                Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             Noel Wilens
</Table>

                                      II-10
<PAGE>

<Table>
<Caption>
              SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
<S>                                     <C>                                      <C>




            /s/ JAMES LONG                Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
              James Long




           /s/ CARL F. PAUL               Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             Carl F. Paul
</Table>

                                      II-11
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH GP HOLDINGS, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                      DATE
              ---------                                 -----                      ----
<S>     <C>                              <C>                                   <C>

        /s/ JAMES D. THOMPSON                Chief Executive Officer and       July 7, 2004
--------------------------------------     President (Principal Executive
          James D. Thompson                           Officer)


          /s/ VIRGINIA BUNTE             Chief Financial Officer (Principal    July 7, 2004
--------------------------------------    Financial and Accounting Officer)
            Virginia Bunte


           /s/ JAMES GROVER                           Director                 July 7, 2004
--------------------------------------
             James Grover


           /s/ NOEL WILENS                            Director                 July 7, 2004
--------------------------------------
             Noel Wilens


            /s/ JAMES LONG                            Director                 July 7, 2004
--------------------------------------
              James Long


           /s/ CARL F. PAUL                           Director                 July 7, 2004
--------------------------------------
             Carl F. Paul
</Table>

                                      II-12
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH GP, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
<S>     <C>                              <C>                                    <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-13
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH DELAWARE, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
<S>     <C>                              <C>                                    <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-14
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH CANADA, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
<S>     <C>                              <C>                                    <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-15
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH EUROPE, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
<S>     <C>                              <C>                                    <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-16
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH USA, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
<S>     <C>                              <C>                                     <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-17
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH NU, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
<S>     <C>                              <C>                                     <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-18
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH LICENSING, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
<S>     <C>                              <C>                                     <C>

        /s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte


           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-19
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL, L.P.

                                          By: Golfsmith GP, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
<S>     <C>                              <C>                                     <C>

        /s/ JAMES D. THOMPSON              President of Golfsmith GP, L.L.C.     July 7, 2004
--------------------------------------       (Principal Executive Officer)
          James D. Thompson


          /s/ VIRGINIA BUNTE               Treasurer of Golfsmith GP, L.L.C.     July 7, 2004
--------------------------------------         (Principal Financial and
            Virginia Bunte                        Accounting Officer)


           /s/ NOEL WILENS                  Manager of Golfsmith GP, L.L.C.      July 7, 2004
--------------------------------------
             Noel Wilens


           /s/ JAMES GROVER                 Manager of Golfsmith GP, L.L.C.      July 7, 2004
--------------------------------------
             James Grover
</Table>

                                      II-20
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          DON SHERWOOD GOLF SHOP

                                          By:      /s/ JAMES THOMPSON
                                            ------------------------------------
                                              Name: James Thompson
                                              Title:   Chief Executive Officer
                                                       and President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

<Table>
<Caption>
              SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
<S>     <C>                              <C>                                     <C>

          /s/ JAMES THOMPSON             Chief Executive Officer and President   July 7, 2004
--------------------------------------       (Principal Executive Officer)
            James Thompson


          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte


           /s/ JAMES GROVER                  Vice President, Secretary and       July 7, 2004
--------------------------------------                 Director
             James Grover


           /s/ CHARLES SHAW                            Director                  July 7, 2004
--------------------------------------
             Charles Shaw


          /s/ NOEL E. WILENS                  Vice-President and Director        July 7, 2004
--------------------------------------
            Noel E. Wilens
</Table>

                                      II-21
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
  2.1    Agreement and Plan of Merger, dated as of September 23,
         2002, among Golfsmith International, Inc., Golfsmith
         International Holdings, Inc. and BGA Acquisition Corporation
         (filed as Exhibit 2.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.1    Certificate of Incorporation of Golfsmith International,
         Inc. (filed as Exhibit 3.1 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.2    Bylaws of Golfsmith International, Inc. (filed as Exhibit
         3.2 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.3    Amended and Restated Certificate of Incorporation of
         Golfsmith International Holdings, Inc. (filed as Exhibit 3.3
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.4    Bylaws of Golfsmith International Holdings, Inc. (filed as
         Exhibit 3.4 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.5    Certificate of Incorporation of Golfsmith GP Holdings, Inc.
         (filed as Exhibit 3.5 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.6    Bylaws of Golfsmith GP Holdings, Inc. (filed as Exhibit 3.6
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.7    Certificate of Limited Partnership of Golfsmith Holdings,
         L.P. (filed as Exhibit 3.7 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.8    Amended and Restated Limited Partnership Agreement of
         Golfsmith Holdings, L.P. (filed as Exhibit 3.8 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.9    Certificate of Formation of Golfsmith GP, L.L.C. (filed as
         Exhibit 3.9 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.10   Company Agreement of Golfsmith GP, L.L.C. (filed as Exhibit
         3.10 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.11   Certificate of Formation of Golfsmith Delaware, L.L.C.
         (filed as Exhibit 3.11 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.12   Company Agreement of Golfsmith Delaware, L.L.C. (filed as
         Exhibit 3.12 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.13   Certificate of Formation of Golfsmith Canada, L.L.C. (filed
         as Exhibit 3.13 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.14   Company Agreement of Golfsmith Canada, L.L.C. (filed as
         Exhibit 3.14 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.15   Certificate of Formation of Golfsmith Europe, L.L.C. (filed
         as Exhibit 3.15 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.16   Company Agreement of Golfsmith Europe, L.L.C. (filed as
         Exhibit 3.16 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.17   Certificate of Formation of Golfsmith USA, L.L.C. (filed as
         Exhibit 3.17 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.18   Company Agreement of Golfsmith USA, L.L.C. (filed as Exhibit
         3.18 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.19   Certificate of Formation of Golfsmith NU, L.L.C. (filed as
         Exhibit 3.19 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.20   Company Agreement of Golfsmith NU, L.L.C. (filed as Exhibit
         3.20 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.21   Certificate of Formation of Golfsmith Licensing, L.L.C.
         (filed as Exhibit 3.21 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
  3.22   Company Agreement of Golfsmith Licensing, L.L.C. (filed as
         Exhibit 3.22 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.23   Certificate of Limited Partnership of Golfsmith
         International, L.P. (filed as Exhibit 3.23 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  3.24   Limited Partnership Agreement of Golfsmith International,
         L.P. (filed as Exhibit 3.24 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.25*  Articles of Incorporation of Don Sherwood Golf Shop.
  3.26*  By-laws of Don Sherwood Golf Shop.
  4.1    Indenture, dated as of October 15, 2002, among Golfsmith
         International, Inc., the guarantors named and defined
         therein and U.S. Bank Trust National Association, as trustee
         (filed as Exhibit 4.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  4.2    Registration Rights Agreement, dated as of October 15, 2002,
         among Golfsmith International, Inc., the guarantors named
         and defined therein and Jefferies & Company, Inc., as the
         initial purchaser (filed as Exhibit 4.3 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.3    Security Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other grantors named
         and defined therein and U.S. Bank Trust National
         Association, as collateral agent (filed as Exhibit 4.4 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.4    Supplement No. 1 to Security Agreement, dated as of July 24,
         2003, between Don Sherwood Golf Shop, Inc. and U.S. Bank
         Trust National Association, as collateral agent (filed as
         Exhibit 4.4 to Golfsmith International Holdings, Inc.'s
         Annual Report on Form 10-K for the fiscal year ended January
         3, 2004, file No. 333-10117, and incorporated herein by
         reference).
  4.5    Trademark Security Agreement, dated as of October 15, 2002,
         between Golfsmith International, Inc. and U.S. Bank Trust
         National Association, as collateral agent (filed as Exhibit
         4.5 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.6    Trademark Security Agreement, dated as of July 24, 2003,
         between Don Sherwood Golf Shop, Inc. and U.S. Bank Trust
         National Association, as collateral agent (filed as Exhibit
         4.6 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.7    Deed of Trust, dated as of October 15, 2002, by Golfsmith
         International, L.P. to M. Marvin Katz, as trustee for the
         benefit of U.S. Bank Trust National Association, as
         indenture trustee (filed as Exhibit 4.6 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.8    Open-End Leasehold Mortgage, dated November 28, 2003, from
         Golfsmith NU, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.8 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.9    Leasehold Mortgage, dated November 28, 2003, from Golfsmith
         NU, L.L.C. in favor of U.S. Bank Trust National Association,
         as indenture trustee (filed as Exhibit 4.9 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
  4.10   Leasehold Deed of Trust, dated November 28, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.10 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
  4.11   Leasehold Deed of Trust, dated December 23, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.11 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.12   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.12 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.13   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.13 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.14   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.14 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.15   Leasehold Deed of Trust, dated November 28, 2003, from
         Golfsmith International, L.P. in favor of U.S. Bank Trust
         National Association, as indenture trustee (filed as Exhibit
         4.15 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.16   Leasehold Deed of Trust, recorded on December 22, 2003, from
         Golfsmith International, L.P. in favor of U.S. Bank Trust
         National Association, as indenture trustee (filed as Exhibit
         4.16 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.17   Leasehold Mortgage, dated November 28, 2003, from Golfsmith
         NU, L.L.C. in favor of U.S. Bank Trust National Association,
         as indenture trustee (filed as Exhibit 4.17 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
  4.18   Leasehold Mortgage, dated December 23, 2003, from Golfsmith
         NU, L.L.C., in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.18 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.19   Security Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other grantors named
         and defined therein and General Electric Capital
         Corporation, as agent for the lenders (filed as Exhibit 4.7
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.20   Trademark Security Agreement, dated as of October 15, 2002,
         among Golfsmith International, Inc. and the other grantors
         named and defined therein and General Electric Capital
         Corporation, as agent for itself and the lenders (filed as
         Exhibit 4.8 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  4.21   Trademark Security Agreement, dated as of July 24, 2003,
         between Don Sherwood Golf Shop, Inc. and General Electric
         Capital Corporation, as agent for itself and the lenders
         (filed as Exhibit 4.21 to Golfsmith International Holdings,
         Inc.'s Annual Report on Form 10-K for the fiscal year ended
         January 3, 2004, file No. 333-10117, and incorporated herein
         by reference).
  4.22   Pledge Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other pledgors named
         and defined therein and General Electric Capital
         Corporation, as secured party (filed as Exhibit 4.9 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
  4.23   Intercompany Subordination Agreement, dated as of October
         15, 2002, among Golfsmith International, Inc., Golfsmith
         International Holdings, Inc., Golfsmith GP Holdings, Inc.,
         Golfsmith Holdings, L.P., Golfsmith International, L.P.,
         Golfsmith GP, L.L.C., Golfsmith Delaware, L.L.C., Golfsmith
         Canada, L.L.C., Golfsmith Europe, L.L.C., Golfsmith USA,
         L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing L.L.C.,
         and General Electric Capital Corporation, as agent for the
         lenders (filed as Exhibit 4.10 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  4.24   Intercreditor Agreement, dated as of October 15, 2002, among
         General Electric Capital Corporation, as senior agent, U.S.
         Bank Trust National Association, as trustee and collateral
         agent, and Golfsmith International, Inc. and the other
         credit parties named therein (filed as Exhibit 4.11 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.25   Assumption and Joinder Agreement in connection with the
         Intercreditor Agreement, dated as of July 24, 2003, made by
         Don Sherwood Golf Shop, Inc. in favor of General Electric
         Capital Corporation, as senior agent (filed as Exhibit 4.25
         to Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.26   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith Holdings, L.P., as the issuer,
         Golfsmith International, Inc., as the pledgor, General
         Electric Capital Corporation, as the senior pledgee and U.S.
         Bank Trust National Association, as collateral agent and the
         junior pledge (filed as Exhibit 4.12 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.27   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith International, L.P., as the
         issuer, Golfsmith Delaware, L.L.C., as the pledgor, General
         Electric Capital Corporation, as the senior pledgee and U.S.
         Bank Trust National Association, as collateral agent and the
         junior pledge (filed as Exhibit 4.13 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.28   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith GP, L.L.C. and the other issuers
         named therein, Golfsmith Holdings, L.P., as the pledgor,
         General Electric Capital Corporation, as the senior pledgee
         and U.S. Bank Trust National Association, as collateral
         agent and the junior pledge (filed as Exhibit 4.13 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  5.1*   Opinion of King & Spalding LLP.
  9.1    Stockholders Agreement, dated as of October 15, 2002, among
         Golfsmith International Holdings, Inc., Atlantic Equity
         Partners III, L.P. and the other stockholders party thereto
         (filed as Exhibit 9.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.1    Redemption Agreement, dated as of September 23, 2002, among
         DLJ Investment Partners, L.P., DLJ Investment Fundings,
         Inc., DLJ ESC II L.P., Golfsmith International, Inc.,
         Golfsmith Holdings, L.P., Golfsmith GP Holdings, Inc.,
         Golfsmith International Holdings, Inc. and BGA Acquisition
         Corporation (filed as Exhibit 10.1 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
 10.2    Escrow Agreement, dated as of October 15, 2002, among
         Golfsmith International Holdings, Inc., Carl F. Paul and
         Franklin C. Paul, as stockholder representatives, and
         JPMorgan Chase Bank, as escrow agent (filed as Exhibit 10.2
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
 10.3    Indemnification Agreement, dated as of October 15, 2002,
         among Golfsmith International Holdings, Inc., and Carl F.
         Paul and Franklin C. Paul, as stockholder representatives
         (filed as Exhibit 10.3 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
 10.4    Management Consulting Agreement, dated as of October 15,
         2002, among Golfsmith International Holdings, Inc.,
         Golfsmith International, Inc. and First Atlantic Capital,
         Ltd. (filed as Exhibit 10.4 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.5    Credit Agreement, dated as of October 15, 2002, among
         Golfsmith International, L.P., Golfsmith NU, L.L.C., and
         Golfsmith USA, L.L.C., as borrowers, Golfsmith
         International, Inc. and the other credit parties named
         therein and General Electric Capital Corporation, as a
         lender, as the initial L/C issuer and as agent (filed as
         Exhibit 10.5 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.6    Amendment No. 1 to the Credit Agreement dated as of January
         10, 2003 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.6 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.7    Amendment No. 2 to the Credit Agreement dated as of
         September 5, 2003 among Golfsmith International, L.P.,
         Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C. as Borrowers
         And General Electric Capital Corporation as a lender (filed
         as Exhibit 10.7 to Golfsmith International Holdings, Inc.'s
         Annual Report on Form 10-K for the fiscal year ended January
         3, 2004, file No. 333-10117, and incorporated herein by
         reference).
 10.8    Amendment No. 3 to the Credit Agreement dated as of February
         10, 2004 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.8 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.9    Amendment No. 4 to the Credit Agreement dated as of March
         11, 2004 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.9 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.10   Assumption and Joinder Agreement, dated as of July 24, 2003
         in connection with the Credit Agreement, made by Don
         Sherwood Golf Shop, Inc. in favor of General Electric
         Capital Corporation, as a lender, as the initial L/C issuer
         and as agent (filed as Exhibit 10.10 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
 10.11   Guaranty, dated as of October 15, 2002, among Golfsmith
         International, Inc. and the other guarantors named and
         defined therein and General Electric Capital Corporation, as
         agent for itself and the lenders (filed as Exhibit 10.6 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
 10.12   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Carl Paul (filed
         as Exhibit 10.7 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.13   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Franklin Paul
         (filed as Exhibit 10.8 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.14   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Barbara Paul
         (filed as Exhibit 10.9 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.15   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Kelly Redding
         (filed as Exhibit 10.10 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
</Table>
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
 10.16   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of John Moriarty
         (filed as Exhibit 10.11 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.17   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and Carl F. Paul (filed as
         Exhibit 10.12 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.18   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and Franklin C. Paul (filed as
         Exhibit 10.13 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.19   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and James D. Thompson (filed
         as Exhibit 10.14 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.20   Employment Agreement, dated as of January 15, 2003, between
         Golfsmith International, Inc. and Virginia Bunte (filed as
         Exhibit 10.15 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.21   Golfsmith International Holdings, Inc. 2002 Incentive Stock
         Plan (filed as Exhibit 10.16 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.22   Golfsmith International, Inc. Severance Benefit Plan (filed
         as Exhibit 10.17 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.23*  Golfsmith 2004 Management Incentive Plan.
 10.24*  Form of Exchange Agreement between Golfsmith International
         Holdings, Inc. and Atlantic Equity Partners III, L.P.
 12.1*   Computation of Ratio of Earnings to Fixed Charges.
 21.1    Subsidiaries of the Registrant (filed as Exhibit 21.1 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
 23.1    Consent of King & Spalding LLP (included as part of Exhibit
         5.1).
 23.2*   Consent of Ernst & Young LLP.
 24.1    Power of Attorney (included in signature pages).
 25.1    Statement of Eligibility of Trustee on Form T-1 (filed as
         Exhibit 25.1 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
</Table>

---------------

* Filed herewith.
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 2004.

                                                           REGISTRATION NO. 333-

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------
GOLFSMITH INTERNATIONAL HOLDINGS, INC.
     GOLFSMITH INTERNATIONAL, INC.                                                      As Registrant of Guarantees
    As Issuer and Registrant of Debt
               Securities
                DELAWARE                                   5940                                   DELAWARE
    (State or Other Jurisdiction of            (Primary Standard Industrial           (State or Other Jurisdiction of
     Incorporation or Organization)       Classification Code Number for each of       Incorporation or Organization)
                                                     the Registrants)
               22-1957337                                                                        16-1634897
  (I.R.S. Employer Identification No.)                                              (I.R.S. Employer Identification No.)
SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO
           (Exact name of registrants as specified in their charters)
                             ---------------------
                                 11000 N. IH-35
                            AUSTIN, TEXAS 78753-3195
                                 (512) 837-8810
  (Address, including zip code, and telephone number, including area code, of
                   registrants' principal executive offices)
                             ---------------------
                               JAMES D. THOMPSON
                     CHIEF EXECUTIVE OFFICER AND PRESIDENT
                         GOLFSMITH INTERNATIONAL, INC.
                                 11000 N. IH35
                            AUSTIN, TEXAS 78753-3195
                                 (512) 837-8810
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                WITH A COPY TO:

                                  TRACY KIMMEL
                                MARK E. THOMPSON
                              KING & SPALDING LLP
                          1185 AVENUE OF THE AMERICAS
                            NEW YORK, NEW YORK 10036
                                 (212) 556-2100
                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:  As soon as
practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
---------

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
---------

    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
---------

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
                                                                     PROPOSED MAXIMUM     PROPOSED MAXIMUM
           TITLE OF EACH CLASS OF                 AMOUNT TO BE        OFFERING PRICE     AGGREGATE OFFERING       AMOUNT OF
         SECURITIES TO BE REGISTERED               REGISTERED          PER UNIT(1)            PRICE(1)         REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
8.375% Senior Secured Notes Due 2009               $7,250,000              100%              $7,250,000              $919
---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 8.375% Senior Secured Notes              --                   --                   --                  (2)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee pursuant
    to Rule 457(o) under the Securities Act of 1933.

(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no additional
    registration fee is payable with respect to the guarantees.

    THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
SCHEDULE A
STATE OR OTHER JURISDICTION OF    I.R.S. EMPLOYER
SUBSIDIARY GUARANTORS                                   INCORPORATION OR ORGANIZATION    IDENTIFICATION NO.
---------------------                                   ------------------------------   ------------------
Golfsmith GP Holdings, Inc............................  Delaware                         74-2882421
Golfsmith Holdings, L.P. .............................  Delaware                         74-2882420
Golfsmith GP, L.L.C. .................................  Delaware                         74-2882412
Golfsmith Delaware, L.L.C. ...........................  Delaware                         74-2882419
Golfsmith Canada, L.L.C. .............................  Delaware                         74-2882407
Golfsmith Europe, L.L.C. .............................  Delaware                         74-2882408
Golfsmith USA, L.L.C. ................................  Delaware                         74-2882405
Golfsmith NU, L.L.C. .................................  Delaware                         74-2882404
Golfsmith Licensing, L.L.C. ..........................  Delaware                         74-3075499
Golfsmith International, L.P. ........................  Delaware                         74-2864257
Don Sherwood Golf Shop................................  California                       94-1746387
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                   SUBJECT TO COMPLETION, DATED JULY 7, 2004.
PROSPECTUS

                                   $7,250,000

                         GOLFSMITH INTERNATIONAL, INC.
                      8.375% SENIOR SECURED NOTES DUE 2009

    This prospectus relates to the offer and sale by Golfsmith International
Holdings, Inc., our parent company, of $7,250,000 aggregate principal amount at
maturity of our 8.375% Senior Secured Notes Due 2009. Golfsmith International
Holdings, Inc., or Holdings, intends to acquire an aggregate of $7,250,000
principal amount at maturity of notes from its majority stockholder in exchange
for shares of its common stock and cash in a private transaction. Holdings has
indicated that it intends to contribute the net proceeds of its sale of the
notes to us.

TERMS OF THE NOTES

- The notes were issued on October 15, 2002, in an aggregate principal amount at
  maturity of $93,750,000.

- We pay interest on the notes at an annual rate of 8.375%. Interest on the
  notes is payable on March 1 and September 1 of each year.

- The notes are our senior secured obligations and rank equally with all of our
  other senior indebtedness. As of April 3, 2004, we had $1.1 million of senior
  indebtedness outstanding in addition to the notes.

- The notes will mature on October 15, 2009.

- Our senior credit facility and the related guarantees are secured by a first
  priority lien on substantially all of our assets, the assets of our parent
  (including our common stock) and the assets of our subsidiaries, other than
  real property, fixtures, equipment and proceeds thereof. The notes and the
  related guarantees are secured by a first priority lien on real property,
  fixtures, equipment and the proceeds thereof and a second priority lien on
  substantially all other assets.

- We may redeem some or all of the notes at any time prior to October 15, 2006
  at a make-whole redemption price. On or after October 15, 2006, we may, at our
  option, redeem some or all of the notes at a redemption price that will
  decrease ratably from 106.50% of accreted value to 100.00% of accreted value
  on October 15, 2008, in all cases plus accrued and unpaid interest. Prior to
  October 15, 2005, we may redeem on one or more occasions notes, if any
  outstanding, in an amount equal to up to 35% in the aggregate of the principal
  amount at maturity of the notes originally issued at a redemption price equal
  to 113% of accreted value plus accrued and unpaid interest with the proceeds
  of certain equity offerings.

- On October 15, 2007 and October 15, 2008, we must make a partial pro rata
  redemption of 20% and 10% (which percentages are subject to reduction as
  described in this prospectus), respectively, of the principal amount at
  maturity of each note, plus accrued and unpaid interest to the redemption
  date. These redemption requirements may be reduced by the aggregate principal
  amount at maturity of any notes we have previously repurchased pursuant to
  excess cash flow offers.

- Within 120 days after the end of each fiscal year, we must offer to repurchase
  a portion of the notes at 100% of their accreted value with 50% of our excess
  cash flow, as defined in the indenture governing the notes.

- If we experience a change of control, we must give holders of the notes the
  opportunity to sell to us their notes at 101% of their accreted value plus
  accrued and unpaid interest.

- If we sell assets, we may have to offer to use the proceeds to repurchase
  notes at 100% of their accreted value plus accrued and unpaid interest.

- All of our existing domestic restricted subsidiaries and Holdings have fully
  and unconditionally guaranteed, and all of our future domestic restricted
  subsidiaries will fully and unconditionally guarantee, the notes, jointly and
  severally, on a senior secured basis.

- The notes are not listed and we do not intend to list the notes on any
  securities exchange or to include the notes in any automated quotation system.
  Currently, there is no public market for the notes.

- The notes will be ready for delivery in book-entry form only through The
  Depository Trust Company on or about          , 2004.

     SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF THE FACTORS
THAT YOU SHOULD CONSIDER BEFORE BUYING THE NOTES.

    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                   PRICE:   % OF PRINCIPAL AMOUNT AT MATURITY

                The date of this prospectus is           , 2004.
TABLE OF CONTENTS
Market Share, Ranking and Other Industry Data...............    i
Summary.....................................................    1
Risk Factors................................................   10
Forward-Looking Statements..................................   25
Use of Proceeds.............................................   26
Capitalization..............................................   27
Selected Consolidated Financial Data........................   28
Management's Discussion and Analysis of Financial Condition    30
  and Results of Operations.................................
Business....................................................   45
Management..................................................   52
Security Ownership of Certain Beneficial Owners and            59
  Management................................................
Related Party Transactions..................................   61
Selling Noteholder..........................................   64
Description of Senior Credit Facility.......................   65
Description of the Notes....................................   69
Material United States Federal Income Tax Consequences......  113
Plan of Distribution........................................  118
Where You Can Find More Information.........................  119
Legal Matters...............................................  119
Experts.....................................................  119
Index to Consolidated Financial Statements..................  F-1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER WE NOR ANY OF THE GUARANTORS HAVE AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH ADDITIONAL OR DIFFERENT INFORMATION. HOLDINGS IS OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, NOTES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR NOTES.

                             ---------------------

     Except as the context otherwise requires, we have assumed in this
prospectus that Golfsmith International Holdings, Inc., or Holdings, will issue
1,526,109 shares of its common stock to its majority stockholder, Atlantic
Equity Partners III, L.P., in exchange for $7,250,000 aggregate principal amount
at maturity of notes in the private transaction described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder,"
which assumes that Holdings will sell the notes offered by this prospectus for
an offering price of 83.8478% of the principal amount at maturity (the book
value of such notes as of July 2, 2004). If the actual sale price of the notes
is greater than the book value of the notes at the time of sale, then Holdings
will make a cash payment to Atlantic Equity Partners III in addition to issuing
shares of its common stock, as described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder."

                 MARKET SHARE, RANKING AND OTHER INDUSTRY DATA

     The market share, ranking and other industry data contained in this
prospectus are based either on our estimates or derived from industry data or
third-party sources and, in each case, we believe these estimates are reasonable
as of the date of this prospectus. However, market share data is subject to
change and cannot always be verified due to limits on the availability and
reliability of independent sources, the voluntary nature of the data gathering
process and other limitations and uncertainties inherent in any statistical
survey of market shares. In addition, purchasing patterns and consumer
preferences can and do change. As a result, you should be aware that market
share, ranking and other similar data set forth herein, and estimates and
beliefs based on such data, may not be accurate.

                                        i
SUMMARY

     The following summary is qualified in its entirety by the more detailed
information included elsewhere in this prospectus. Because this is a summary, it
may not contain all of the information that may be important to you. You should
read this prospectus carefully before making an investment decision. On October
15, 2002, we were acquired by a subsidiary of Atlantic Equity Partners III, L.P.
in a merger transaction described below under "-- The Merger." Unless the
context requires otherwise, references in this prospectus to (1) "Golfsmith,"
"our company," "we," "our," "us" and similar expressions refer to Golfsmith
International, Inc., a Delaware corporation, and its consolidated subsidiaries
and (2) "Holdings" refers to Golfsmith International Holdings, Inc., a Delaware
corporation, which became our parent company upon completion of the merger and
is the selling noteholder. As a result of applying the required purchase
accounting rules, the financial statements of Golfsmith International Holdings,
Inc. are significantly affected. The application of purchase accounting rules
results in different accounting bases and hence financial information for the
periods beginning on October 16, 2002. The term "successor" refers to Golfsmith
International Holdings, Inc. and all of its subsidiaries, including Golfsmith
International, Inc. following the acquisition on October 15, 2002. The term
"predecessor" refers to Golfsmith International, Inc. prior to being acquired by
Golfsmith International Holdings, Inc.

     References to "fiscal 2002" refer to the combined financial results of our
predecessor from December 30, 2001 through October 15, 2002 and of Holdings from
October 16, 2002 through December 28, 2002. As used herein, references to any
other "fiscal" year of our company refer to the fiscal year of us or our
predecessor ended or ending on the Saturday closest to December 31 of such year.

                                  THE COMPANY

     Carl Paul founded our company in 1967 when he began providing clubmakers
with the components necessary to offer custom-made golf clubs at a time when
most golfers could only purchase ready-made, off-the-shelf equipment. In order
to capitalize on this market opportunity, we helped pioneer the golf club
components industry by designing and selling a line of components and supplies
(principally golf clubheads, shafts, grips and tools) for custom clubmakers
through our clubmakers' catalog. Over the years we have complemented and
expanded our operations by opening our first retail outlet in 1972, mailing our
first general golf product catalog in 1975, opening our first superstore in
1992, opening the Harvey Penick Golf Academy in 1993 and launching golfsmith.com
in 1997.

     We are a multi-channel retailer of golf equipment, merchandise and training
curriculum for consumers and golf clubmaking businesses. We offer equipment from
leading manufacturers, including Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). In addition, we offer our own
proprietary brands, including Golfsmith(R), Lynx(R), Snake Eyes(R), Killer
Bee(R) and Zevo(R). We market our products through 42 superstores as well as
through our direct-to-consumer channel, which includes our clubmaking and
accessory catalogs and our Internet site. We also operate the Harvey Penick Golf
Academy, an instructional school incorporating the techniques of the well-known
golf instructor, the late Harvey Penick.

     We offer a complete line of golf equipment and related accessories through
multiple distribution channels:

          Superstores.  We opened our first golf superstore in 1992 and
     currently operate 42 superstores. These stores range in size from
     approximately 8,000 to 30,000 square feet. Our superstores feature a wide
     selection of golf equipment from major name brand manufacturers.

          Direct-to-Consumer.  Our principal publications are the Golfsmith
     Accessory Catalog and the Golfsmith Clubmaking Catalog. We also sell our
     products through our website,www.golfsmith.com. Through our
     direct-to-consumer distribution channels, we provide customers our offering
     of products, including equipment, apparel, accessories and clubmaking
     components and tools.

                                        1
Harvey Penick Academy.  In 1993, we partnered with Austin native and
     well-known golf instructor, the late Harvey Penick, to form the Harvey
     Penick Golf Academy. The academy has attracted over 17,000 students since
     its inception. We believe the academy helps contribute to sales at our
     adjacent Austin superstore.

          International.  We work with a group of international distributors to
     offer golf club components and equipment to clubmakers and golfers in
     selected regions outside the United States. In the United Kingdom, we sell
     our proprietary branded equipment through a commissioned sales force
     directly to retailers. Throughout most of Europe and parts of Asia and
     other parts of the world, we sell our products through a network of
     distributors.

THE MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., or Holdings, merged with and into
Golfsmith International, Inc., or Golfsmith. Golfsmith is the surviving
corporation and is a wholly owned subsidiary of Holdings as a result of the
merger. The aggregate purchase price for the merger was approximately $121.0
million. The components of this purchase price included the payment to our
stockholders prior to the merger of $101.5 million in cash and $12.8 million of
our equity securities, and $6.7 million in fees and expenses incurred in
connection with the merger. The cash portion of the purchase price for the
merger was funded out of:

     - the net proceeds from the offering of our 8.375% senior secured notes due
       2009, of approximately $67.9 million;

     - the cash contribution of $50.0 million described below; and

     - existing cash.

     The merger agreement required Golfsmith to repay and terminate all then
existing indebtedness and also required Holdings to put in place a new revolving
credit facility as a condition to the closing of the merger. For more
information about the terms of the merger generally, you should read the
description of the merger agreement in "Related Party Transactions."

     Holdings was formed by Atlantic Equity Partners III, L.P., a limited
partnership operated by First Atlantic Capital Ltd. First Atlantic is a private
equity investment firm. Holdings was formed solely for the purpose of completing
the merger and had no operations, assets or properties prior to the merger. In
connection with the merger, Atlantic Equity Partners III contributed $50.0
million in return for approximately 79.7% of the common stock of Holdings on a
fully diluted basis. In addition, some of our stockholders prior to the merger,
including members of our current management, received shares of common stock of
Holdings and restricted common stock units, which entitle the holders thereof to
shares of common stock of Holdings. As of April 3, 2004, these stockholders
owned in the aggregate 17.3% of the common stock of Holdings on a fully diluted
basis, including outstanding stock options. In connection with the merger, we
entered into a management consulting agreement with First Atlantic, and all of
Holdings' stockholders, including members of our management, entered into a
stockholders agreement and certain other contractual arrangements with First
Atlantic as described in "Related Party Transactions."

                             ---------------------

     We were incorporated in Texas in 1973 and reincorporated in Delaware in
1998. Our principal offices are located at 11000 N. IH-35, Austin, Texas
78753-3195. Our telephone number is (512) 837-8810. Our website address is
www.golfsmith.com. Information on our website does not constitute part of this
prospectus.

                                        2
THE NOTES

     The following summary is not intended to be complete. For a more complete
description of the terms of the notes, see "Description of the Notes" in this
prospectus.

Issuer........................   Golfsmith International, Inc.

Securities Offered............   $7,250,000 aggregate principal amount at
                                 maturity of our 8.375% senior secured notes due
                                 2009.

Issue Price...................   The notes were issued at an issue price of $800
                                 per note. Each note has a principal amount at
                                 maturity of $1,000.

Maturity Date.................   October 15, 2009.

Interest Rate and Payment
Dates.........................   We pay interest on the notes at a rate equal to
                                 8.375% per year. Interest on the notes is
                                 payable semi-annually in cash in arrears on
                                 March 1 and September 1 of each year.

Original Issue Discount.......   The notes were issued with original issue
                                 discount (that is, the difference between the
                                 stated principal amount at maturity and the
                                 issue price of the notes) for federal income
                                 tax purposes. Thus, original issue discount
                                 accrues from the issue date and must be
                                 included as interest income periodically in a
                                 holder's gross income for federal income tax
                                 purposes in advance of receipt of the cash
                                 payments to which the income is attributable.
                                 See "Material United States Federal Income Tax
                                 Consequences."

HYDO Payments.................   On each interest payment date beginning March
                                 1, 2008, in addition to accrued interest due on
                                 that date, we will make a payment, which we
                                 call a HYDO payment, on each note in an amount
                                 equal to the excess, if any, of:

                                   - the total amount of interest and original
                                     issue discount accrued on the note through
                                     that date, over

                                   - the sum of:

                                      - all amounts of interest and original
                                        issue discount paid in cash with respect
                                        to such note through and including that
                                        date;

                                      - all HYDO payments previously made by us;
                                        and

                                      - the annual "yield to maturity"
                                        applicable for purposes of the accrual
                                        of original issue discount multiplied by
                                        the original principal amount at
                                        maturity of the note.

                                 Each HYDO payment will reduce the outstanding
                                 principal amount at maturity of the applicable
                                 note. As a result of making these HYDO
                                 payments, we will not be subject to special
                                 rules (applicable to some high-yield debt
                                 obligations with significant amounts of unpaid
                                 original issue discount after five years from
                                 their issue date), that would otherwise limit
                                 the amount of interest expense we could deduct
                                 on the notes for U.S. federal income tax
                                 purposes.

Guarantees....................   Holdings, our parent company, has guaranteed
                                 the notes on a senior secured basis. In
                                 addition, all of our domestic restricted

                                        3
subsidiaries have guaranteed, and all of our
                                 future domestic restricted subsidiaries will
                                 guarantee, the notes on a senior secured basis.
                                 If we are unable to make payments on the notes
                                 when they are due, Holdings and our subsidiary
                                 guarantors will be obligated to make them
                                 instead.

Security Interest.............   The notes are secured by a first priority lien
                                 on our real property, fixtures, equipment and
                                 proceeds thereof and a second priority lien on
                                 substantially all of our other assets
                                 (including stock of subsidiaries), and each
                                 guarantee is secured by a first priority lien
                                 on the real property, fixtures, equipment and
                                 proceeds thereof of the relevant guarantor and
                                 a second priority lien on substantially all of
                                 the other assets (including stock of
                                 subsidiaries) of such guarantor. Our senior
                                 credit facility is secured by a first priority
                                 lien on substantially all of the assets of the
                                 borrowers and the guarantors under the senior
                                 credit facility, including stock of their
                                 respective subsidiaries (including all of our
                                 stock) but excluding real property, fixtures,
                                 equipment and proceeds thereof.

Ranking.......................   The notes are our senior secured obligations
                                 and rank equal in right of payment with all of
                                 our existing and future senior indebtedness.
                                 The guarantees are the senior secured
                                 obligations of Holdings and the subsidiary
                                 guarantors and rank equal in right of payment
                                 with all of their respective existing and
                                 future senior indebtedness. As of April 3,
                                 2004, we had $1.1 million of senior
                                 indebtedness outstanding in addition to the
                                 notes. In addition, we had $10.9 million of
                                 borrowing availability (after giving effect to
                                 required reserves of $500,000), subject to
                                 customary conditions, under our senior credit
                                 facility, which, if borrowed, would be senior
                                 indebtedness. In the event of a bankruptcy, the
                                 rights of noteholders to receive any
                                 distribution of assets or the proceeds
                                 therefrom from us, Holdings or the subsidiary
                                 guarantors with respect to the collateral on
                                 which the notes have a second priority lien
                                 will be subject to the prior claims of the
                                 lenders under our senior credit facility.

Optional Make-Whole
Redemption....................   We may, at our option, redeem some or all of
                                 the notes at any time prior to October 15, 2006
                                 by paying the greater of (1) 100% of the
                                 accreted value of the notes and (2) the sum of
                                 the present values of 106.5% of the accreted
                                 value of the notes plus scheduled interest
                                 payments on the notes through and including
                                 October 15, 2006, discounted to the redemption
                                 date on a semi-annual basis at the adjusted
                                 treasury rate plus 50 basis points, plus
                                 accrued and unpaid interest to the redemption
                                 date. In the event that we redeem less than all
                                 of the notes, the trustee will select the notes
                                 for redemption on a pro rata basis or another
                                 method it reasonably determines is fair and
                                 appropriate.

Optional Redemption...........   On or after October 15, 2006, we may redeem all
                                 or a portion of the notes at our option at the
                                 redemption prices described under "Description
                                 of the Notes -- Redemption -- Optional
                                 Redemption On or After October 15, 2006." In
                                 the event that we redeem less than all of the
                                 notes, the trustee will select the notes

                                        4
for redemption on a pro rata basis or another
                                 method it reasonably determines is fair and
                                 appropriate.

Equity Offering Optional
Redemption....................   Prior to October 15, 2005, we may redeem on one
                                 or more occasions notes in an amount equal to
                                 up to 35% in the aggregate of the principal
                                 amount at maturity of the notes originally
                                 issued at 113% of the accreted value of the
                                 notes being redeemed plus accrued and unpaid
                                 interest, if any, to the redemption date with
                                 the net cash proceeds realized by us from any
                                 equity offering. In the event that we redeem
                                 less than all of the notes, we will redeem such
                                 notes on a pro rata basis.

Mandatory Redemption..........   We must make a partial pro rata redemption of a
                                 portion of the original principal amount at
                                 maturity of each note according to the
                                 following schedule:
PERCENTAGE OF
                                          DATE                                      PRINCIPAL REDEEMED
                                          ----                                      ------------------
October 15, 2007........................          20%
                                          October 15, 2008........................          10%
In addition, we must pay accrued and unpaid
                                 interest on the principal amount of notes
                                 redeemed to the redemption date.

                                 If we issue additional notes after the issue
                                 date, these percentages will be reduced by
                                 multiplying the relevant percentage by a
                                 fraction, the numerator of which is the
                                 principal amount at maturity of notes issued on
                                 the issue date and the denominator of which is
                                 the sum of the principal amount at maturity of
                                 such notes and the principal amount at maturity
                                 of any additional notes issued under the
                                 indenture.

                                 However, the principal amount at maturity of
                                 notes we must redeem on the dates set forth
                                 above will be reduced by the aggregate
                                 principal amount at maturity of notes we have
                                 previously repurchased pursuant to the excess
                                 cash flow offers, as described below.

Excess Cash Flow Offer........   Within 120 days after the end of each fiscal
                                 year, we must offer to repurchase the maximum
                                 principal amount of notes that may be purchased
                                 with 50% of our excess cash flow from our
                                 previous fiscal year at a purchase price of
                                 100% of the accreted value of the notes to be
                                 purchased. We will repurchase notes pursuant to
                                 any excess cash flow offer on a pro rata basis,
                                 or by another method if required by law. The
                                 indenture governing the notes defines excess
                                 cash flow as consolidated net income plus
                                 interest, amortization and depreciation
                                 expense, income taxes, and net non-cash
                                 charges, less certain capital expenditures,
                                 increases in working capital, cash interest
                                 expense and income taxes.

Change of Control Offer.......   If we experience a change of control, each
                                 holder of notes will have the right to sell us
                                 all or a portion of its notes at 101% of the
                                 accreted value of the notes, plus accrued and
                                 unpaid interest, if any, to the date of
                                 purchase.

Asset Sale Offers.............   If we do not reinvest the proceeds from the
                                 sale of assets in our business, we may have to
                                 use the proceeds to offer to repurchase notes
                                 at 100% of the accreted value of the notes,
                                 plus accrued and unpaid interest, if any, to
                                 the date of purchase.

                                        5
Restrictive Covenants.........   The indenture governing the notes contains
                                 covenants that, among other things, limit our
                                 ability to:

                                   - incur additional indebtedness or issue
                                     disqualified capital stock;

                                   - pay dividends or make other restricted
                                     payments;

                                   - issue capital stock of certain
                                     subsidiaries;

                                   - make capital expenditures;

                                   - enter into transactions with affiliates;

                                   - enter into sale/leaseback transactions;

                                   - create or incur liens;

                                   - transfer or sell assets;

                                   - incur dividend or other payment
                                     restrictions affecting certain
                                     subsidiaries; and

                                   - consummate a merger, consolidation or sale
                                     of all or substantially all of our assets.

                                 These covenants are subject to a number of
                                 important exceptions described below in
                                 "Description of the Notes -- Certain
                                 Covenants."

Events of Default.............   The indenture governing the notes contains the
                                 following as events of default, which could
                                 result in the accreted value and all accrued
                                 and unpaid interest on the notes becoming
                                 immediately due and payable:

                                   - failure to pay premium, if any, interest or
                                     any other amount (other than principal) on
                                     any notes for a period of 30 days or more
                                     after it becomes due and payable;

                                   - failure to pay the principal on any notes
                                     when it becomes due and payable;

                                   - a default upon certain covenants that
                                     continues for a specified period;

                                   - a default under any other agreement in the
                                     indenture or any agreement contained in the
                                     documents relating to the collateral,
                                     including the security agreement described
                                     below, that continues for a specified
                                     period;

                                   - our or any guarantor's failure to pay any
                                     indebtedness when due, if the amount of
                                     such indebtedness is $5.0 million or more
                                     at any one time;

                                   - judgments in excess of $5.0 million are
                                     rendered against us or any of our
                                     restricted subsidiaries and remain unpaid
                                     for a specified period;

                                   - certain events of bankruptcy affecting us
                                     or certain of our subsidiaries;

                                   - any agreement relating to the collateral
                                     ceases to be effective;

                                        6
- we or any of our subsidiaries contest any
                                     agreement relating to the collateral; and

                                   - certain guarantees cease to be in effect.

                                 You should read the description of these events
                                 of default below under "Description of the
                                 Notes -- Events of Default" for a complete
                                 explanation of their terms and exceptions.

                                        7
SUMMARY CONSOLIDATED FINANCIAL DATA

     The following summary consolidated financial data as of and for fiscal
1999, 2000, 2001 and for the period from December 30, 2001 through October 15,
2002 have been derived from the audited consolidated financial statements of
Golfsmith International, Inc., and for the period from October 16, 2002 through
December 28, 2002 and as of and for fiscal 2003 have been derived from the
audited consolidated financial statements of Golfsmith International Holdings,
Inc., all periods of which have been audited by Ernst & Young LLP. Golfsmith
International Holdings, Inc. was formed on September 4, 2002 and became the
parent company of Golfsmith International, Inc. on October 15, 2002 as a result
of the merger. Holdings is a holding company and had no material assets or
operations prior to acquiring all of the capital stock of Golfsmith
International, Inc. in the merger. The summary consolidated financial data of
Holdings as of and for the three months ended March 29, 2003 and April 3, 2004
have been derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and, in our opinion, reflect all adjustments,
consisting of normal accruals, necessary for a fair presentation of the data for
those periods. Our results of operations for the three months ended April 3,
2004 may not be indicative of results that may be expected for the full year.
You should read the information set forth below in conjunction with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.
PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,
                                                                     2001           2002                      THREE MONTHS ENDED
                                         FISCAL YEAR               THROUGH        THROUGH                    --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
RESULTS OF OPERATIONS:
Net revenues..................  $267,946   $232,080   $221,439     $180,315       $ 37,831      $257,745     $ 45,830    $ 65,782
Cost of products sold.........   175,600    153,630    143,118      117,206         25,147       171,083       30,972      42,807
                                --------   --------   --------     --------       --------      --------     --------    --------
Gross profit..................    92,346     78,450     78,321       63,109         12,684        86,662       14,858      22,975
Selling, general and
  administrative..............    78,360     76,352     64,081       48,308         13,581        73,400       14,259      20,168
Store pre-opening/closing
  expenses....................       493      1,592         --          122             93           600           --         329
Amortization of deferred
  compensation(1).............        --         --        458        6,033             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Total operating expenses......    78,853     77,944     64,539       54,463         13,674        74,000       14,259      20,497
                                --------   --------   --------     --------       --------      --------     --------    --------
Operating income..............    13,493        506     13,782        8,646           (990)       12,662          599       2,478
Interest expense..............    (5,775)    (6,905)    (6,825)      (5,206)        (2,210)      (11,157)      (2,639)     (2,795)
Interest income...............        22         82        597          331              7            40            8           1
Other income, net.............       275        449      1,031        2,365             14           164            3         (11)
Minority interest.............      (583)       454       (581)        (844)            --            --           --          --
Loss on debt
  extinguishment(1)...........        --         --         --       (8,047)            --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) before income
  tax.........................     7,432     (5,414)     8,004       (2,755)        (3,179)        1,709       (2,029)       (327)
Income tax benefit
  (expense)...................      (289)       190       (251)        (709)           633          (645)         811         124
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) from continued
  operations..................     7,143     (5,224)     7,753       (3,464)        (2,546)        1,064       (1,217)       (203)
Income (loss) from
  discontinued operations.....        52       (380)      (590)        (230)           (40)           --           --          --
Income (loss) before
  extraordinary items.........     7,195     (5,604)     7,163       (3,694)        (2,586)        1,064       (1,217)       (203)
Extraordinary items(1)........        --         --         --        4,122             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Net income (loss).............  $  7,195   $ (5,604)  $  7,163     $    428       $ (2,586)     $  1,064     $ (1,217)   $   (203)
                                ========   ========   ========     ========       ========      ========     ========    ========
8
PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,
                                                                     2001           2002                      THREE MONTHS ENDED
                                         FISCAL YEAR               THROUGH        THROUGH                    --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
OTHER FINANCIAL DATA:
Depreciation and
  amortization(2).............  $  5,601   $  9,118   $  6,717     $  4,808       $  1,349      $  5,228     $  1,311    $  1,335
Capital expenditures(3).......     9,740      2,107      1,345        2,086          1,127         5,759          409       1,816
Ratio of earnings to fixed
  charges(4)..................       1.6x       0.6x       1.6x         0.7x           0.1x          1.1x         0.5x        0.9x

BALANCE SHEET DATA (AT PERIOD
  END):
Cash and cash equivalents.....  $  3,023   $ 11,149   $ 39,550     $  3,788       $ 11,412      $  2,928     $  2,775    $  4,177
Total assets..................   105,882    106,902    111,500      153,135        160,011       179,327      162,701     196,432
Long-term debt................    23,540     37,145     33,720       75,000         75,380        77,488       77,954      78,029
Total stockholders' equity....    33,004     24,921     32,519       56,011         53,473        58,976       52,246      58,811
---------------

(1) For the period from December 31, 2001 through October 15, 2002, please refer
    to note 5 and note 14 in our consolidated financial statements included in
    this prospectus for a discussion of the extraordinary items, loss on debt
    extinguishment and amortization of deferred compensation.

(2) Excludes the amortization of the debt discount and deferred charges
    associated with our 12% senior subordinated notes which were outstanding
    prior to the merger, the deferred charges associated with our credit
    facility in effect prior to the merger, the amortization of the debt
    discount and deferred charges associated with our 8.375% senior secured
    notes and deferred charges associated with our senior credit facility in
    effect subsequent to the merger.

(3) Capital expenditures consist of total capital expenditures, including
    capital costs associated with opening new stores.

(4) The ratio of earnings to fixed charges is calculated by dividing the fixed
    charges into net income before taxes plus fixed charges. Fixed charges
    consist of interest expense, amortization of deferred debt issuance costs
    and the estimated interest component of rent expense.

                                        9
RISK FACTORS

     You should carefully consider the following factors and other information
included in this prospectus before deciding to buy any of the notes.

RISK FACTORS RELATING TO THE NOTES

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.

     We have a significant amount of indebtedness and we are highly leveraged.
Our total debt outstanding as of April 3, 2004 was $79.1 million (consisting of
the accreted principal amount of the notes and borrowings outstanding under our
senior credit facility), and we had the ability, subject to customary
conditions, to incur $10.9 million of additional debt under our senior credit
facility (after giving effect to required reserves of $500,000). As of April 3,
2004 we had borrowed $1.1 million under our senior credit facility. Our:

     - ratio of total debt to total capitalization was 57% at April 3, 2004;

     - ratio of earnings to fixed charges for the three months ended April 3,
       2004 was 0.9x.

     Our substantial amount of indebtedness could have important consequences
for you. For example, it could:

     - make it more difficult for us to satisfy our obligations with respect to
       the notes upon realization of the common collateral in any bankruptcy
       proceeding because all amounts so released would be required to be used
       to repay borrowings under our senior credit facility;

     - limit our ability to obtain additional financing, if needed, for working
       capital, capital expenditures, acquisitions, and general corporate
       purposes;

     - increase our vulnerability to adverse economic and industry conditions;

     - require us to dedicate a substantial portion of our cash flow from
       operations to payments on our indebtedness, thereby reducing funds
       available for working capital, capital expenditures, acquisitions and
       other purposes;

     - limit our flexibility in planning for, or reacting to, changes in our
       business and/or our industry; and

     - place us at a competitive disadvantage compared to our competitors that
       have less indebtedness.

     The terms of the indenture allow us to incur additional indebtedness,
subject to certain limitations. Any such additional debt could increase the
risks associated with our substantial leverage.

THE INDENTURE AND OUR SENIOR CREDIT FACILITY IMPOSE SIGNIFICANT OPERATING AND
FINANCIAL RESTRICTIONS ON US. IF WE DEFAULT UNDER OUR SENIOR CREDIT FACILITY, WE
MAY NOT BE ABLE TO MAKE PAYMENTS ON THE NOTES.

     The indenture and our senior credit facility impose significant operating
and financial restrictions on us. These restrictions limit our ability and the
ability of our subsidiaries, among other things, to:

     - incur additional indebtedness or issue disqualified capital stock;

     - pay dividends or make other restricted payments;

     - issue capital stock of subsidiaries;

     - make capital expenditures;

     - enter into transactions with affiliates;

     - create or incur liens;

     - transfer or sell assets;

                                        10
- incur dividend or other payment restrictions affecting subsidiaries; and

     - consummate a merger, consolidation or sale of all or substantially all of
       our or its assets.

     In addition, our senior credit facility requires us to maintain compliance
with specified financial ratios, including fixed charge coverage and total
leverage ratios, as well as achievement of a minimum level of EBITDA. Our
ability to comply with these ratios may be affected by events beyond our
control. See "Description of Senior Credit Facility."

     A breach of any of the covenants contained in our senior credit facility,
or our inability to comply with the required financial ratios, could result in
an event of default, which would allow the lenders under the senior credit
facility to discontinue lending and/or to declare all borrowings outstanding to
be due and payable. We, the borrowers under the senior credit facility and the
guarantors of the senior credit facility have granted the lenders under our new
senior credit facility a first priority security interest in substantially all
of our respective assets (including, without limitation, our common stock, all
of the capital stock of our domestic subsidiaries and 65% of the voting capital
stock and 100% of the non-voting capital stock of our foreign subsidiaries that
are direct subsidiaries of us or any of our domestic subsidiaries), other than
real property, fixtures, equipment and proceeds thereof. All of the borrowers
and guarantors under our senior credit facility (other than us) are guarantors
of the notes.

     In the event of any default under the senior credit facility, the lenders
thereunder could elect to discontinue lending and/or to declare all amounts
outstanding to be immediately due and payable, to foreclose upon the assets
pledged to them, or to require Golfsmith, Holdings and each of their domestic
subsidiaries to apply all of their available cash to repay borrowings under the
senior credit facility. If the amounts outstanding under the senior credit
facility or the notes were to be accelerated, we cannot assure you that our
consolidated assets would be sufficient to repay in full the money owed to the
lenders or to our other debt holders, including the holders of the notes.
Although the lenders under our senior credit facility and the holders of the
notes share in the proceeds of this collateral (other than collateral consisting
of real property, fixtures, equipment and the proceeds thereof), our obligations
to the lenders under our senior credit facility are secured on a first priority
basis and our obligations under the notes are secured on a second priority
basis. As a result, the lenders under our senior credit facility are entitled to
receive proceeds from any realization of such collateral to repay their
obligations in full before the holders of the notes. Therefore, if the lenders
under the senior credit facility proceed against the collateral (whether held by
us or any guarantor) securing that indebtedness, including the collateral
pledged by the guarantors, the proceeds received upon the realization of the
collateral upon which the lenders under the senior credit facility have a first
priority lien would be applied first to amounts due under our senior credit
facility before any proceeds will be available to make payments on the notes. In
addition, under the intercreditor agreement, at any time that obligations under
our senior credit facility are outstanding, any actions that may be taken with
respect to such collateral, including the ability to cause the commencement of
enforcement proceedings against such collateral and to control the conduct of
such proceedings, will be at the direction of the lenders under our senior
credit facility, and the trustee, on behalf of the holders of the notes, does
not have the ability to control or direct such actions, even if the rights of
the holders of the notes are adversely affected.

THE LENDERS UNDER OUR SENIOR CREDIT FACILITY MAY LIMIT BORROWINGS UNDER OUR
SENIOR CREDIT FACILITY WHICH COULD LIMIT OUR LIQUIDITY AND THEREBY ADVERSELY
AFFECT OUR BUSINESS AND OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES.

     If the lenders under our credit facility limit our borrowing ability, we
may not have the liquidity we need to purchase inventory or otherwise run our
business. This could cause us to be unable to generate enough cash flow to make
payments on the notes or otherwise adversely affect our business. The amount
available to be borrowed under our senior credit facility is limited for each
borrower to 85% of the net amount of eligible receivables of such borrower plus
the lesser of 65% of the value of eligible inventory (valued on a lower of cost
or market basis) of such borrower and 60% of the net orderly liquidation value
of eligible inventory of such borrower. The lender agent under our senior credit
facility retains the right

                                        11
from time to time to establish or modify advance rates, standards of eligibility
and reserves against availability. The borrowers have agreed with the lender
agent that, in addition to other reserves that the lender agent may impose, they
will maintain an availability reserve at all times of $0.5 million. As a result,
the amount of borrowings available to the borrowers under the senior credit
facility may at no time exceed $12.0 million, unless the lender agent releases
that reserve. In addition, the occurrence of an event of default under the
senior credit facility, or the occurrence of a material adverse change in our
financial condition, operations, business or prospects, or the inability of the
borrowers to make certain representations required to be made upon each
borrowing, would entitle the lenders to withhold further funding under the
senior credit facility. These limitations may result in the borrowers being able
to borrow less than the $12.0 million availability under the senior credit
facility (after giving effect to required reserves of $500,000).

     If we are able to borrow less than the $12.0 million available under our
senior credit facility (after giving effect to required reserves of $500,000),
we may not have sufficient funds available to us for working capital, capital
expenditures, acquisitions and other purposes. As a result, we may not be able
to effectively engage in our business or to compete effectively and our
profitability, and therefore our ability to fulfill our obligations under the
notes, may be adversely affected.

WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MAKE INTEREST PAYMENTS
UNDER THE NOTES OR REQUIRED PAYMENTS UNDER OUR SENIOR CREDIT FACILITY DUE TO
EVENTS THAT ARE BEYOND OUR CONTROL WHICH COULD CAUSE US TO DEFAULT UNDER THE
CREDIT AGREEMENT AND THE INDENTURE.

     Economic, financial, competitive, regulatory and other factors beyond our
control affect our ability to generate cash flow from operations to make
payments on, or to refinance, the notes and our other indebtedness, including
indebtedness under our senior credit facility, and to fund necessary working
capital. We cannot assure you that our operations will generate sufficient cash
flow to enable us to meet our obligations. A significant reduction in operating
cash flow would likely increase the need for alternative sources of liquidity.
If we are unable to generate sufficient cash flow to make payments on the notes
or other debt, including debt under our senior credit facility, we will have to
pursue one or more alternatives, such as reducing or delaying capital
expenditures, refinancing the notes or other debt, selling assets or raising
equity. We cannot assure you that any of these alternatives could be
accomplished on satisfactory terms or that they would yield sufficient funds to
retire the notes and our other debt or to make payments on the notes or under
our senior credit facility. In the event that our cash flow and any alternative
sources of liquidity are insufficient to make the required payments under our
senior credit facility, a default may occur under our senior credit facility and
the indebtedness under our senior credit facility could be accelerated, which
may cause an event of default under the indenture.

FRAUDULENT CONVEYANCE LAWS MAY PERMIT COURTS TO VOID THE GUARANTEE OF OUR PARENT
OR THE SUBSIDIARY GUARANTEES OF THE NOTES IN SPECIFIC CIRCUMSTANCES, WHICH WOULD
INTERFERE WITH THE PAYMENT OF THESE GUARANTEES.

     U.S. federal bankruptcy law and comparable state statutes may allow courts,
upon the bankruptcy or financial difficulty of a parent or subsidiary guarantor,
to void that parent's or that subsidiary's guarantee of the notes. If a court
voids a guarantee or holds it unenforceable, the holders of the notes will cease
to be creditors of, and may be required to return payments received from, that
guarantor, and the holders of the notes will be creditors solely of us and the
other guarantors whose guarantees have not been voided. In the alternative, the
court could subordinate that guarantee (including all payments thereunder) to
all other debt of the guarantor. The court could take these actions in respect
of a guarantee if, among other things, the guarantor, at the time it incurred
the debt evidenced by its guarantee:

     - incurred the guarantee with the intent of hindering, delaying or
       defrauding current or future creditors; or

     - received less than reasonably equivalent value or fair consideration for
       incurring the guarantee, and

      - was insolvent or was rendered insolvent by reason of the incurrence; or
                                        12
- was engaged, or about to engage, in a business or transaction for which
        the assets remaining with it constituted unreasonably small capital to
        carry on such business; or

      - intended to incur, or believed that it would incur, debts beyond its
        ability to pay as those debts matured; or

     - was a defendant in an action for money damages, or had a judgment for
       money damages entered against it, if, in either case, after final
       judgment the judgment was unsatisfied.

     The tests for fraudulent conveyance, including the criteria for insolvency,
will vary depending upon the law of the jurisdiction that is being applied.
Generally, however, a debtor would be considered insolvent if, at the time the
debtor incurred the debt, either:

     - the sum of the debtor's debts and liabilities, including contingent
       liabilities, was greater than the debtor's assets at fair valuation; or

     - the present fair saleable value of the debtor's assets was less that the
       amount required to pay the probable liability on the debtor's total
       existing debts and liabilities, including contingent liabilities, as they
       became absolute and matured.

     Because certain of our subsidiaries who are guarantors of the notes are
direct borrowers under the senior credit facility, in the event that guarantees
are voided, the lenders under our senior credit facility would continue to have
recourse to the assets of these subsidiaries; in contrast, holders of the notes
would be forced to look to dividends and similar equity payments from those
subsidiaries, after payment of the senior credit facility obligations.

THE COLLATERAL WHICH SECURES BOTH THE NOTES AND BORROWINGS UNDER OUR SENIOR
CREDIT FACILITY IS SUBJECT TO CONTROL BY THE LENDERS UNDER OUR SENIOR CREDIT
FACILITY. IF THERE IS A DEFAULT, THE PROCEEDS FROM THE COLLATERAL MAY NOT BE
SUFFICIENT TO REPAY BOTH THE LENDERS UNDER OUR SENIOR CREDIT FACILITY AND THE
HOLDERS OF THE NOTES AND THE LENDERS UNDER THE SENIOR CREDIT FACILITY WILL BE
REPAID BEFORE THE HOLDERS OF THE NOTES.

     The rights of the holders of the notes with respect to the collateral
securing the notes are limited pursuant to the terms of the intercreditor
agreement. The intercreditor agreement permits borrowings of up to $12.5 million
principal amount under the senior credit facility. Borrowings under the senior
credit facility are secured by the same collateral, other than collateral
consisting of real property, fixtures, equipment and proceeds thereof, that
secures the notes. Although the lenders under our senior credit facility and the
holders of the notes share in the proceeds of this collateral (other than
collateral consisting of real property, fixtures, equipment and the proceeds
thereof), our obligations to the lenders under our senior credit facility are
secured on a first priority basis and our obligations under the notes are
secured on a second priority basis. As a result, the lenders under our senior
credit facility are entitled to receive proceeds from any realization of such
collateral to repay their obligations in full before the holders of the notes.
In addition, under the intercreditor agreement, at any time that obligations
under our senior credit facility are outstanding, any actions that may be taken
with respect to such collateral, including the ability to cause the commencement
of enforcement proceedings against such collateral and to control the conduct of
such proceedings, will be at the direction of the lenders under our senior
credit facility, and the trustee, on behalf of the holders of the notes, does
not have the ability to control or direct such actions, even if the rights of
the holders of the notes are adversely affected. See "Description of the
Notes -- Security." We cannot assure you that the value of this collateral will
be sufficient to repay in full all indebtedness outstanding under the senior
credit facility and the notes.

THE VALUE OF THE LIMITED ASSETS SECURING THE NOTES ON A FIRST PRIORITY BASIS MAY
NOT BE SUFFICIENT TO MAKE UP ANY SHORTFALL BETWEEN OUR OBLIGATIONS UNDER THE
NOTES AND THE PROCEEDS FROM THE REALIZATION OF THE COLLATERAL WHICH SECURES THE
NOTES ON A SECOND PRIORITY BASIS.

     Our obligations under the notes are secured on a first priority basis by
collateral consisting of real property, fixtures, equipment and proceeds
thereof. The lenders under our senior credit facility do not have a security
interest in such collateral. However, the proceeds from any realization of this
collateral may not
                                        13
be sufficient to make up any shortfall between our obligations under the notes
and any proceeds allocable to noteholders from the realization of the collateral
which secures our obligations to the lenders under our senior credit facility on
a first priority basis.

THE ASSETS EXCLUDED FROM THE LIENS SECURING OUR OBLIGATIONS UNDER THE NOTES
AND/OR OUR SENIOR CREDIT FACILITY MAY BE SUBJECT TO LIENS IN FAVOR OF OTHER
PARTIES AND, IF NOT SUBJECT TO ANY SUCH LIENS, WILL BE AVAILABLE, ON AN EQUAL
AND PRO RATA BASIS, TO SATISFY ALL SENIOR INDEBTEDNESS OF THE ENTITY OWNING SUCH
ASSETS. THESE ASSETS MAY NOT BE SUFFICIENT TO PROVIDE FOR PAYMENT OF ALL SUCH
SENIOR INDEBTEDNESS (INCLUDING THE NOTES), ESPECIALLY IF WE ISSUE ADDITIONAL
INDEBTEDNESS OR DISPOSE OF ASSETS.

     Any claim for the remaining shortfall between the amount realized by the
holders of the notes from the sales of such collateral securing the notes (and
related guarantees) and the obligations under the notes (and related guarantees)
will rank equally in right of payment with all of our existing and future senior
indebtedness or that of the relevant guarantor, as applicable, and, in some
cases, junior to the claims of any person holding liens which are permitted
liens as described under "Description of the Notes." The indenture does not
require that we maintain the current level of collateral or maintain a specific
ratio of indebtedness to asset values. Any additional notes issued pursuant to
the indenture will rank equal to the notes and be entitled to the same rights
and priority with respect to the collateral. Thus, the issuance of additional
notes pursuant to the indenture may have the effect of significantly diluting
your ability to recover in full from the then existing pool of collateral.

THE BOOK VALUE OF OUR ASSETS IS NOT A MEASURE OF THE AMOUNT OF PROCEEDS
REALIZABLE UPON A SALE. THE PROCEEDS FROM THE SALE OF THE COLLATERAL SECURING
THE NOTES AND OUR SENIOR CREDIT FACILITY IN THE EVENT OF A LIQUIDATION MAY BE
INSUFFICIENT TO REPAY THE NOTES AND OUR SENIOR CREDIT FACILITY.

     The value of the collateral in the event of liquidation is not the book
value of the assets, but rather will depend on market and economic conditions,
the availability of buyers and other factors. We have not conducted any asset
appraisals in connection with the initial offering of the notes or this
offering. Moreover, the amount to be received upon such a sale would be
dependent upon numerous factors, including the condition, age and useful life of
the collateral at the time of such sale, as well as the timing and manner of
such sale. By its nature all or some of the collateral will be illiquid and may
have no readily ascertainable market value. Accordingly, there can be no
assurance that the collateral, if saleable, can be sold in a short period of
time or at an appropriate price. The proceeds from any sale of the collateral
will likely be insufficient to satisfy the amounts outstanding under the notes
after payment in full of all obligations under our senior credit facility. If
such proceeds are not sufficient to repay amounts outstanding under the notes,
then holders of the notes (to the extent not repaid from the proceeds of the
sale of the collateral) would have only an unsecured claim against our remaining
assets. As of April 3, 2004, we had borrowed $1.1 million under our senior
credit facility and had $10.9 million of borrowing availability (after giving
effect to required reserves of $500,000).

BANKRUPTCY LAWS MAY LIMIT YOUR ABILITY TO REALIZE VALUE FROM THE COLLATERAL.

     The right of the collateral agent to repossess and dispose of the
collateral upon the occurrence of an event of default under the indenture
governing the notes is likely to be significantly impaired by applicable
bankruptcy law if a bankruptcy case were to be commenced by or against us before
the collateral agent repossessed and disposed of the collateral. Upon the
commencement of a case for relief under Title 11 of the United States Code, a
secured creditor such as the collateral agent is prohibited from repossessing
its security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover, the
bankruptcy code permits the debtor to continue to retain and use collateral even
though the debtor is in default under the applicable debt instruments, provided
that the secured creditor is given "adequate protection." The meaning of the
term "adequate protection" may vary according to circumstances, but it is
intended in general to protect the value of the secured creditor's interest in
the collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines that
the value of the secured creditor's interest in the

                                        14
collateral is declining during the pendency of the bankruptcy case. A bankruptcy
court may determine that a secured creditor may not require compensation for a
diminution in the value of its collateral if the value of the collateral exceeds
the debt it secures.

     In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict:

     - how long payments under the notes could be delayed following commencement
       of a bankruptcy case;

     - whether or when the collateral agent could repossess or dispose of the
       collateral;

     - the value of the collateral at the time of the bankruptcy petition; or

     - whether or to what extent holders of the notes would be compensated for
       any delay in payment or loss of value of the collateral through the
       requirement of "adequate protection."

     Any disposition of the collateral during a bankruptcy case would also
require permission from the bankruptcy court. Furthermore, in the event a
bankruptcy court determines the value of the collateral is not sufficient to
repay all amounts due on the notes, the holders of the notes would hold secured
claims to the extent of the value of the collateral to which the holders of the
notes are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy code only permits the payment and accrual of post-petition interest,
costs and attorney's fees to a secured creditor during a debtor's bankruptcy
case to the extent the value of its collateral is determined by the bankruptcy
court to exceed the aggregate outstanding principal amount of the obligations
secured by the collateral.

     The intercreditor agreement also prohibits the holders of the notes or the
collateral agent from seeking adequate protection with respect to the collateral
which also secures the senior credit facility and prohibits the collateral agent
and holders of the notes from objecting to the lender agent or the lenders
seeking adequate protection with respect to such collateral.

AN ACTIVE TRADING MARKET FOR THE NOTES HAS NOT, AND MAY NOT, DEVELOP, WHICH
COULD MAKE IT DIFFICULT FOR YOU TO RESELL YOUR NOTES AT THEIR FAIR MARKET VALUE
OR AT ALL.

     There is currently no public market for the notes. We do not intend to list
the notes on any national securities exchange or automated quotation system.
Accordingly, no market for the notes may develop, and any market that develops
may not last. If the notes are traded, they may trade at a discount from their
initial offering price, depending on prevailing interest rates, the market for
similar securities, our performance and other factors. To the extent that an
active trading market does not develop, you may not be able to resell your notes
at their fair market value or at all.

WE MAY BE UNABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY
THE INDENTURE, WHICH COULD CONSTITUTE A DEFAULT UNDER THE INDENTURE.

     Upon the occurrence of certain specific kinds of change of control events,
we must offer to repurchase all outstanding notes. In addition, a change of
control under the indenture would also constitute a change of control, and thus
an event of default, under our senior credit facility as well. This would
entitle the lenders to cause all of our outstanding debt under our senior credit
facility to become due and payable. As of April 3, 2004, we had $1.1 million of
borrowings outstanding under our senior credit facility. It is possible that we
will not have sufficient funds at the time of the change of control to make the
required repurchase of notes or payments under our senior credit facility, or
that restrictions in our senior credit facility will not allow such repurchases
of the notes. If we are required to repurchase the notes or to make accelerated
payments under our senior credit facility, we would probably require third party
financing. We cannot be sure that we would be able to obtain third party
financing on acceptable terms, or at all. Our failure to purchase the notes
would be a default under the indenture, which would also result in a default
under our senior credit facility.

                                        15
WE ARE NOT REQUIRED BY THE CHANGE OF CONTROL PROVISIONS IN THE INDENTURE TO
REPURCHASE THE NOTES IF WE SELL ASSETS THAT DO NOT CONSTITUTE "SUBSTANTIALLY
ALL" OF OUR ASSETS UNDER THE INDENTURE. WHETHER ANY GIVEN SALE OF ASSETS
CONSTITUTES A SALE OF "SUBSTANTIALLY ALL" OF OUR ASSETS IS SUBJECT TO
UNCERTAINTY, WHICH COULD MAKE IT DIFFICULT FOR NOTEHOLDERS TO DETERMINE WHETHER
A CHANGE OF CONTROL HAS OCCURRED.

     The indenture requires us to offer to repurchase all outstanding notes upon
a change of control, which includes a sale of all or substantially all of our
assets. We may sell large amounts of our assets and may not be required by the
indenture to repurchase the notes if the sale is not deemed to be "substantially
all" of our assets under the indenture. Because this term is not defined in the
indenture, we must rely on the definition established under New York law, which
governs the indenture. New York law is not clear regarding what constitutes a
sale of "substantially all" of a company's assets and we can not predict how a
court might apply New York law with respect to a particular sale of assets. As a
consequence, in cases where the law is uncertain, the noteholders may have
difficulty determining whether a change of control has occurred. This could
impede the repurchase of the notes upon a possible change of control in some
cases.

WE MAY EXPERIENCE CORPORATE EVENTS OR ENTER INTO TRANSACTIONS OTHER THAN A SALE
OF ASSETS THAT WILL NOT CONSTITUTE A CHANGE OF CONTROL AND MAY ADVERSELY AFFECT
OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES.

     Certain corporate events or transactions, such as leveraged
recapitalizations that increase the level of our indebtedness, would not
constitute a change of control under the indenture and we would not be required
to offer to repurchase the notes. These corporate events, including increases in
our indebtedness, may adversely affect our ability to fulfill our obligations
under the notes.

HOLDERS OF THE NOTES ARE REQUIRED TO INCLUDE AMOUNTS IN GROSS INCOME FOR FEDERAL
INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF CASH PAYMENTS.

     The notes were issued with original issue discount for United States
federal income tax purposes. As a result, U.S. holders, as defined under
"Material United States Federal Income Tax Consequences," are required to
include amounts in income in respect of the notes on a constant yield to
maturity basis in advance of the receipt of the cash to which such income is
attributable. See "Material United States Federal Income Tax
Consequences -- U.S. Holders -- Original Issue Discount."

RISK FACTORS RELATING TO OUR BUSINESS

OUR SUCCESS DEPENDS ON THE CONTINUED POPULARITY OF GOLF AND THE GROWTH OF THE
MARKET FOR GOLF-RELATED PRODUCTS. IF GOLF DECLINES IN POPULARITY, OUR SALES
COULD MATERIALLY DECLINE.

     We generate substantially all of our net revenues from the sale of
golf-related equipment and accessories. The demand for our golf products is
directly related to the popularity of golf, the number of golf participants and
the number of rounds of golf being played by these participants. If golf
participation decreases, sales of our products would be adversely affected. In
addition, the popularity of golf organizations, such as the Professional Golfers
Association, also affects the sales of our golf equipment and golf-related
apparel. We depend on the exposure of our brands to increase brand recognition
and reinforce the quality of our products. Any significant reduction in
television coverage of PGA or other golf tournaments, or any other significant
decreases in either attendance at golf tournaments or viewership of golf
tournaments, will reduce the visibility of our brand and could adversely affect
our sales.

     In addition, we do not believe there has been any material increase in golf
participation or the number of golf rounds played since 1999. The number of
rounds played in the U.S. dropped to 502.4 million in 2002 from 518.4 million in
2000, perhaps reflecting the general decline in the U.S. economy. Additionally,
the number of rounds played in the U.S. in 2003 dropped 2.6% from 2002 to 489.3
million rounds played. Golf Datatech reported that the number of golf rounds
played in the U.S. increased 4.0% in the first quarter of 2004 as compared to
the same quarter in 2003. However, we can not assure you that the overall dollar
volume of the worldwide market for golf-related products will grow, or that it
will not decline, in the future.
                                        16
WE MAY NOT BE ABLE TO BORROW ADDITIONAL FUNDS, IF NEEDED, TO EXPAND OUR BUSINESS
OR COMPETE EFFECTIVELY AND, AS A RESULT, OUR NET REVENUES AND PROFITABILITY MAY
BE MATERIALLY ADVERSELY AFFECTED.

     The indenture governing the notes and our senior credit facility limit
almost completely our ability to borrow additional funds. We believe that the
terms of the liens securing our senior credit facility and the notes effectively
preclude us from borrowing additional funds, other than under our senior credit
facility. As a result, to the extent that we do not have borrowing availability
under our senior credit facility, we will have to fund our operations, including
new store openings and capital expenditures as well as any future acquisitions,
with cash flow from operations. If we do not generate sufficient cash flow from
our operations to fund these expenditures, we may not be able to compete
effectively and our sales and profitability would likely be materially adversely
affected.

A REDUCTION IN DISCRETIONARY CONSUMER SPENDING COULD REDUCE SALES OF OUR
PRODUCTS.

     Our products are recreational in nature and are therefore discretionary
purchases for consumers. Consumers are generally more willing to make
discretionary purchases of golf products during favorable economic conditions.
Discretionary spending is affected by many factors, including, among others,
general business conditions, interest rates, the availability of consumer
credit, taxation, and consumer confidence in future economic conditions. Our
customers' purchases of discretionary items, including our products, could
decline during periods when disposable income is lower, or periods of actual or
perceived unfavorable economic conditions. Any significant decline in these
general economic conditions or uncertainties regarding future economic prospects
that adversely affect discretionary consumer spending could lead to reduced
sales of our products. In addition, our sales could be adversely affected by a
downturn in the economic conditions in the markets in which our superstores
operate. The general slowdown in the United States economy and the uncertain
economic outlook have adversely affected consumer spending habits, which has
adversely affected our net revenues. A prolonged economic downturn could have a
material adverse effect on our business, financial condition, and results of
operations.

OUR SALES AND PROFITS MAY BE ADVERSELY AFFECTED IF WE AND OUR SUPPLIERS FAIL TO
SUCCESSFULLY DEVELOP AND INTRODUCE NEW PRODUCTS.

     Our future success will depend, in part, upon our and our suppliers'
continued ability to develop and introduce innovative products in the golf
equipment market. The success of new products depends in part upon the various
subjective preferences of golfers, including a golf club's look and "feel," and
the level of acceptance that a golf club has among professional and recreational
golfers. The subjective preferences of golf club purchasers are difficult to
predict and may be subject to rapid and unanticipated changes. If we or our
suppliers fail to successfully develop and introduce innovative products on a
timely basis, then our sales and profits may suffer.

     In addition, if we or our suppliers introduce new golf clubs too rapidly,
it could result in close-outs of existing inventories. Close-outs can result in
reduced margins on the sale of older products, as well as reduced sales of new
products given the availability of older products at lower prices. These reduced
margins and sales may adversely affect our results of operations.

OUR SALES AND PROFITABILITY MAY BE ADVERSELY AFFECTED IF NEW COMPETITORS ENTER
THE GOLF PRODUCTS INDUSTRY.

     Increased competition in our markets due to the entry of new competitors,
including companies which currently supply us with products that we sell, could
reduce our net revenues. Our competitors currently include other specialty
retailers, mass merchandise retailers, conventional sporting goods retailers,
on-course pro shops, and online retailers of golf equipment. These businesses
compete with us in one or more product categories. In addition, traditional and
specialty golf retailers are expanding more aggressively in marketing brand-name
golf equipment, thereby competing directly with us for products, customers and
locations. Some of these potential competitors have been in business longer than
us and/or have greater financial or marketing resources than we do and may be
able to devote greater resources to sourcing, promoting and selling their
products. Several of our key vendors have begun to operate retail stores or

                                        17
websites that sell directly to consumers and may compete with us and reduce our
sales. As a result of this competition, we may experience lower sales or greater
operating costs, such as marketing costs, which would have an adverse effect on
our profitability.

NEW SUPERSTORES THAT WE MAY OPEN MAY DIVERT OUR LIMITED CAPITAL RESOURCES AWAY
FROM OTHER AREAS OF OUR BUSINESS AND MAY NOT BE PROFITABLE WHICH COULD ADVERSELY
AFFECT THE PROFITABILITY OF OUR COMPANY AS A WHOLE.

     Our strategy involves opening additional superstores in new and existing
markets. During the year ended January 3, 2004, not including stores that we
acquired through our acquisition of Don Sherwood Golf Shop, we opened six new
stores, incurring $0.6 million in pre-opening expenses and $3.9 million in
capital expenditures. During the three months ended April 3, 2004, we opened
four new stores, incurring $0.3 million in pre-opening expenses and $0.9 million
in capital expenditures. We plan to open two to four additional stores during
the remaining three quarters of fiscal 2004. Based on our experience, we expect
to spend $1.3 million to open each additional superstore, which includes
pre-opening expenses, capital expenditures and inventory costs. This amount is
an estimate and actual store opening costs may vary. We intend to fund new store
openings through cash flow from operations. Our senior credit facility and the
indenture governing our senior secured notes significantly restrict our ability
to incur indebtedness and to make capital expenditures. We may not have or be
able to obtain sufficient funds to fund our planned expansion.

     Our ability to open new stores on a timely and profitable basis is subject
to various contingencies, some of which are beyond our control. These
contingencies include our ability to locate suitable store sites, negotiate
acceptable lease terms, build-out or refurbish sites on a timely and
cost-effective basis, hire, train and retain skilled managers and personnel,
obtain adequate capital resources and successfully integrate new stores into
existing operations. We can not assure you that our new stores will be a
profitable deployment of our limited capital resources. If any of our new stores
are not profitable, then the profitability of our company as a whole may be
adversely affected.

OUR EXPANSION IN NEW AND EXISTING MARKETS, IF UNSUCCESSFUL, COULD CAUSE OUR
OPERATING INCOME TO DECREASE.

     Our expansion in new and existing markets may present competitive,
distribution, and merchandising challenges that differ from our current
challenges, including competition among our stores clustered in a single market,
diminished novelty of our store design and concept, added strain on our
distribution center and management information systems and diversion of
management attention from existing operations. To the extent that we are not
able to meet these new challenges, our operating income could decrease.

IF WE DO NOT ACCURATELY PREDICT OUR SALES DURING OUR PEAK SEASONS AND THEY ARE
LOWER THAN WE EXPECT, OUR PROFITABILITY MAY BE MATERIALLY ADVERSELY AFFECTED.

     Our business is highly seasonal. Our sales during our second fiscal quarter
of each year, which includes the Father's Day selling season, and during the
fourth fiscal quarter, which includes the Christmas holiday selling season, have
historically contributed a disproportionate percentage of our net revenues and
most of our net income for the entire year. We make decisions regarding
merchandise well in advance of the season in which it will be sold, particularly
for the Father's Day and Christmas holiday selling seasons. We incur significant
additional expenses leading up to and during our second fiscal quarter and the
month of December in anticipation of higher sales in those periods, including
acquiring additional inventory, preparing and mailing our catalogs, advertising,
creating in-store promotions and hiring additional employees. If our sales
during our peak seasons are lower than we expect for any reason, we may not be
able to adjust our expenses in a timely fashion. As a result, our profitability
may be materially adversely affected.

                                        18
IF THE PRODUCTS WE SELL DO NOT SATISFY THE STANDARDS OF THE UNITED STATES GOLF
ASSOCIATION AND THE ROYAL AND ANCIENT GOLF CLUB OF ST. ANDREWS IN THE FUTURE,
OUR NET REVENUES ATTRIBUTABLE TO THOSE PRODUCTS AND OUR PROFITABILITY MAY BE
REDUCED.

     We and our suppliers generally seek to satisfy the standards established by
the United States Golf Association and the Royal and Ancient Golf Club of St.
Andrews in the design of golf clubs because these standards are generally
followed by golfers within their respective geographic areas. We believe that
all of the products we sell conform to these standards, except where expressly
marketed as non-conforming. However, we cannot assure you that our products will
satisfy these standards in the future or that the standards of these
organizations will not be changed in a way that makes our products
non-conforming. If our products that are intended to conform are determined to
be non-conforming, our net revenues attributable to those products and, as a
result, our profitability may be reduced.

WE LEASE MOST OF OUR SUPERSTORE LOCATIONS. IF WE ARE UNABLE TO MAINTAIN THOSE
LEASES OR LOCATE ALTERNATIVE SITES FOR OUR SUPERSTORES ON TERMS THAT ARE
ACCEPTABLE US, OUR NET REVENUES AND PROFITABILITY COULD BE REDUCED.

     We lease 41 of our 42 current superstores. As of April 3, 2004, two of our
superstores operated under a lease with a term that expires in less than one
year. We cannot assure you that we will be able to maintain our existing store
locations as leases expire, or that we will be able to locate alternative sites
on favorable terms. If we cannot maintain our existing store locations or locate
alternative sites on favorable or acceptable terms, our net revenues and
profitability could be reduced.

OUR COMPARABLE STORE SALES MAY FLUCTUATE, WHICH COULD NEGATIVELY IMPACT OUR
FUTURE OPERATING PERFORMANCE.

     Our comparable store sales are affected by a variety of factors, including,
among others:

     - customer demand in different geographic regions;

     - our ability to efficiently source and distribute products;

     - changes in our product mix;

     - promotional events;

     - effects of competition;

     - our ability to effectively execute our business strategy; and

     - general economic conditions.

     Our comparable store sales have fluctuated significantly in the past and we
believe that such fluctuations may continue. Our historic results are not
necessarily indicative of our future results, and we cannot assure you that our
comparable store sales will not decrease again in the future. Any reduction in
or failure to increase our comparable store sales could negatively impact our
future operating performance.

IF WE FAIL TO ACCURATELY TARGET THE APPROPRIATE SEGMENT OF THE CONSUMER CATALOG
MARKET OR IF WE FAIL TO ACHIEVE ADEQUATE RESPONSE RATES TO OUR CATALOGS, OUR
RESULTS OF OPERATIONS MAY SUFFER.

     Our results of operations depend in part on the success of our catalog
operations. We believe that the success of our catalog operations depends on our
ability to:

     - achieve adequate response rates to our mailings;

     - continue to offer a merchandise mix that is attractive to our mail order
       customers;

     - cost-effectively add new customers;

     - cost-effectively design and produce appealing catalogs; and

     - timely deliver products ordered through our catalogs to our customers.

                                        19
We have historically experienced fluctuations in the response rates to our
catalog mailings. If we fail to achieve adequate response rates, we could
experience lower sales, significant markdowns or write-offs of inventory and
lower margins, which would adversely affect our results of operations, perhaps
materially.

IF WE ARE UNABLE TO MEET OUR LABOR NEEDS, OUR PERFORMANCE WILL SUFFER.

     Many of our employees are in entry-level or part-time positions that
historically have high rates of turnover. We may be unable to meet our labor
needs and control our costs due to external factors such as unemployment levels,
minimum wage legislation, and wage inflation. If we cannot attract and retain
quality employees, our performance will suffer and we may not be able to
successfully execute our strategy to open new superstores.

IF WE LOSE THE SERVICES OF KEY MEMBERS OF OUR MANAGEMENT, WE MAY NOT BE ABLE TO
MANAGE OUR OPERATIONS AND IMPLEMENT OUR GROWTH STRATEGY EFFECTIVELY.

     Our future success depends, in large part, on the continued service of
James Thompson, our chief executive officer, and some of our other key executive
officers and managers who possess significant expertise and knowledge of our
business and markets. We do not maintain key person insurance on any of our
officers or managers. Any loss or interruption of the services of these
individuals could significantly reduce our ability to effectively manage our
operations and implement our growth strategy because we cannot assure you that
we would be able to find appropriate replacements for our key executives and
managers should the need arise.

WE ARE CONTROLLED BY ONE STOCKHOLDER, WHICH MAY GIVE RISE TO A CONFLICT OF
INTEREST.

     As of April 3, 2004, after giving effect to the exchange by Atlantic Equity
Partners III, L.P. of all of the notes beneficially owned by it for additional
shares of common stock of Holdings and cash in a private transaction, Atlantic
Equity Partners III would have owned approximately 76.6% of Holdings' common
stock on a fully diluted basis (including outstanding stock options). All of
Holdings' stockholders are parties to a stockholders agreement that contains
voting arrangements that give Atlantic Equity Partners III voting control over
the election of all but one of its directors. As a result, Atlantic Equity
Partners III controls Holdings and us and effectively has the power to approve
any action requiring the approval of the holders of our and Holdings' stock,
including adopting certain amendments to our and Holdings' certificate of
incorporation and approving mergers or sales of all of our assets. In addition,
as a result of Atlantic Equity Partners III's ownership interest, conflicts of
interest could arise with respect to transactions involving business dealings
between us and Atlantic Equity Partners III or First Atlantic Capital Ltd.,
which operates Atlantic Equity Partners III, potential acquisitions of
businesses or properties, the issuance of additional securities, the payment of
dividends by us and other matters.

IF WE ARE UNABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, OR IF WE ARE
ACCUSED OF INFRINGING ON A THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS, OUR NET
REVENUES AND PROFITS MAY DECLINE.

     We currently hold a substantial number of industrial designs and
trademarks. The exclusive right to use these designs and trademarks has helped
establish our market share. The loss or reduction of any of our significant
proprietary rights could hurt our ability to distinguish our products from
competitors' products and retain our market share. In addition, our proprietary
products generate substantially higher margins than products we sell that are
produced by other manufacturers. If we are unable to effectively protect our
proprietary rights and less of our sales come from our proprietary products, our
net revenues and profits may decline.

     Additionally, third parties may assert claims against us alleging
infringement, misappropriation or other violations of patent, trademark or other
proprietary rights, whether or not such claims have merit. Such claims can be
time consuming and expensive to defend and could require us to cease using and
selling the allegedly infringing products, which may have a significant impact
on our net revenues and cause us to incur significant litigation costs and
expenses.

                                        20
SELF-INSURED BENEFITS PLAN CLAIMS COULD MATERIALLY IMPACT OUR RESULTS OF
OPERATIONS.

     We administer self-insured, voluntary employee benefits plans that provide,
among other benefits, health care benefits to participating employees. The plans
are designed to provide specified levels of coverage up to $75,000 per covered
employee, with excess insurance coverage provided by a commercial insurer. Costs
of health care have risen significantly in recent years, and we expect this
trend to continue. Our expenses and, consequently, our results of operations,
could be materially impacted by claims and other expenses related to such plans.

WE RELY ON OUR MANAGEMENT INFORMATION SYSTEMS FOR INVENTORY MANAGEMENT,
DISTRIBUTION AND OTHER FUNCTIONS. IF OUR INFORMATION SYSTEMS FAIL TO ADEQUATELY
PERFORM THESE FUNCTIONS OR IF WE EXPERIENCE AN INTERRUPTION IN THEIR OPERATION,
OUR BUSINESS AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.

     The efficient operation of our business is dependent on our management
information systems. We rely on our management information systems to
effectively manage order entry, order fulfillment, point-of-sale, and inventory
replenishment processes. The failure of our management information systems to
perform as we anticipate, as we experienced when we implemented our current
system in 2000, could disrupt our business and could result in decreased sales,
increased overhead costs, excess inventory and product shortages, causing our
business and results of operations to suffer.

     In addition, our management information systems are vulnerable to damage or
interruption from:

     - earthquake, fire, flood and other natural disasters; and

     - power loss, computer systems failure, Internet and telecommunications or
       data network failure.

     Any such interruption could have a material adverse effect on our business.

OUR PROFITABILITY WOULD BE ADVERSELY AFFECTED IF THE OPERATION OF OUR AUSTIN
CALL CENTER OR DISTRIBUTION CENTER WERE INTERRUPTED OR SHUT DOWN.

     We operate a centralized call center and distribution center in Austin,
Texas. We receive most of our catalog orders and receive and ship a substantial
portion of our merchandise at our Austin facility. Any natural disaster or other
serious disruption to this facility due to fire, tornado or any other cause
would substantially disrupt our sales and would damage a portion of our
inventory, impairing our ability to adequately stock our stores. In addition, we
could incur significantly higher costs and longer lead times associated with
fulfilling our direct-to-consumer orders and distributing our products to our
stores during the time it takes for us to reopen or replace our Austin facility.
As a result, disruption at our Austin facility would adversely affect our
profitability.

IF OUR SUPPLIERS FAIL TO DELIVER PRODUCTS ON A TIMELY BASIS AND IN SUFFICIENT
QUANTITIES, SUCH FAILURE COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS.

     We depend on a limited number of suppliers for our clubheads and shafts. In
addition, some of our products require specifically developed manufacturing
techniques and processes which make it difficult to identify and utilize
alternative suppliers quickly. Any significant production delay or inability of
current suppliers to timely deliver products including clubheads and shafts in
sufficient quantities, or the transition to other suppliers, could have a
material adverse effect on our results of operations.

     We import substantially all of our proprietary products from Asia, and a
significant amount of the products we buy from vendors to resell through our
distribution channels is shipped to us from Asia. If a disruption occurs in the
operations of ports through which our products are imported, we may begin to
ship some of our products from Asia by air freight, and many of our suppliers
may also begin to ship their products by air freight. Shipping by air freight is
more expensive than shipping by boat, and if we cannot pass these increased
shipping costs on to our customers, our profitability will be reduced. A
disruption at ports through which our products are imported would have a
material adverse effect on our results of operations.

                                        21
WE MAY BE SUBJECT TO PRODUCT WARRANTY CLAIMS OR PRODUCT RECALLS WHICH COULD HARM
OUR BUSINESS, RESULTS OF OPERATIONS, AND REPUTATION.

     We may be subject to risks associated with our products, including product
liability. Our existing or future products may contain design or materials
defects, which could subject us to product liability claims and product recalls.
Although we maintain limited product liability insurance, if any successful
product liability claim or product recall is not covered by or exceeds our
insurance coverage, our business, results of operation and financial condition
would be harmed. In addition, product recalls could adversely affect our
reputation in the marketplace. In May 2002, we learned that some of our private
label products sold in the prior two years were not manufactured in accordance
with their design specifications. Upon discovery of this discrepancy, we offered
our customers refunds, replacements or gift certificates. As a result, in fiscal
2002, we recognized $0.3 million in product return and replacement expenses. In
fiscal 2003 and the three months ended April 3, 2004, we did not recognize any
product-return and replacement expenses.

AN INCREASE IN THE COSTS OF MAILING, PAPER, AND PRINTING OUR CATALOGS WOULD
DECREASE OUR NET INCOME.

     Postal rate increases and paper and printing costs affect the cost of our
catalog mailings. We rely on discounts from the basic postal rate structure such
as discounts for bulk mailings and sorting by zip code and carrier routes for
our catalogs. We are not a party to any long-term contracts for the supply of
paper. Our cost of paper has fluctuated significantly during the past three
fiscal years, and our future paper costs are subject to supply and demand forces
external to our business. A material increase in postal rates or printing or
paper costs for our catalogs could materially decrease our net income.

A DISRUPTION IN THE SERVICE OF OUR PRIMARY DELIVERY SERVICE FOR OUR
DIRECT-TO-CONSUMER SALES MAY DECREASE OUR PROFITABILITY.

     During fiscal 2003 and the three months ended April 3, 2004, we generated
approximately 34.5% and 33.6% of our net revenues through our direct-to-consumer
sales, respectively. We use the United Parcel Service, or UPS, for substantially
all of our ground shipments of products sold through our catalogs and Internet
site to our customers in the United States. Any significant interruption in
UPS's services would impede our ability to deliver our products to our
direct-to-consumer channel, which could cause us to lose sales and/or customers.
In the event of an interruption in UPS's services, we may not be able to engage
alternative carriers to deliver our products in a timely manner on equally
favorable terms. If we incur higher shipping costs, we may be unable to pass
these costs on to our customers, which could decrease our profitability.

CURRENT AND FUTURE TAX REGULATIONS MAY ADVERSELY AFFECT OUR DIRECT-TO-CONSUMER
BUSINESS AND NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS.

     Our direct-to-consumer business may be adversely affected by state sales
and use taxes as well as the regulation of Internet commerce. We currently must
collect taxes for approximately half of our catalog and Internet sales. An
unfavorable change in state sales and use taxes could adversely affect our
business and results of operations. In addition, future regulation of the
Internet, including the imposition of taxes on Internet commerce, could affect
the development of our Internet business and negatively affect our ability to
increase our net revenues.

IF WE DO NOT ANTICIPATE AND RESPOND TO THE CHANGING PREFERENCES OF OUR
CUSTOMERS, OUR REVENUES COULD SIGNIFICANTLY DECLINE AND WE COULD BE REQUIRED TO
TAKE SIGNIFICANT MARKDOWNS IN INVENTORY.

     Our success depends, in large part, on our ability to identify and
anticipate the changing preferences of our customers and stock our stores with a
wide selection of quality merchandise that appeals to their preferences. Our
customers' preferences for merchandise and particular brands vary from location
to location, and may vary significantly over time. We cannot guarantee that we
will accurately identify or anticipate the changing preferences of our customers
or stock our stores with merchandise that appeals to them. If we do not
accurately identify and anticipate our customers' preferences, we may lose sales
or we

                                        22
may overstock merchandise, which may require us to take significant markdowns on
our inventory. In either case, our revenues could significantly decline and our
business and financial results may suffer.

WE MAY INCUR MATERIAL COSTS OR LIABILITIES UNDER ENVIRONMENTAL LAWS, WHICH MAY
MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

     We are subject to various foreign, federal, state, and local environmental
protection, chemical control, and health and safety laws and regulations. We own
and lease real property, and some environmental laws hold current or previous
owners or operators of businesses and real property liable for contamination on
or originating from that property, even if they did not know of and were not
responsible for the contamination. The presence of hazardous substances on any
of our properties or the failure to meet environmental regulatory requirements
may materially adversely affect our ability to use or to sell the property or to
use the property as collateral for borrowing, and may cause us to incur
substantial remediation or compliance costs. If hazardous substances are
released from or located on any of our properties, we could incur substantial
liabilities through a private party personal injury or property damage claim or
a claim by a governmental entity for other damages.

     In addition, some of the products we sell contain hazardous or regulated
substances, such as solvents and lead. Environmental laws may impose liability
on any person who disposes of hazardous substances, regardless of whether the
disposal site is owned or operated by such person.

     If we incur material costs or liabilities in the future under environmental
laws for any reason, our results of operations may be materially adversely
affected.

OUR SALES COULD DECLINE IF WE ARE UNABLE TO PROCESS INCREASED TRAFFIC TO OUR
WEBSITE OR TO PREVENT UNAUTHORIZED SECURITY BREACHES.

     A key element of our strategy is to generate a high volume of traffic on,
and use of, our website. Accordingly, the satisfactory performance, reliability
and availability of our website, transaction processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain customers, as well as maintain adequate customer service levels. Our
Internet revenues will depend on the number of visitors who shop on our website
and the volume of orders we can fill on a timely basis. Problems with our
website or order fulfillment performance would reduce the volume of goods sold
and the attractiveness of our merchandise and could also adversely affect
consumer perception of our brand name. We may experience periodic system
interruptions from time to time. If there is a substantial increase in the
volume of traffic on our website or the number of orders placed by customers, we
may be required to expand and upgrade further our technology, transaction
processing systems and network infrastructure. There can be no assurance that we
will be able to accurately project the rate or timing of increases, if any, in
the use of our website, or that we will be able to expand and upgrade our
systems and infrastructure to accommodate such increases on a timely basis.

     The success of our website depends on the secure transmission of
confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. In addition, we maintain an
extensive confidential database of customer profiles and transaction
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms we use to protect
customer transaction and personal data contained in our customer database. If
any such compromise of our security were to occur, it could have a material
adverse effect on our reputation, business, operating results and financial
condition. A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such breaches.

                                        23
OUR ACQUISITION OF DON SHERWOOD GOLF SHOP, AND ANY FUTURE ACQUISITIONS, COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS IF UNANTICIPATED LIABILITIES ARE
DISCOVERED OR IF WE FAIL TO SUCCESSFULLY INTEGRATE THE ACQUIRED BUSINESSES INTO
OUR EXISTING OPERATIONS.

     We completed our acquisition of Don Sherwood Golf Shop in July 2003. Our
failure to successfully address the risks associated with this acquisition could
harm our ability to fully integrate and market products. We may discover
liabilities and risks associated with this acquisition that were not discovered
in our due diligence prior to completing the acquisition. Additionally, we may
acquire other businesses in the future, which would complicate our management
tasks. We may need to integrate widely dispersed operations that have different
and unfamiliar corporate cultures. These integration efforts may not succeed or
may distract management's attention from existing business operations. Our
failure to successfully integrate Don Sherwood Golf Shop and future acquisitions
into our existing operations could materially harm our business.

                                        24
FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements within the meaning of
the federal securities laws. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
Forward-looking statements include statements preceded by, followed by or that
include the words "may," "could," "would," "should," "believe," "expect,"
"anticipate," "plan," "estimate," "target," "project," "intend," or similar
expressions. These statements include, among others, statements regarding our
expected business outlook, anticipated financial and operating results, our
business strategy and means to implement the strategy, our objectives, the
amount and timing of future store openings, store retrofits and capital
expenditures, the likelihood of our success in expanding our business, financing
plans, working capital needs and sources of liquidity.

     Forward-looking statements are only predictions and are not guarantees of
performance. These statements are based on our management's beliefs and
assumptions, which in turn are based on currently available information.
Important assumptions relating to the forward-looking statements include, among
others, assumptions regarding demand for our products, the introduction of new
product offerings, store opening costs, our ability to lease new sites on a
timely basis, expected pricing levels, the timing and cost of planned capital
expenditures, competitive conditions and general economic conditions. These
assumptions could prove inaccurate. Forward-looking statements also involve
risks and uncertainties, which could cause actual results that differ materially
from those contained in any forward-looking statement. Many of these factors are
beyond our ability to control or predict. Such factors include, but are not
limited to, the risk factors set forth in "Risk Factors."

     We believe our forward-looking statements are reasonable; however, undue
reliance should not be placed on any forward-looking statements, which are based
on current expectations. Further, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update publicly any of
them in light of new information or future events.

                                        25
USE OF PROCEEDS

     The notes are being offered solely for the account of Holdings. Holdings
will receive the net proceeds of the sale of the notes offered by this
prospectus, which are estimated to be approximately $5.9 million (assuming an
offering price of 83.8478% of the principal amount at maturity, which was the
book value of the notes as of July 2, 2004), after deducting the estimated
expenses related to this offering. Holdings has indicated that it intends to
contribute the net proceeds of its sale of the notes to us. We intend to use
these amounts to fund possible acquisitions and for working capital and other
general corporate purposes.

                                        26
CAPITALIZATION

     We estimate that the net proceeds to Holdings from the sale of the notes
offered by this prospectus will be approximately $5.9 million (assuming an
offering price of 83.8478% of the principal amount at maturity, which was the
book value of the notes as of July 2, 2004), after deducting the estimated
expenses related to this offering.

     The following table sets forth the capitalization of Holdings as of April
3, 2004:

     - on an actual basis; and

     - on a pro forma as adjusted basis to give effect to the exchange of
       Atlantic Equity Partners III's notes for shares of common stock of
       Holdings, the sale of the notes by Holdings in this offering (after
       deducting the estimated expenses related to this offering), and the use
       of the proceeds as described in "Use of Proceeds."

     You should read the table below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our unaudited consolidated financial statements and related notes included
elsewhere in this prospectus.
AS OF APRIL 3, 2004
                                                              ----------------------
                                                                          PRO FORMA
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
                                                                  (IN THOUSANDS)
Cash and cash equivalents...................................  $  4,177    $ 10,056
                                                              ========    ========
Total debt:
  Senior credit facility(1).................................  $  1,075    $  1,075
  Senior secured notes due 2009.............................    78,029      78,029
                                                              --------    --------
     Total debt.............................................  $ 79,104    $ 79,104
Stockholders' equity........................................    58,811      64,690
                                                              --------    --------
     Total capitalization...................................  $137,915    $143,794
                                                              ========    ========
---------------

(1) As of April 3, 2004, we had $10.9 million of borrowing availability, subject
    to customary conditions, under our senior credit facility (after giving
    effect to required reserves of $500,000).

                                        27
SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data as of and for fiscal
1999, 2000, 2001 and for the period from December 30, 2001 through October 15,
2002 have been derived from the audited consolidated financial statements of
Golfsmith International, Inc., and for the period from October 16, 2002 through
December 28, 2002 and as of and for fiscal 2003 have been derived from the
audited consolidated financial statements of Golfsmith International Holdings,
Inc., all periods of which have been audited by Ernst & Young LLP. Golfsmith
International Holdings, Inc. was formed on September 4, 2002 and became the
parent company of Golfsmith International, Inc. on October 15, 2002 as a result
of the merger. Holdings is a holding company and had no material assets or
operations prior to acquiring all of the capital stock of Golfsmith
International, Inc. in the merger. The selected consolidated financial data of
Holdings as of and for the three months ended March 29, 2003 and April 3, 2004
have been derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and, in our opinion, reflect all adjustments,
consisting of normal accruals, necessary for a fair presentation of the data for
those periods. Our results of operations for the three months ended April 3,
2004 may not be indicative of results that may be expected for the full year.
You should read the information set forth below in conjunction with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.
PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,                   THREE MONTHS ENDED
                                         FISCAL YEAR             2001 THROUGH   2002 THROUGH                 --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
RESULTS OF OPERATIONS:
Net revenues..................  $267,946   $232,080   $221,439     $180,315       $ 37,831      $257,745     $ 45,830    $ 65,782
Cost of products sold.........   175,600    153,630    143,118      117,206         25,147       171,083       30,972      42,807
                                --------   --------   --------     --------       --------      --------     --------    --------
Gross profit..................    92,346     78,450     78,321       63,109         12,684        86,662       14,858      22,975
Selling, general and
  administrative..............    78,360     76,352     64,081       48,308         13,581        73,400       14,259      20,168
Store pre-opening/closing
  expenses....................       493      1,592         --          122             93           600           --         329
Amortization of deferred
  compensation(1).............        --         --        458        6,033             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Total operating expenses......    78,853     77,944     64,539       54,463         13,674        74,000       14,259      20,497
                                --------   --------   --------     --------       --------      --------     --------    --------
Operating income..............    13,493        506     13,782        8,646           (990)       12,662          599       2,478
Interest expense..............    (5,775)    (6,905)    (6,825)      (5,206)        (2,210)      (11,157)      (2,639)     (2,795)
Interest income...............        22         82        597          331              7            40            8           1
Other income, net.............       275        449      1,031        2,365             14           164            3         (11)
Minority interest.............      (583)       454       (581)        (844)            --            --           --          --
Loss on debt
  extinguishment(1)...........        --         --         --       (8,047)            --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) before income
  tax.........................     7,432     (5,414)     8,004       (2,755)        (3,179)        1,709       (2,029)       (327)
Income tax benefit
  (expense)...................      (289)       190       (251)        (709)           633          (645)         811         124
                                --------   --------   --------     --------       --------      --------     --------    --------
Income (loss) from continued
  operations..................     7,143     (5,224)     7,753       (3,464)        (2,546)        1,064       (1,217)       (203)
Income (loss) from
  discontinued operations.....        52       (380)      (590)        (230)           (40)           --           --          --
Income (loss) before
  extraordinary items.........     7,195     (5,604)     7,163       (3,694)        (2,586)        1,064       (1,217)       (203)
Extraordinary items(1)........        --         --         --        4,122             --            --           --          --
                                --------   --------   --------     --------       --------      --------     --------    --------
Net income (loss).............  $  7,195   $ (5,604)  $  7,163     $    428       $ (2,586)     $  1,064     $ (1,217)   $   (203)
                                ========   ========   ========     ========       ========      ========     ========    ========
28
PREDECESSOR                                        SUCCESSOR
                                ---------------------------------------------   -------------------------------------------------
                                                                 PERIOD FROM    PERIOD FROM
                                                                 DECEMBER 30,   OCTOBER 16,                   THREE MONTHS ENDED
                                         FISCAL YEAR             2001 THROUGH   2002 THROUGH                 --------------------
                                ------------------------------   OCTOBER 15,    DECEMBER 28,   FISCAL YEAR   MARCH 29,   APRIL 3,
                                  1999       2000       2001         2002           2002          2003         2003        2004
                                --------   --------   --------   ------------   ------------   -----------   ---------   --------
                                                                  (IN THOUSANDS, EXCEPT RATIOS)
OTHER FINANCIAL DATA:
Depreciation and
  amortization(2).............  $  5,601   $  9,118   $  6,717     $  4,808       $  1,349      $  5,228     $  1,311    $  1,335
Capital expenditures(3).......     9,740      2,107      1,345        2,086          1,127         5,759          409       1,816
Ratio of earnings to fixed
  charges(4)..................       1.6x       0.6x       1.6x         0.7x           0.1x          1.1x         0.5x       0.9x

BALANCE SHEET DATA (AT PERIOD
  END):
Cash and cash equivalents.....  $  3,023   $ 11,149   $ 39,550     $  3,788       $ 11,412      $  2,928     $  2,775    $  4,177
Total assets..................   105,882    106,902    111,500      153,135        160,011       179,327      162,701     196,432
Long-term debt................    23,540     37,145     33,720       75,000         75,380        77,488       77,954      78,029
Total stockholders' equity....    33,004     24,921     32,519       56,011         53,473        58,976       52,246      58,811
---------------

(1) For the period from December 31, 2001 through October 15, 2002, please refer
    to note 5 and note 14 in our consolidated financial statements included in
    this prospectus for a discussion of the extraordinary items, loss on debt
    extinguishment and amortization of deferred compensation.

(2) Excludes the amortization of the debt discount and deferred charges
    associated with our 12% senior subordinated notes which were outstanding
    prior to the merger, the deferred charges associated with our credit
    facility in effect prior to the merger, the amortization of the debt
    discount and deferred charges associated with our 8.375% senior secured
    notes and deferred charges associated with our senior credit facility in
    effect subsequent to the merger.

(3) Capital expenditures consist of total capital expenditures, including
    capital costs associated with opening new stores.

(4) The ratio of earnings to fixed charges is calculated by dividing the fixed
    charges into net income before taxes plus fixed charges. Fixed charges
    consist of interest expense, amortization of deferred debt issuance costs
    and the estimated interest component of rent expense.

                                        29
MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes included elsewhere in this prospectus.

OVERVIEW

     Golfsmith International Holdings, Inc., or Holdings, became the parent
company of Golfsmith International, Inc., or Golfsmith, on October 15, 2002 as a
result of a purchase business combination, which we refer to as the merger.
Holdings has no assets or liabilities other than its investment in its wholly
owned subsidiary Golfsmith and did not have assets or operations prior to its
acquisition of Golfsmith. The following discussion and analysis of historical
financial condition and results of operations is therefore based on the
financial condition and results of operations of Golfsmith International, Inc.
with respect to periods prior to the merger. The discussion for periods
following the merger is based on the financial condition and results of
operations of Golfsmith International Holdings, Inc.

     We sell brand name golf equipment from the industry's leading manufacturers
including Callaway(R), FootJoy(R), Ping(R), Nike(R), Taylor Made(R) and
Titleist(R) as well as our own proprietary brands, Golfsmith(R), Lynx(R), Snake
Eyes(R), Killer Bee(R) and Zevo(R). We sell through multiple distribution
channels consisting of:

     - 42 golf superstores;

     - regular mailings of our clubmakers' catalogs, which offer golf club
       components, and our accessory catalogs, which offer golf accessories,
       clothing and equipment; and

     - golfsmith.com, our online e-commerce website.

     We also operate a clubmaker training program and are the exclusive operator
of the Harvey Penick Golf Academy, an instructional school incorporating the
techniques of the well-known golf instructor, the late Harvey Penick.

     Over the past few years we have implemented a number of initiatives to
improve our competitive position and financial performance, including closing
under-performing stores, updating and remodeling existing stores, narrowing
product assortments and upgrading our technology and infrastructure. While some
of these initiatives have reduced sales, we believe that these actions have
contributed to improved cash flow, earnings and asset management. We continue to
implement new initiatives surrounding product offerings such as our "Playability
Guarantee" program designed to insure complete customer satisfaction with our
customers' purchase of golf clubs; our "Club Vantage" program that provides the
customer with separately-priced repair service on any club purchase; the
Golfsmith credit card which offers flexible payment options on any purchase; and
the availability of in-store golf lessons through a partnership with GolfTEC
Learning Centers. In April 2004, we formed a partnership with The Golf Digest
Companies in which we will serve as the order fulfillment, distribution and call
center partner for The Golf Digest Pro Shop, the catalog and online store of The
Golf Digest Companies. We opened four stores during the three months ended April
3, 2004 and we plan to open two to four additional superstores during the
remaining three quarters of fiscal 2004. We believe our continued market
expansion combined with these new initiatives have contributed to increased
market presence and brand recognition, as evidenced by our increased comparable
store sales in the three months ended April 3, 2004 compared to the three months
ended March 29, 2003 and in fiscal 2003 compared to fiscal 2002 (see discussion
of comparable store sales below in "-- Results of Operations").

     We recognize revenue for retail sales at the time the customer takes
possession of the merchandise and purchases are paid for, primarily with either
cash or credit card. Catalog and e-commerce sales are recorded upon shipment of
merchandise. Revenue from the Harvey Penick Golf Academy instructional school is
recognized at the time the services are performed. Revenues from the sale of
gift certificates are

                                        30
recorded upon the redemption of the gift certificate for the purchase of
tangible products at the time the customer takes possession of the merchandise.

     Sales of our products are affected by increases and declines in the golf
industry as a whole. According to national publications, the golf industry is a
greater than $62 billion industry, has a base of over 26 million participants in
the United States and is characterized by favorable demographic trends. During
2002, total consumer golf equipment spending grew by a moderate 1% according to
a national publication. We believe that since 1997, the overall worldwide
premium golf club market has experienced only moderate growth in dollar volume
from year to year and that from 1999 to 2003 there was no material increase in
the number of rounds played. Golf Datatech has reported that during 2003, the
number of golf rounds played in the United States declined 2.6% as compared to
the same period in 2002. Declines in the number of rounds played in 2003 have
been attributed to bad weather, the uncertainty in the U.S. economy, and golfers
spending more time at work and with their families. However, during the first
quarter of 2004, the golf industry exhibited signs of growth. Golf Datatech has
reported that the number of rounds played during the three months ended March
31, 2004 increased by 4.0% over the comparable three-month period in 2003. While
we are optimistic about the potential for increased rounds during the remainder
of 2004 that could spur increased consumer spending, we cannot assure you that
declines in the U.S. economy or a reduction in discretionary consumer spending
will not impede growth in the worldwide market for golf-related products,
including our products.

     Our business is highly seasonal, with sales and earnings peaks during the
Father's Day and Christmas Holiday seasons. A substantial portion of our net
revenues and an even larger portion of our operating income occur in our second
fiscal quarter. You should read the information set forth in "Risk Factors" for
a discussion of the effects and risks of the seasonality of our business.

     We capitalize inbound freight and vendor discounts into inventory upon
receipt of inventory. These costs are then subsequently included in cost of
goods sold upon the sale of that inventory. Because some retailers exclude their
costs from cost of goods sold, and instead include them in a line item like
selling and administrative expenses, our gross margins may not be comparable to
those of these other retailers.

     Our fiscal year ends on the last Saturday in December and generally
consists of 52 weeks, though occasionally our fiscal years will consist of 53
weeks. This occurred in fiscal 2003. Fiscal year 2002 consisted of 52 weeks.
Each quarter of each fiscal year generally consists of 13 weeks. The three month
periods ended April 3, 2004 and March 29, 2003 both consisted of 13 weeks. The
fourth fiscal quarter of 2003 consisted of 14 weeks.

IMPACT OF MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. We accounted for the merger under the purchase method of
accounting for business combinations. In accordance with the purchase method of
accounting, in connection with the merger, we allocated the excess purchase
price over the fair value of our net assets between a write-up of certain of our
assets, which reflect an adjustment to the fair values of these assets, and
goodwill. The assets that have had their fair values adjusted include inventory,
property and equipment, and certain intangible assets.

     As a result of applying the required purchase accounting rules, our
financial statements are significantly affected. The application of purchase
accounting rules results in different accounting bases and hence financial
information for the periods beginning on October 16, 2002. The term "successor"
refers to Golfsmith International Holdings, Inc. and all of its subsidiaries,
including Golfsmith International, Inc. following the acquisition on October 15,
2002. The term "predecessor" refers to Golfsmith International, Inc. prior to
being acquired by Holdings.

     Immediately prior to the merger, we repaid in full our 12% senior
subordinated notes for $34.4 million and terminated our then existing revolving
credit facility. Deferred debt financing costs of $1.6 million were written-off
in connection with the termination of these agreements. We sold 8.375% senior
secured

                                        31
notes due 2009 with an aggregate principal amount at maturity of $93.75 million
for gross proceeds of $75.0 million in a private placement offering to finance
part of the cash portion of the merger consideration, and entered into a new
senior credit facility to fund our future working capital requirements and for
general corporate purposes as described below in "-- Liquidity and Capital
Resources -- Credit Facility".

     As a result of the merger and the offering of the notes, we currently have
total debt in amounts substantially greater than our historical levels. This
amount of debt and associated debt service costs will lower our net income and
cash provided by operating activities and will limit our ability to obtain
additional debt financing, fund capital expenditures or operating requirements,
open new or retrofit existing stores, and make acquisitions.

     Historically, we operated as a Subchapter S corporation under the Internal
Revenue Code. Consequently, we were not generally subject to federal income
taxes because our stockholders included our income in their personal income tax
returns. Simultaneously with the completion of the merger, we converted from a
Subchapter S corporation to a Subchapter C corporation and consequently became
subject to federal income taxes from that date. This conversion will lower our
future net income and cash provided by operating activities.

     In connection with the merger, all stock options held by our employees
vested and were either canceled in exchange for the right to receive cash or
surrendered in exchange for stock units. As a result, we incurred a non-cash
compensation charge of $4.6 million which was equal to the difference between
the market value of its common stock and the exercise price of these options at
that vesting date. Total non-cash compensation expense for fiscal 2002 and
fiscal 2003 was $6.0 million and $0, respectively. As all options were either
canceled in exchange for the right to receive cash or surrendered in exchange
for stock units concurrent with the merger, there is no future amortization
expense associated with these pre-merger options. For further information about
our stock-based compensation, see Note 1 and Note 14 to our audited consolidated
financial statements included in the prospectus.

BUSINESS COMBINATIONS -- DON SHERWOOD GOLF SHOP

     On July 24, 2003, we acquired all of the issued and outstanding shares of
Don Sherwood Golf Shop, which we refer to as Sherwood, for a total purchase
price of $9.2 million, including related acquisition costs of $0.4 million. We
believe that the Sherwood acquisition supports our goal of expanding our
national presence while gaining exposure to one of the country's top golf
markets in San Francisco, California. We acquired all six Sherwood retail stores
as part of the acquisition. The operations of Sherwood stores are included in
our statements of operations and cash flows as of July 25, 2003 and do not
result in any new segments for us.

     In conjunction with the acquisition of Sherwood, Holdings issued 1,433,333
shares of its common stock to existing stockholders, including its majority
stockholder, for consideration of $4.3 million. The proceeds from the issuance
of common stock were used to fund a portion of the purchase price of the
acquisition of Sherwood. The issuance of these additional shares increased
Holdings' majority stockholder's 79.7% controlling interest to an 80.9%
controlling interest, including issued restricted common stock units, which
entitle the holders to shares of common stock of Holdings, and excluding
outstanding stock options. As of April 3, 2004, after giving effect to the
exchange by Atlantic Equity Partners III, L.P. of all of the notes beneficially
owned by it for additional shares of common stock of Holdings and cash in a
private transaction, Atlantic Equity Partners III, L.P. would have owned
approximately 76.6% of Holdings' common stock on a fully diluted basis
(including outstanding stock options).

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. This allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

                                        32
Contingent consideration of $1.3 million was placed in an escrow account by
us to secure certain indemnification obligations of the selling shareholder.
Pursuant to the terms and conditions of the escrow agreement, these funds were
released from the escrow account and disbursed to the selling shareholder on
June 17, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Management's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosures of contingent assets and
liabilities. The estimates and assumptions are evaluated on an ongoing basis and
are based on historical experience and other various factors that are believed
to be reasonable under the circumstances. Actual results may differ from these
estimates.

     We believe the following critical accounting policies, as have been
discussed with our audit committee, affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.

  INVENTORY VALUATION

     Inventory value is presented as a current asset on our balance sheet and is
a component of cost of products sold in our statement of operations. It
therefore has a significant impact on the amount of net income reported in any
period. Merchandise inventories are carried at the lower of cost or market. Cost
is the sum of expenditures, both direct and indirect, incurred to bring
inventory to its existing condition and location. Cost is determined using the
weighted-average method. We estimate a reserve for damaged, obsolete, excess and
slow-moving inventory and for inventory shrinkage due to anticipated
book-to-physical adjustments. We periodically review these reserves by comparing
them to on-hand quantities, historical and projected rates of sale, changes in
selling price and inventory cycle counts. Based on our historical results, using
various methods of disposition, we estimate the price at which we expect to sell
this inventory to determine the potential loss if those items are later sold
below cost. The carrying value for inventories that are not expected to be sold
at or above costs are then written down. A significant adjustment in these
estimates or in actual sales may have a material adverse impact on our net
income. Reserves are booked on a monthly basis at 0.4% to 0.75% of net revenues
depending on the distribution channel (direct-to-consumer channel or retail
channel) in which the sales occur. Inventory shrink expense recorded in the
statements of operations in fiscal 2002 and 2003 was 0.55% and 0.66% of net
sales, respectively, and during the three months ended March 29, 2003 and April
3, 2004 was 0.8% and 0.6% of net sales, respectively. Inventory shrink expense
recorded is a result of physical inventory counts made during these respective
periods and reserve amounts recorded for periods outside of the physical
inventory count dates. These reserve amounts are based on management's estimates
of shrink expense using historical experience.

  LONG-LIVED ASSETS, INCLUDING GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

     We evaluate the impairment of the book value of our indefinite lived
intangibles and related goodwill in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. We
evaluate impairment annually, as well as whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be
recoverable based on a combination of our projection of estimated future
discounted cash flows and other valuation methodologies. We evaluate the
impairment of the book value of our long-lived assets including intangible
assets subject to amortization in accordance with SFAS No. 144, Impairment of
Long-Lived Assets, based on our projection of estimated future undiscounted cash
flows whenever events or changes in circumstances indicate that the carrying
amounts of these assets may not be recoverable. Factors that are considered by
management in performing this assessment include, but are not limited to, our
performance relative to our projected or historical results, our intended use of
acquired assets and our strategy for our overall business, as well as industry
and economic trends. In the event that the book value of intangibles, long-lived
assets
                                        33
and related goodwill is determined to be impaired, such impairments are measured
using a combination of a discounted cash flow valuation, with a discount rate
determined to be commensurate with the risk inherent in our current business
model, and other valuation methodologies. To the extent these future projections
or our strategies change, our estimates regarding impairment may differ from our
current estimates. In accordance with SFAS No. 142, we determined that our
recorded tradename and trademarks have indefinite useful lives and therefore are
not amortized. Based on our analyses, no impairment of long-lived assets,
including goodwill and identifiable intangible assets, was recorded in either
fiscal 2002 or fiscal 2003.

  PRODUCT RETURN RESERVES

     We reserve for product returns based on estimates of future sales returns
related to our current period sales. We analyze historical returns, current
economic trends and changes in customer acceptance of our products when
evaluating the adequacy of the reserve for sales returns. Any significant
increase in merchandise returns that exceeds our estimates could adversely
affect our operating results. In addition, we may be subject to risks associated
with defective products, including product liability. Our current and future
products may contain defects, which could subject us to higher defective product
returns, product liability claims and product recalls. Because our allowances
are based on historical return rates, we cannot assure you that the introduction
of new merchandise in our stores or catalogs, the opening of new stores, the
introduction of new catalogs, increased sales over the Internet, changes in the
merchandise mix or other factors will not cause actual returns to exceed return
allowances. We book reserves on a monthly basis at 2% to 10% of net revenues
depending on the distribution channel in which the sales occur. We routinely
compare actual experience to current reserves and make any necessary
adjustments.

  STORE CLOSURE COSTS

     When we decide to close a store and meet the applicable accounting guidance
criteria, we recognize an expense related to the future net lease obligation,
non-recoverable investments in related fixed assets and other expenses directly
related to the discontinuance of operations in accordance with SFAS No. 146,
Accounting For Costs Associated With Exit or Disposal Activities. These charges
require us to make judgments about exit costs to be incurred for employee
severance, lease terminations, inventory to be disposed of, and other
liabilities. The ability to obtain agreements with lessors, to terminate leases
or to assign leases to third parties can materially affect the accuracy of these
estimates.

     We closed two stores in fiscal 2000, one store in fiscal 2001 and two
stores in fiscal 2002. These stores were selected for closure by evaluating the
historical and projected financial performance of all of our stores in
accordance with our store strategy. In each case, the stores that have been
closed were our only store in that market and were substantially larger in size
than our current store prototype. We did not close any stores in fiscal 2003 or
in the three month period ended April 3, 2004. We do not currently have any
plans to close any additional stores, although we regularly evaluate our stores.

  DEFERRED TAX ASSETS

     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 resulting from temporary
differences in the financial reporting and tax bases of assets and liabilities.
We provide a valuation allowance for our deferred tax assets when, in the
opinion of management, it is more likely than not that such assets will not be
realized. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to realize
our deferred tax assets in the future in excess of our net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise, should we determine that we would not be able
to realize all or part of our net deferred tax asset in the future as a result
of net losses, an adjustment to the deferred tax asset would be charged to
income in the period such determination was made.

                                        34
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46),
which was revised in December 2003 (FIN 46(R)). FIN 46(R) requires that
companies consolidate a variable interest entity if they are subject to a
majority of the risk of loss from the variable interest entity's activities or
are entitled to receive a majority of the entity's residual returns, or both.
The provisions of FIN 46(R) currently are required to be applied no later than
the first reporting period ending after March 15, 2004 for variable interest
entities. We have no special purpose entities, nor have we acquired a variable
interest in an entity where we are the primary beneficiary. The adoption of FIN
46(R) did not have a material impact on the our financial condition, results of
operations or cash flows.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS No. 150 did not have a material impact on our results of
operations or financial position.

RESULTS OF OPERATIONS

  THREE MONTHS ENDED APRIL 3, 2004 COMPARED TO THREE MONTHS ENDED MARCH 29, 2003

     We had net revenues of $65.8 million, operating income of $2.5 million and
a net loss of $0.2 million in the three months ended April 3, 2004 compared to
net revenues of $45.8 million, operating income of $0.6 million and a net loss
of $1.2 million in the three months ended March 29, 2003.

     The $20.0 million increase in net revenues from the three months ended
March 29, 2003 to the three months ended April 3, 2004 was mostly comprised of a
$6.0 million increase, or 23.9%, in comparable store revenues and a $10.9
million increase in non-comparable store revenues (including six stores acquired
in the acquisition of Don Sherwood Golf Shop on July 24, 2003). In comparison,
comparable store revenues for the three months ended March 29, 2003 declined
2.2%. We believe increased comparable store sales from the three months ended
March 29, 2003 to the three months ended April 3, 2004 are correlated with the
4.0% increase in the number of golf rounds played in the U.S. during the first
quarter of 2004 as compared to the same quarter in 2003, as reported by Golf
Datatech, as well as the cross-marketing benefits of our multi-channel retail
model combined with activity related to our new and existing specialty retail
services. We consider sales of a store to be comparable commencing in the
fourteenth month after the store was opened or acquired. Direct to consumer
channel revenues increased $2.4 million, or 12.2%, from the three months ended
March 29, 2003 to the three months ended April 3, 2004. International revenues
increased $0.7 million from the three months ended March 29, 2003 to the three
months ended April 3, 2004.

     For the three months ended April 3, 2004, gross profit was $23.0 million,
or 34.9% of net revenues, compared to $14.9 million, or 32.4% of net revenues,
for the three months ended March 29, 2003. Increased net revenues for the three
months ended April 3, 2004 compared to the three months ended March 29, 2003 led
to higher gross profit for the three months ended April 3, 2004. The increase in
gross margin percentage resulted from increased sales in higher margin
merchandise categories combined with improved selling and merchandising
practices.

     Selling, general and administrative expenses increased $5.9 million to
$20.2 million for the three months ended April 3, 2004 from $14.3 million for
the three months ended March 29, 2003. Increased selling, general and
administrative expenses for the three months ended April 3, 2004 compared to the
three months ended March 29, 2003 resulted from an increase in expenses of $4.3
million related to sixteen additional retail stores in operation for the three
months ended April 3, 2004 (including six stores acquired in the acquisition of
Don Sherwood Golf Shop on July 24, 2003) compared to the three months

                                        35
ended March 29, 2003 and an increase of $1.6 million related to general
operations for existing retail stores and corporate expenses.

     Pre-opening costs include costs associated with hiring and training
personnel, supplies and certain occupancy and miscellaneous costs related to new
store openings and are expensed as incurred. Pre-opening costs are incurred
primarily in the 30 days prior to the grand opening of a new store. During the
three months ended April 3, 2004, we incurred approximately $0.3 million in
pre-opening expenses related to the opening of four new retail locations. We did
not incur any pre-opening costs in the three months ended March 29, 2003.

     Interest expense consists of costs related to our 8.375% senior secured
notes and our senior credit facility. Interest expense increased $0.2 million to
$2.8 million for the three months ended April 3, 2004 from $2.6 million for the
three months ended March 29, 2003. The increase was primarily the result of an
increase in our average outstanding daily balance under our revolving senior
credit facility. For further discussion see "-- Liquidity and Capital
Resources -- Senior Secured Notes" and "-- Liquidity and Capital
Resources -- Credit Facility" below.

     We record income taxes, consisting of federal, state and foreign taxes,
based on the effective rate expected for the fiscal year. Actual results may
differ from these estimates. The benefit from income taxes was $0.1 million, or
38.0% of pre-tax net loss, for the three months ended April 3, 2004. The benefit
from income taxes was $0.8 million, or 40.0% of pre-tax net loss, for the three
months ended March 29, 2003. The decrease in our effective tax rate was
attributable to lower than projected effective state income tax rates.

  SUCCESSOR FISCAL 2003 COMPARED TO COMBINED FISCAL 2002

     For comparison purposes, references to "fiscal 2002" refer to the combined
financial results of our predecessor from December 30, 2001 through October 15,
2002 and of Holdings from October 16, 2002 through December 28, 2002. In
conjunction with the acquisition of Golfsmith, Golfsmith, being the surviving
wholly owned subsidiary of Holdings, issued the 8.375% senior secured notes at a
20% discount off of face value for gross proceeds of $75.0 million.

     We had net revenues of $257.7 million, operating income of $12.7 million
and net income of $1.1 million in fiscal 2003 compared to net revenues of $218.1
million, operating income of $7.7 million and a net loss of $2.2 million in
fiscal 2002.

     The $39.6 million increase in net revenues from fiscal 2002 to fiscal 2003
was mostly comprised of a $9.1 million increase, or 7.4%, in comparable store
revenues, a $18.2 million increase in revenue generated by twelve retail stores
that were opened or acquired subsequent to December 28, 2002 (including six
stores acquired in the acquisition of Don Sherwood Golf Shop on July 24, 2003),
and a $11.2 million increase in other non-comparable stores. Direct to consumer
channel revenues increased $0.9 million, or 1.0%, from fiscal 2002 to fiscal
2003. International revenues increased $0.2 million, or 4.0%, from fiscal 2002
to fiscal 2003.

     For fiscal 2003, gross profit was $86.7 million, or 33.7% of net revenues,
compared to $75.8 million, or 34.8% of net revenues, for fiscal 2002. Increased
net revenues in fiscal 2003 compared to fiscal 2002 led to higher gross profits
for fiscal 2003. The decline in gross profit percentage resulted principally
from higher sales in lower margin merchandise categories such as equipment. We
realized additional declines in gross profit percentage as a result of multiple
sales promotions during fiscal 2003 which were designed to drive revenues.
Additionally, in fiscal 2003, we incurred approximately $0.7 million of
non-recurring costs included in cost of goods sold resulting from the fair value
adjustment made to inventory as part of the merger transaction in October 2002.

     Selling, general and administrative expenses increased $11.5 million to
$73.4 million for fiscal 2003 from $61.9 million for fiscal 2002. We had twelve
additional retail stores in operation during fiscal 2003 compared to fiscal 2002
(including six stores acquired in the acquisition of Don Sherwood Golf Shop on
July 24, 2003), resulting in an increase in selling, general and administrative
expenses of $7.3 million. In
                                        36
fiscal 2003, we also incurred increased costs relating to and resulting from the
merger transaction on October 15, 2002, including a $0.6 million increase in
depreciation and amortization resulting from the fair value adjustments made as
part of the merger transaction. Additionally, in fiscal 2003 we incurred
increased expenses of $0.9 million related to professional fees associated with
our filings with the Securities and Exchange Commission and other company
initiatives, $0.5 million related to management fees paid to our majority
stockholder, $2.2 million related to salaries and benefits, $1.5 million related
to occupancy costs such as rent and utilities, and $0.3 million related to
advertising expenses. These increases were offset by a $1.8 million decrease in
depreciation expense in fiscal 2003 compared to fiscal 2002.

     During fiscal 2003, we incurred approximately $0.6 million in pre-opening
expenses related to the opening of six new retail locations fiscal 2003. During
fiscal 2002, we closed two stores and opened three stores. The two closed stores
accounted for $2.0 million in net revenues and $0.3 million in operating losses
in fiscal 2002. Store closure expenses were $0.3 million in fiscal 2002. Store
closure expenses for stores closed in 2002 are reflected in discontinued
operations in accordance with SFAS No. 144, Impairment of Long-Lived Assets. We
incurred approximately $0.2 million in store pre-opening expenses in fiscal
2002.

     Amortization of deferred compensation was approximately $6.0 million for
fiscal 2002. Deferred compensation is related to the accounting for stock
options under variable plan accounting guidance. These non-cash charges did not
exist in fiscal 2003 due to all remaining outstanding options becoming vested
and being either canceled in exchange for the right to receive cash or
surrendered in exchange for stock units on the merger date of October 15, 2002.
See "-- Impact of Merger" above for further discussion.

     For fiscal 2002, interest expense consisted of costs related to our 12%
senior subordinated notes, a mortgage note and a bank line of credit.
Immediately prior to the merger in October 2002, we repaid the senior
subordinated notes and other pre-existing debt and a new line of credit was put
in place. Interest expense was $11.2 million and $7.4 million in fiscal 2003 and
2002, respectively. Interest expense increased as debt balances during fiscal
2003 were almost three times higher than during most of fiscal 2002.
Approximately $0.9 million of amortization of debt issuance costs resulting from
the new senior secured notes and senior credit facility during fiscal 2003 as
compared to approximately $0.6 million of amortization of debt issuance costs
related to the senior subordinated notes and prior credit facility during fiscal
2002 also contributed to the increase in interest expense. For further
discussion, see "-- Liquidity and Capital Resources -- Senior Secured Notes" and
"-- Liquidity and Capital Resources -- Credit Facility" below. Interest income
was approximately $40,000 and $0.3 million in fiscal 2003 and 2002,
respectively. The decrease in interest income was the result of overall lower
cash and cash equivalent balances combined with lower interest rates.

     Other income, net of other expenses was approximately $164,000 for fiscal
2003, compared to other income, net of other expenses of $2.4 million for fiscal
2002. In March 2002, the rights to certain intellectual property were sold for
gross proceeds of $3.3 million, resulting in a $2.2 million gain which accounts
for most of the difference.

     On October 15, 2002, immediately prior to the merger, we repaid in full our
12% senior subordinated notes. We recorded a loss of $8.0 million on the
extinguishment of this debt, as reported in continuing operations.

     We recognized a loss of $0.3 million in fiscal 2002 from discontinued
operations related to the operations and final closing costs associated with
closing two retail locations during fiscal 2002 due to poor operating
performance and the lack of market penetration being derived from these
single-store markets. Store closure costs include writedowns of remaining
leasehold improvements and store equipment to estimated fair values and lease
termination costs. We recorded a loss on the disposal of these assets in fiscal
2002 of $0.3 million, which is reported in discontinued operations under the
accounting guidance of SFAS No. 144, Impairment of Long-Lived Assets. All
related assets and liabilities for this location have been eliminated from each
of the consolidated balance sheets included in this prospectus. We did not close
or determine any stores to be discontinued during fiscal 2003.

                                        37
Minority interest expense during fiscal 2002 of $0.8 million relates to an
obligation that was associated with partnership interests issued in 1998.
Immediately prior to the merger, we repurchased this minority interest
obligation. The minority interest obligation had a carrying value of $13.1
million and was repurchased for $9.0 million, resulting in the recording of
negative goodwill during the fourth quarter of fiscal 2002.

     Historically, we elected to be treated as a Subchapter S Corporation under
the Internal Revenue Code. Consequently, we were not generally subject to
federal income taxes because our stockholders included our income in their
personal income tax returns. Concurrently with the completion of the merger, we
converted from a Subchapter S corporation to a Subchapter C corporation and
consequently became subject to federal income taxes from that date. For fiscal
2003, our income tax expense was $0.6 million, which consisted of federal, state
and foreign taxes for a consolidated 38% tax rate, compared to income tax
expense of $0.1 million for fiscal 2002 which related to our European and
Canadian operations as well as certain state income taxes.

  COMBINED FISCAL 2002 COMPARED TO PREDECESSOR FISCAL 2001

     For comparison purposes, references to "fiscal 2002" refer to the combined
financial results of our predecessor from December 30, 2001 through October 15,
2002 and of Holdings from October 16, 2002 through December 28, 2002.

     We had net revenues of $218.1 million, operating income of $7.7 million and
a net loss of $2.2 million in fiscal 2002 compared to net revenues of $221.4
million, operating income of $13.8 million and net income of $7.2 million in
fiscal 2001.

     The $3.3 million decline in net revenues from fiscal 2002 to fiscal 2001
was due to one store that closed in 2001 and one store that closed in January
2002 and therefore did not contribute to 2002 revenues, accounting for a
reduction in revenues of $1.3 million combined with a $4.7 million reduction in
revenues in our direct to consumer channel. These revenue declines were
partially offset by the opening of three new stores in fiscal 2002, resulting in
$2.2 million in revenues, as well as an increase in international revenues of
$0.5 million. Revenues from comparable stores remained consistent with a 0.1%
increase from fiscal 2001 to fiscal 2002.

     In fiscal 2002, gross profit was $75.8 million, or 34.8% of net revenues,
compared to $78.3 million, or 35.4% of net revenues, in fiscal 2001. Gross
profit declined due to the lower net revenues and lower gross profit margins
resulting principally from higher sales in lower margin merchandise categories
such as equipment.

     Selling, general and administrative expenses, excluding store
pre-opening/closing expenses, decreased $2.2 million to $61.9 million in fiscal
2002 from $64.1 million in fiscal 2001. The decrease was the result of
improvements in management of administrative expenses, which decreased by $2.6
million, as well as a reduction in store payroll, which decreased by $0.2
million. Those reductions were partially offset by a $0.6 million increase in
advertising expense.

     During fiscal 2002, we closed two stores, opened one store in June and
opened two stores in November. The two closed stores accounted for $2.0 million
and $7.8 million in net revenues and $0.3 million and $0.6 million in operating
loses in fiscal 2002 and 2001, respectively. Store closure expenses were $0.3
million and $0.7 million in fiscal 2002 and 2001, respectively. Store closure
expenses for stores closed in 2002 are reflected in discontinued operations in
accordance with SFAS No. 144, Impairment of Long-Lived Assets. We incurred
approximately $0.2 million in store pre-opening expenses in fiscal 2002.

     Amortization of deferred compensation increased $5.5 million to $6.0
million in fiscal 2002 compared to $0.5 million in 2001. Deferred compensation
is related to the accounting for stock options under variable plan accounting
guidance. These non-cash charges increased over the prior year due to all
remaining outstanding options becoming vested on the merger date of October 15,
2002. See "-- Impact of Merger" above for further discussion.
                                        38
For all of fiscal 2001 and a majority of fiscal 2002, interest expense
consisted of costs related to our 12% senior subordinated notes, a mortgage note
and our prior credit facility. Immediately prior to the merger in October 2002,
we repaid our senior subordinated notes and other pre-existing debt with the net
proceeds from our senior secured notes, which were $67.9 million. Interest
expense was $7.4 million and $6.8 million for fiscal 2002 and fiscal 2001,
respectively. Interest expense increased as a result of increased borrowings in
fiscal 2002 compared to fiscal 2001. The senior subordinated notes and
borrowings under our prior credit facility were repaid in connection with the
merger in October 2002 and a new line of credit and the senior secured notes
were put in place. For further discussion, see "-- Liquidity and Capital
Resources -- Senior Secured Notes" and "-- Liquidity and Capital
Resources -- Credit Facility" below. In fiscal 2002 and fiscal 2001, interest
income was $0.3 million and $0.6 million, respectively.

     Other income, net of other expenses was $2.4 million in fiscal 2002,
compared to other income, net of other expenses of $1.0 million for fiscal 2001.
The increase is due primarily to a gain on the sale of assets. In March 2002,
the rights to certain intellectual property were sold for gross proceeds of $3.3
million, resulting in a $2.2 million gain. In March 2001, unutilized real estate
adjacent to our Austin facilities was sold, which resulted in a $1.1 million
gain.

     On October 15, 2002, immediately prior to the merger, we repaid in full our
12% senior subordinated notes. We recorded a loss of $8.0 million on the
extinguishment of this debt, as reported in continuing operations.

     We recognized a loss of $0.3 million and $0.6 million in fiscal 2002 and
2001, respectively, from discontinued operations related to the operations and
final closing costs associated with closing two retail locations in fiscal 2002
due to poor operating performance and the lack of market penetration being
derived from these single-market stores. We recorded a loss on the disposal of
these assets in fiscal 2002 of $0.3 million, which is reported in discontinued
operations under the accounting guidance of SFAS No. 144, Impairment of
Long-Lived Assets. All related assets and liabilities for these two locations
have been eliminated from the consolidated balance sheets included in this
prospectus.

     Minority interest expense during fiscal 2002 of $0.8 million and during
fiscal 2001 of $0.6 million relates to an obligation that was associated with
partnership interests issued in 1998. Immediately prior to the merger, we
repurchased this minority interest obligation. The minority interest obligation
had a carrying value of $13.1 million and was repurchased for $9.0 million,
resulting in the recording of negative goodwill during the fourth quarter of
fiscal 2002. In accordance with SFAS No. 141, Business Combinations, this gain
was recorded on the statement of operations as an extraordinary item in fiscal
2002.

     Historically, we elected to be treated as a Subchapter S Corporation under
the Internal Revenue Code. Consequently, we were not generally subject to
federal income taxes because our stockholders included our income in their
personal income tax returns. For fiscal 2002, income tax expense was $0.1
million compared to income tax expense of $0.3 million for fiscal 2001, related
to our European and Canadian operations as well as certain state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

     As of April 3, 2004, we had $4.2 million in cash and cash equivalents,
working capital of $18.6 million and outstanding debt obligations of $79.1
million. We had $10.9 million in borrowing availability under our credit
facility as of April 3, 2004.

  OPERATING ACTIVITIES

     Net cash provided by operating activities was $3.4 million for the three
months ended April 3, 2004, compared to $10.3 million in net cash used in
operating activities for the three months ended March 29, 2003. The increase in
net cash provided by operating activities of $13.7 is attributable to three main
causes. First, our net loss decreased by $1.0 million, from a $1.2 million net
loss for the three months
                                        39
ended March 29, 2003 to a $0.2 million net loss for the three months ended April
3, 2004. Second, we were able to increase our net revenues during the three
months ended April 3, 2004, including a 23.9% increase in comparable store
revenues, without experiencing a comparable outflow of cash for the purchases of
the related inventory due to more favorably negotiated vendor terms. As a
result, for the three months ended April 3, 2004, the increase in accounts
payable in excess of cash used to purchase and maintain inventory provided cash
of $6.2 million. For the three months ended March 29, 2003, the increase in
accounts payable was less than the related increase in inventory, resulting in
cash used in operating activities of $5.2 million. Third, changes in other
working capital accounts associated with ongoing operations contributed $1.3
million to cash provided by operating activities.

     Net cash provided by operating activities was $1.1 million for fiscal 2003,
compared to $20.2 million in net cash provided by operating activities for
fiscal 2002. This decrease in net cash provided by operations during fiscal 2003
as compared to fiscal 2002 is primarily attributable to additional cash of $13.4
million used to fund working capital requirements during fiscal 2003 as compared
to fiscal 2002 as we utilized cash to grow and expand operations. Additional
cash of approximately $16.5 million was used during fiscal 2003 as compared to
fiscal 2002 to fund normal inventory requirements. These requirements were
primarily the result of having twelve additional retail stores in operation
subsequent to fiscal 2002 combined with an increased effort to be better stocked
in all retail stores during fiscal 2003. The cash used to fund inventory
requirements was offset by an increase of $3.1 million in cash generated from
working capital accounts during fiscal 2003 as compared to fiscal 2002. In
addition, in fiscal 2002 we recognized certain non-recurring non-cash expenses,
net of gains, totaling $8.6 million that were additive to the fiscal 2002 net
loss in determining fiscal 2002 net cash provided by operating activities. These
combined decreases in net cash provided by operating activities in fiscal 2003
compared to fiscal 2002 were offset by the fact that we generated net income of
$1.1 million in fiscal 2003 compared to a net loss of $2.1 million in fiscal
2002.

  INVESTING ACTIVITIES

     Net cash used in investing activities was $1.8 million for the three months
ended April 3, 2004, compared to net cash used in investing activities of $0.4
million for the three months ended March 29, 2003. Net cash used in investing
activities for the three months ended April 3, 2004 of $1.8 million was almost
entirely the result of capital expenditures. For the three months ended April 3,
2004, capital expenditures were comprised of $1.3 million for new and existing
stores and $0.5 million for corporate projects. Net cash used in investing
activities for the three months ended March 29, 2003 of $0.4 million was almost
entirely the result of capital expenditures. For the three months ended March
29,2003, capital expenditures were comprised of $0.2 million for new and
existing stores and $0.2 million for corporate projects.

     Net cash used in investing activities was $15.3 million for fiscal 2003,
compared to net cash provided by investing activities of $0.1 million for fiscal
2002. Net cash used in investing activities for fiscal 2003 of $15.3 million was
the result of capital expenditures of $5.8 million, $0.9 million related to
asset purchases, and $8.6 million related to our acquisition of Don Sherwood
Golf Shop. In fiscal 2003, capital expenditures were comprised of $5.2 million
for new and existing stores and $0.6 million for corporate projects. Net cash
provided by investing activities for fiscal 2002 of $0.1 million was the result
of proceeds from the sale of certain intellectual property of $3.3 million,
which was partially offset by $3.2 million in capital expenditures. In fiscal
2002, capital expenditures were comprised of $2.7 million for new and existing
stores and $0.5 million for corporate projects.

  FINANCING ACTIVITIES

     Net cash used in financing activities was $0.3 million for the three months
ended April 3, 2004, compared to net cash provided by financing activities of
$2.1 million for the three months ended March 29, 2003. Net cash used in
financing activities for the three months ended April 3, 2004 of $0.3 million
was comprised primarily of payments on our senior credit facility of $0.3
million, net of proceeds from borrowings. Net cash provided by financing
activities for the three months ended March 29,
                                        40
2003 of $2.1 million was comprised primarily of proceeds from borrowings under
our senior credit facility of $2.1 million, net of payments.

     Net cash provided by financing activities was $5.6 million for fiscal 2003,
compared to net cash used in financing activities of $48.5 million for fiscal
2002. Net cash provided by financing activities for fiscal 2003 of $5.6 million
was comprised of proceeds from a line of credit of $1.4 million, net of
payments, $4.3 million in proceeds from the issuance of common stock primarily
related to the purchase of Don Sherwood Golf Shop, offset by $0.1 million
relating to payments of debt issuance costs and notes payable. Net cash used in
financing activities in fiscal 2002 of $48.5 million was comprised of principal
payments on long-term debt of $41.7 million, payments to satisfy debt and
minority interest obligations of $10.6 million, distributions to stockholders of
$35.9 million as a result of the merger in October 2002 discussed above and
dividends paid to stockholders of $3.5 million. We received proceeds of $43.2
million from the issuance of common stock associated with the merger.

SENIOR SECURED NOTES

     On October 15, 2002, we completed a private placement of $93.75 million
aggregate principal amount at maturity of our 8.375% senior secured notes due
2009 for gross proceeds of $75.0 million. In July 2003, we conducted an exchange
offer in which we offered to exchange new senior secured notes registered under
the Securities Act of 1933 for all of our eligible existing senior secured
notes. The terms of the new notes are substantially identical as those issued in
the private placement, except the new notes are freely tradable. Holdings fully
and unconditionally guarantees the notes. As a result of the covenants in the
indenture governing the notes, our ability to borrow under the credit facility
described below is restricted to a maximum of $12.5 million and the payment of
dividends or repurchases of stock are limited. The proceeds from the sale of the
notes were used to pay part of the cash portion of the merger consideration and
for fees and expenses of the offering and merger.

     As a result of the merger and the offering of the notes, we currently have
total debt in amounts substantially greater than historical levels. This amount
of debt and associated debt service costs could lower our net income and cash
provided by operating activities and will limit our ability to obtain additional
debt financing, fund capital expenditures or operating requirements, open new or
retrofit existing stores, and make acquisitions.

CREDIT FACILITY

     Historically, our principal sources of liquidity consisted of cash from
operations and financing sources. In fiscal 1998, we issued in a private
placement $30.0 million of our 12% senior subordinated notes and partnership
interests that could have been converted into warrants to purchase shares of our
common stock under certain circumstances. We repaid in full the 12% senior
subordinated notes in connection with the merger.

     Concurrently with the merger, we entered into a revolving senior credit
facility with $9.5 million availability (after giving effect to required
reserves of $500,000), subject to customary conditions, to fund our working
capital requirements and for general corporate purposes. Three of our
subsidiaries are borrowers under the senior credit facility and we, our other
subsidiaries and Holdings fully and unconditionally guarantee the senior credit
facility. The credit agreement is secured by a pledge of our inventory,
receivables, and certain other assets. The credit agreement provides for
same-day funding of the revolver, as well as letters of credit up to a maximum
of $1 million. The credit agreement contains various covenants restricting our
activities, such as payment of dividends on our capital stock, as well as
covenants regarding maximum indebtedness, minimum interest coverage ratios,
maximum capital expenditures and minimum earnings levels. Borrowings under the
credit facility may be made, at our option, as either an index rate loan or a
LIBOR rate loan. Index rate loans bear interest at the higher of (1) the Wall
Street Journal posted base rate on corporate loans or (2) the federal funds
rate, in each case plus 1%. LIBOR rate loans bear interest at a rate based on
LIBOR plus 2.5%. A fee of 2.5% per annum of the amount available under
outstanding letters of credit is due and payable monthly. We are also required
to pay a

                                        41
monthly commitment fee equal to 0.5% of the undrawn availability, as calculated
under the agreement. As of April 3, 2004, we had $1.1 million in borrowings
outstanding under the credit agreement and were in compliance with the
covenants.

     In January 2003, the senior credit facility was amended to extend the
period of time permitted to obtain certain waivers from landlords of leased
premises in connection with collateral under the senior credit facility. In
September 2003, the senior credit facility was amended to clarify certain
definitions contained in the agreement relating to minimum levels of EBITDA (as
defined in the senior credit facility) for each of the three fiscal quarters
ending on or about December 31, 2002, March 31, 2003, and June 30, 2003. In
February 2004, the senior credit facility was amended in order to increase the
borrowing availability from $10 million to $12.5 million, in each case subject
to required reserved of $500,000. In March 2004, the senior credit facility was
amended to decrease the minimum levels of EBITDA (as defined in the senior
credit facility) for the fiscal quarters ending on or about March 31, 2004 and
June 30, 2004 and to decrease the minimum interest coverage ratios for the first
three fiscal quarters of 2004. Due to a higher retail store base than was in
existence at the origination of the facility as well as accelerated growth
plans, we believe the increased availability and the modification of certain
short-term financial covenants better matches our currently projected cash
needs.

     For a detailed description of our senior credit facility, see "Description
of Senior Credit Facility."

     Borrowings under the credit agreement are expected to increase as working
capital increases in anticipation of the important selling periods in late
spring and in advance of the Christmas holiday, and then decline following these
periods. In the event sales results are less than anticipated and our working
capital requirements remain constant, the amount available under the credit
facility may not be adequate to satisfy our needs. If this occurs, we may not
succeed in obtaining additional financing in sufficient amounts and on
acceptable terms. Our ability to borrow under the credit agreement is limited in
some circumstances.

CAPITAL EXPENDITURES

     Subject to our ability to generate sufficient cash flow, in fiscal 2004 we
currently plan to spend $6.0 million to $8.0 million on corporate projects, to
open additional stores and/or to retrofit existing stores, of which $1.8 million
was expended during the three months ended April 3, 2004. However, to the extent
that we use capital for acquisitions, our store openings and retrofittings will
be reduced.

CONTRACTUAL OBLIGATIONS

     Our future contractual obligations related to long-term debt and
noncancellable operating leases at April 3, 2004 are as follows:
PAYMENTS DUE BY PERIOD
                                   ------------------------------------------------------------
                                              LESS THAN
CONTRACTUAL OBLIGATIONS             TOTAL      1 YEAR     1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
-----------------------            --------   ---------   ---------   ---------   -------------
                                                          (IN THOUSANDS)
Long-term debt...................  $ 93,750    $    --     $    --     $18,750      $ 75,000
Operating leases.................  $ 94,059    $12,137     $23,163     $20,698      $ 38,061
                                   --------    -------     -------     -------      --------
  Total..........................  $187,809    $12,137     $23,163     $39,448      $113,061
                                   ========    =======     =======     =======      ========
We issue purchase orders for merchandise which may be cancelled prior to
the vendor's scheduled shipment under certain circumstances, such as the
vendor's breach of its obligations to us.

     We expect that our principal uses of cash for the next several years will
be interest payments on the notes and our senior credit facility, capital
expenditures, primarily for new store openings, possible acquisitions (to the
extent permitted by the lenders under our senior credit facility and under the
indenture

                                        42
governing the notes), working capital requirements and our contractually
obligated operating lease payments. Additionally, subsequent to fiscal 2003, we
are required to (1) offer to repurchase a portion of the notes at 100% of their
accreted value within 120 days after the end of each fiscal year with 50% of our
excess cash flow, as defined in the indenture governing the notes, and (2) under
certain circumstances, purchase senior secured notes at 101% of their accreted
value plus accrued and unpaid interest, if any, to the date of purchase.
Subsequent to the end of fiscal 2003, we determined that we did not have any
excess cash flow, as defined in the indenture, in fiscal 2003 and we were thus
not required to offer to repurchase any of the notes. We believe that cash from
operations combined with borrowing availability under our senior credit facility
will be sufficient to meet our expected debt service requirements, planned
capital expenditures and operating needs. However, we have limited ability to
obtain additional debt financing to fund working capital needs and capital
expenditures should cash from operations and from our senior credit facility be
insufficient. At April 3, 2004, there was $10.9 million of borrowing
availability under the senior credit facility. We believe that the financial
support of Holdings' principal stockholder and the use of our senior credit
facility offer us potential funding avenues to meet working capital
requirements. Further, we believe discretionary cash outflows related to new
store openings, advertising and capital expenditures can be adjusted accordingly
if needed to meet working capital requirements. If cash from operations is not
sufficient, we cannot assure you that we will be able to obtain additional
financing in sufficient amounts and on acceptable terms. You should read the
information set forth under "Risk Factors" for a discussion of the risks
affecting our operations.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements, as defined by the rules
and regulations of the Securities and Exchange Commission.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risks, which include changes in U.S. interest
rates and, to a lesser extent, foreign exchange rates. We do not engage in
financial transactions for trading or speculative purposes.

  INTEREST RATE RISK

     The interest payable on our senior credit facility is based on variable
interest rates and therefore affected by changes in market interest rates. If
the maximum available under the credit facility of $12.5 million is drawn and
interest rates on existing variable rate debt rose to greater than 15.25%, our
results from operations and cash flows may be materially affected. Our interest
rate risk objectives are to limit the impact of interest rate fluctuations on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, we manage our exposure to fluctuations in market interest rate
for a portion of our borrowings through the use of fixed rate debt instruments
to the extent that reasonably favorable rates are obtainable with such
arrangements. We may enter into derivative financial instruments such as
interest rate swaps or caps and treasury options or locks to mitigate our
interest rate risk on a related financial instrument or to effectively fix the
interest rate on a portion of our variable rate debt. Currently, we are not a
party to any derivative financial instruments. We do not enter into derivative
or interest rate transactions for speculative purposes. We regularly review
interest rate exposure on our outstanding borrowings in an effort to minimize
the risk of interest rate fluctuations.

  FOREIGN CURRENCY RISKS

     We purchase a significant amount of products from outside of the U.S.
However, these purchases are primarily made in U.S. dollars and only a small
percentage of our international purchase transactions are in currencies other
than the U.S. dollar. Any currency risks related to these transactions are
deemed to be immaterial to us as a whole.

                                        43
We operate a fulfillment center in Toronto, Canada and a sales, marketing
and fulfillment center near London, England, which exposes us to market risk
associated with foreign currency exchange rate fluctuations. At this time, we do
not manage the risk through the use of derivative instruments. A 10% adverse
change in foreign currency exchange rates would not have a significant impact on
our results of operations or financial position.

                                        44
BUSINESS

OVERVIEW

     Carl Paul founded our company in 1967 when he began providing clubmakers
with the components necessary to offer custom-made golf clubs at a time when
most golfers could only purchase ready-made, off-the-shelf equipment. In order
to capitalize on this market opportunity, we helped pioneer the golf club
components industry by designing and selling a line of components and supplies
(principally golf clubheads, shafts, grips and tools) for custom clubmakers
through our clubmakers' catalog. Over the years we have complemented and
expanded our operations by opening our first retail outlet in 1972, mailing our
first general golf product catalog in 1975, opening our first superstore in
1992, opening the Harvey Penick Golf Academy in 1993 and launching golfsmith.com
in 1997.

     We are a multi-channel retailer of golf equipment, merchandise and training
curriculum for consumers and golf clubmaking businesses. We offer equipment from
leading manufacturers, including Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). In addition, we offer our own
proprietary brands, including Golfsmith(R), Lynx(R), Snake Eyes(R), Killer
Bee(R) and Zevo(R). We market our products through 42 superstores as well as
through our direct-to-consumer channel, which includes our clubmaking and
accessory catalogs and our Internet site. We also operate the Harvey Penick Golf
Academy, an instructional school incorporating the techniques of the well-known
golf instructor, the late Harvey Penick.

     We offer a complete line of golf equipment and related accessories through
multiple distribution channels:

          Superstores.  We opened our first golf superstore in 1992 and
     currently operate 42 superstores. These stores range in size from
     approximately 8,000 to 30,000 square feet. Our superstores feature a wide
     selection of golf equipment from major name brand manufacturers.

          Direct-to-Consumer.  Our principal publications are the Golfsmith
     Accessory Catalog and the Golfsmith Clubmaking Catalog. We also sell our
     products through our website,www.golfsmith.com. Through our
     direct-to-consumer distribution channels, we provide customers our offering
     of products, including equipment, apparel, accessories and clubmaking
     components and tools.

          Harvey Penick Academy.  In 1993, we partnered with Austin native and
     well-known golf instructor, the late Harvey Penick, to form the Harvey
     Penick Golf Academy. The academy has attracted over 17,000 students since
     its inception. We believe the academy helps contribute to sales at our
     adjacent Austin superstore.

          International.  We work with a group of international distributors to
     offer golf club components and equipment to clubmakers and golfers in
     selected regions outside the United States. In the United Kingdom, we sell
     our proprietary branded equipment through a commissioned sales force
     directly to retailers. Throughout most of Europe and parts of Asia and
     other parts of the world, we sell our products through a network of
     distributors.

THE MERGER

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. Golfsmith is the surviving corporation and is a wholly owned
subsidiary of Holdings as a result of the merger. The aggregate purchase price
for the merger was approximately $121.0 million. The components of this purchase
price included the payment to our stockholders prior to the merger of $101.5
million in cash and $12.8 million of our equity securities, and $6.7 million in
fees and expenses incurred in connection with the merger. The cash portion of
the purchase price for the merger was funded out of:

     - the net proceeds from the offering of our 8.375% senior secured notes due
       2009, of approximately $67.9 million;

                                        45
- the cash contribution of $50.0 million described below; and

     - existing cash.

     The merger agreement required Golfsmith to repay and terminate all then
existing indebtedness and also required Holdings to put in place a new revolving
credit facility as a condition to the closing of the merger. For more
information about the terms of the merger generally, you should read the
description of the merger agreement in "Related Party Transactions".

     Holdings was formed by Atlantic Equity Partners III, L.P., a limited
partnership operated by First Atlantic Capital Ltd. First Atlantic is a private
equity investment firm. Holdings was formed solely for the purpose of completing
the merger and had no operations, assets or properties prior to the merger. In
connection with the merger, Atlantic Equity Partners III contributed $50.0
million in return for approximately 79.7% of the common stock of Holdings on a
fully diluted basis. In addition, some of our stockholders prior to the merger,
including members of our current management, received shares of common stock of
Holdings and restricted common stock units, which entitle the holders thereof to
shares of common stock of Holdings. As of April 3, 2004, these stockholders
owned in the aggregate 17.3% of the common stock of Holdings on a fully diluted
basis, including outstanding stock options. In connection with the merger, we
entered into a management consulting agreement with First Atlantic, and all of
Holdings' stockholders, including members of our management, entered into a
stockholders agreement and certain other contractual arrangements with First
Atlantic as described in "Related Party Transactions."

PRODUCTS AND SUPPLIERS

     We currently derive over 60% of our net revenues from clubs and components
and a large portion of our club sales are of our own proprietary brands. Our
products include golf clubs and club components, club bags, golf gloves, golf
shoes, and golfing apparel.

  ORIGINAL EQUIPMENT MANUFACTURERS

     We offer a large selection of golf equipment from leading manufacturers,
including, but not limited to, Callaway(R), Cobra(R), FootJoy(R), Nike(R),
Ping(R), Taylor Made(R) and Titleist(R). We believe that we enjoy strong
relationships with many of the major equipment vendors in the industry.

     In fiscal 2002 and 2003, Callaway Golf supplied 12% and 11% of our
consolidated purchases, respectively. No other single supplier accounted for
more than 10% of our consolidated purchases during fiscal 2002 or 2003. Our top
ten suppliers for fiscal 2003 were as follows:

                                TOP 10 SUPPLIERS
--------------------------------------------------------------------------------
Calloway Golf                              Roger Cleveland Golf
              Eaton Corporation                           Taylor Made/Adidas Golf
    Fortune Brands (Titleist/Cobra Golf)                        True Temper
                    Nike                                    Twin Lakes Co. Ltd.
                    Ping                                           Winn
PROPRIETARY BRANDS

     We are the registrant of over 80 trademarks and service marks in more than
25 countries including Golfsmith(R), Lynx(R), Snake Eyes(R), Black Cat(R),
Killer Bee(R), Predator(R), Tigress(R) and Zevo(R). Our trademarks are generally
valid as long as they are properly in use in commerce. The registrations are
valid as long as they are properly maintained and the registered marks have not
become generic, abandoned or the registrations obtained fraudulently. Our
trademarks may cease to be valid, for example, if we:

     - license our trademarks without quality control or fail to enforce quality
       control provisions in any licenses;

                                        46
- fail to contest infringing uses;

     - fail to use a U.S. trademark for three consecutive years;

     - fail to use a foreign registered trademark within the time required after
       registration; and

     - fail to maintain foreign registrations, in which case we may lose the
       presumption of ownership in the foreign country.

     Our trademarks and domain names are considered to be indefinite lived
assets under SFAS No. 142, Goodwill and Other Intangible Assets, and therefore
are not amortized. Other definite lived intellectual property is amortized on a
straight-line basis over nine years.

     We focus on developing products that are high-quality and designed to
increase the penetration of our private label offerings, fill a niche or gap in
the premium brand product offerings, and appeal to custom clubmakers and enhance
our status in equipment design. Three of these private labels were added in
fiscal 1998 when we purchased assets of three golf companies: Lynx Golf Inc.,
Snake Eyes Golf Clubs Inc. and Black Rock Golf Corp., the manufacturer of the
Killer Bee(R) line. We purchased an additional brand -- Zevo(R) -- in 2003.
These companies' equipment lines are now proprietary brands included in all of
our retail channels. We source over 70% of our proprietary products from
contract manufacturers in Asia, and these suppliers manufacture our equipment
according to our specifications.

SALES AND DISTRIBUTION

  SUPERSTORES

     We opened our first golf superstore in 1992 and currently operate 42
superstores. The locations of our superstores are more fully described below in
"-- Properties."

     Our superstores range in size from approximately 8,000 to 30,000 square
feet. Our superstores feature a wide selection of golf equipment from major name
brand manufacturers and also serve as the primary retail outlet in the United
States for our proprietary branded products. Our superstores also cater to golf
and sports enthusiasts by providing golf simulators, indoor driving nets,
computerized swing analyzers, putting greens, indoor lesson capabilities in
certain locations and television monitors that display golf and major sporting
events. In addition, the majority of our superstores offer components,
clubmaking tools, supplies and on-site custom clubfitting and technical support.

     We plan to modify selected larger superstores into a smaller, more
productive layout that we believe will lower our operating costs and capital
requirements and increase our profitability while providing customers with a
superior shopping environment. In fiscal 2003, all six of the new stores opened
were built in this mold of the smaller store layout.

     We opened three stores during fiscal 2002, six stores during fiscal 2003
and four stores in the three months ended April 3, 2004, and acquired six stores
with our acquisition of Don Sherwood Golf Shop in July 2003.

     We intend to selectively expand our existing store base in existing as well
as new markets that fit our selection criteria. We plan to open two to four
superstores during the remaining three quarters of fiscal 2004. The criteria for
the selection of new superstore locations include:

     - demographic characteristics with a high number of avid golfers and above
       average annual household incomes;

     - visibility from and access to highways or other major roadways;

     - the ability to obtain favorable lease terms; and

     - co-tenants that are likely to draw customers whom we would otherwise
       target within the site's relevant market.

                                        47
After we have identified a potential site, we assess the cost of the site
and carefully examine the projected profitability and returns generated from
opening the additional store.

     Our superstores accounted for approximately 55.4%, 56.7%, 62.9% and 63.7%
of our net revenues for fiscal 2001, fiscal 2002, fiscal 2003 and the three
months ended April 3, 2004, respectively. The increase in the percentage of our
net revenues derived from superstores correlates with our increased number of
superstores from 26 superstores at December 29, 2001 to 42 superstores at April
3, 2004.

  DIRECT-TO-CONSUMER

     Through our direct-to-consumer distribution channels, we provide customers
our offering of products, including equipment, apparel, accessories, and
clubmaking components and tools. Our direct-to-consumer channels accounted for
approximately 34.5% and 33.6% of our net revenues for fiscal 2003 and the three
months ended April 3, 2004, respectively.

     Catalogs.  Our principal publications are the Golfsmith Accessory Catalog
and the Golfsmith Clubmaking Catalog. We have developed a proprietary customer
database largely through our catalog and online website order processing and to
a lesser extent through contests and point-of-sale registers in our superstores.
The names and associated sales information are merged periodically into our
customer master file. This merge process provides a source of current
information to help assess the effectiveness of the catalog and identifies new
customers that can be added to our in-house mailing lists. We use statistical
evaluation and selection techniques to determine which customer segments are
likely to contribute the greatest revenue per mailing.

     Our two catalog titles are designed and produced by our in-house staff of
writers, photographers and graphic artists. The monthly production and
distribution schedule of our accessory catalog permits frequent changes in the
product selection and price.

     Internet.  We also sell our products through our e-commerce site,
www.golfsmith.com. We have an additional website, www.Lynxgolf.com, which links
to www.golfsmith.com.

     Our Internet business complements our superstore business by building
customer awareness of our brand and acting as an effective advertising vehicle
for new product introductions, unique product offerings, and our proprietary
brands.

  INTERNATIONAL

     We work with a group of international distributors to offer golf club
components and equipment to clubmakers and golfers in selected regions outside
the United States. In the United Kingdom, we sell our proprietary branded
equipment through a commissioned sales force directly to retailers. Throughout
most of Europe and parts of Asia and other parts of the world, we sell our
products through a network of distributors. Approximately 2.3%, 2.5%, 2.3% and
2.4% of our net revenues were derived from sales made through our international
distributors and our distribution center near London in fiscal 2001, fiscal
2002, fiscal 2003 and the three months ended April 3, 2004, respectively.

  HARVEY PENICK ACADEMY

     In 1993, we partnered with Austin native and well-known golf instructor,
the late Harvey Penick, to form the Harvey Penick Golf Academy. The academy has
attracted over 17,000 students since its inception. We believe the academy helps
contribute to sales at our adjacent Austin superstore. The academy accounted for
approximately 0.3% of our net revenues for both fiscal 2003 and the three months
ended April 3, 2004.

MARKETING

     We have a multi-faceted marketing strategy that combines direct marketing,
local advertising and supplier marketing.

                                        48
On the local level, we run newspaper ads to promote superstores and store
events. Additional marketing activity occurs during key shopping periods, such
as Father's Day and Christmas, and on specific sales and promotional events. On
the national level, we participate in cooperative advertising arrangements with
our vendors. Along with "vendor buy-ins" to sponsor events, these arrangements
have reduced our advertising costs. Also, on the national level, we run printed
advertisements in national magazines. We have a strategic alliance with The Golf
Digest Companies that establishes us as a national golf retail advertiser in
Golf Digest publications. Historically, we have run national ads on the Golf
Channel and local television ads in select markets to complement our direct
marketing campaign. To contain costs and increase effectiveness, we have
expanded the use of e-mail for direct marketing.

     The catalogs that we distribute annually are also an important marketing
tool. The Golfsmith Clubmaking Catalog is distributed to many of our clubmaking
catalog customers and reinforces our place in the component market. In addition,
we believe the magazine extends the Golfsmith(R) brand and encourages additional
sales through the publicity of new product and promotional offerings.

INFRASTRUCTURE

     Our order fulfillment infrastructure includes:

     - a 100,000 square foot, direct-to-consumer shipping facility and
       associated warehouse which can handle over one million packages annually;

     - a 140,000 square foot distribution center with available capacity to
       handle all store inventory and order fulfillment requirements; and

     - management information systems that fully integrate all aspects of our
       business and enable us to quickly obtain key operating data.

     We also have two smaller distribution facilities in Toronto, Canada and
near London, England from which we service our Canadian and European customers.

MANAGEMENT INFORMATION SYSTEMS

     Our management information systems provide us with a network and
applications that are scalable and easy to use, maintain, and modify. These
systems provide us with the infrastructure necessary to support continued
growth. This infrastructure integrates all major aspects of our business,
improves our back-office capabilities, enhances management reporting and
analysis capabilities through rapid access to data, lowers operating costs and
improves and expands our direct marketing capabilities.

     The in-store, point-of-sale system tracks all sales by category, style and
item and allows us to routinely compare current performance with historical and
planned performance. The information gathered by this system supports automatic
replenishment of inventory and is integrated into product buying decisions.

     The majority of our hardware resides at our corporate headquarters. We have
implemented redundant servers and communication lines to limit downtime in the
event of power outages or other potential problems. System administrators and
network managers monitor and operate our network operations and
transactions-processing systems to ensure the continued uninterrupted operation
of our website and transaction-processing systems.

SEASONALITY

     Based on our experience, we believe that retailers in the golf industry
experience a high degree of seasonality in their businesses during the spring
and Christmas holiday selling seasons. As a consequence, retailers, including
us, incur higher expenses related to building inventory in order to meet the
higher demand during these seasons. In keeping with this trend, a substantial
portion of our sales and earnings occur in our second fiscal quarter each year.

                                        49
EMPLOYEES

     As of April 3, 2004, we employed 1,281 people. We believe we have strong
relationships with our employees. None of our work force is unionized.

COMPETITION

     Our competitors currently include other specialty retailers, mass
merchandise retailers, conventional sporting goods retailers, on-course pro
shops, and online retailers of golf equipment. These businesses compete with us
in one or more product categories. In addition, traditional and specialty golf
retailers are expanding more aggressively in marketing brand-name golf
equipment, thereby competing directly with us for products, customers and
locations. Some of these potential competitors have been in business longer than
us or have greater financial or marketing resources than we do and may be able
to devote greater resources to sourcing, promoting and selling their products.
Several of our key vendors have begun to operate retail stores or websites that
sell directly to consumers and may compete with us and reduce our sales. In the
specialty off-course segment, our primary competitors include retail chains such
as Edwin Watts, Golf Galaxy, Pro Golf Discount, Dick's Sporting Goods, Galyan's
and Nevada Bobs. Other competitors include on-course pro shops, direct marketers
and sporting goods retailers. We compete on the basis of brand image,
technology, quality and performance of our products, method of distribution,
price, style and intellectual property protection.

ENVIRONMENTAL MATTERS

     We are subject to various foreign, federal, state, and local environmental
protection, chemical control, and health and safety laws and regulations, and we
incur costs to comply with those laws. We own and lease real property, and some
environmental laws hold current or previous owners or operators of businesses
and real property liable for contamination on or originating from that property,
even if they did not know of and were not responsible for the contamination. The
presence of hazardous substances on any of our properties or the failure to meet
environmental regulatory requirements may have a material adverse affect on our
ability to use or to sell the property or to use the property as collateral for
borrowing, and may cause us to incur substantial remediation or compliance
costs. If hazardous substances are released from or located on any of our
properties, we could incur substantial liabilities through a private party
personal injury or property damage claim or a claim by a governmental entity for
other damages. The liability may be imposed on us under environmental laws or
common law principles. In addition, some of the products we sell contain
regulated substances, such as solvents and lead. Environmental laws may impose
liability on any person who disposes of hazardous substances, regardless of
whether the disposal site is owned or operated by such person.

     Although we do not currently anticipate that the costs of complying with
environmental laws or otherwise satisfying any current liabilities under
environmental laws will materially adversely affect us, we cannot assure you
that we will not incur material costs or liabilities in the future, due to the
discovery of new facts or conditions, acquisition of new properties, the
occurrence of releases of hazardous substances, the filing of new claims,
changes in operations, a change in existing environmental laws, adoption of new
environmental laws, or new interpretations of existing environmental laws.

                                        50
PROPERTIES

     At April 3, 2004, we operated 42 stores in 12 states. We own our 41-acre
Austin, Texas campus, which is home to our general offices, distribution center,
call center, clubmaker training facility and Harvey Penick Golf Academy. The
Austin campus also includes a golf testing and practice area. With the exception
of the Austin superstore at our corporate headquarters, we lease all of our
superstores. All leased premises are held under long-term leases with differing
provisions and expiration dates. Leases provide for monthly rentals, typically
computed on the basis of a fixed amount. Most leases contain provisions
permitting us to renew for one or more specified terms. Details of our
non-superstore properties and facilities are as follows:
SIZE                                            YEAR    OWNED
    LOCATION                       (SQ. FT.)              FACILITY TYPE             OPENED   LEASED
    --------                       ---------              -------------             ------   ------
Austin, Texas................    60,000    Office                                1992     Owned
    Austin, Texas................    50,000    Warehouse                             1994     Owned
    Austin, Texas................   140,000    Distribution Center                   1999     Owned
    Austin, Texas................    50,000    Shipping Facility                     1994     Owned
    Austin, Texas................  17 Acres    Driving Range and Training Facility   1992     Owned
    Toronto, Canada..............     3,906    Direct-to-Consumer Order              2001    Leased
                                                 Fulfillment Facility
    St. Ives, Cambridgeshire,
      England....................    15,900    Office, Warehouse and Shipping        2001    Leased
                                                 Facility
The following table shows the number of our stores by state as of April 3,
2004:
NUMBER
LOCATION                                                      OF STORES
--------                                                      ---------
Arizona.....................................................      3
California..................................................     12
Colorado....................................................      2
Connecticut.................................................      1
Georgia.....................................................      3
Illinois....................................................      4
Michigan....................................................      3
Minnesota...................................................      1
New Jersey..................................................      1
New York....................................................      2
Ohio........................................................      1
Texas.......................................................      9
LEGAL PROCEEDINGS

     We are a party to a number of claims and lawsuits incidental to our
business. We believe that the ultimate outcome of such matters, in the
aggregate, will not have a material adverse impact on our financial position,
liquidity or results of operations.

                                        51
MANAGEMENT

     The following table sets forth information regarding our executive officers
and directors as of July 2, 2004:
NAME                                  AGE                      POSITION
----                                  ---                      --------
James D. Thompson...................  41    Chief Executive Officer, President and Director
Virginia Bunte......................  39    Vice President -- Chief Financial Officer
Kenneth Brugh.......................  54    Vice President -- Operations
Fred Quandt.........................  34    Vice President -- Merchandising
Kiprian Miles.......................  42    Vice President -- Chief Information Officer
James Loden, Jr. ...................  37    Vice President -- Retail Operations
Jeff Sheets.........................  45    Vice President -- Research and Development
James Grover........................  32    Vice President, Secretary and Director
Noel Wilens.........................  41    Vice President and Director
Charles Shaw........................  70    Chairman of the Board
Roberto Buaron......................  58    Director
Thomas G. Hardy.....................  59    Director
James Long..........................  61    Director
Carl Paul...........................  64    Director
James D. Thompson became our chief executive officer, president and a
director upon completion of the merger. Prior to that, Mr. Thompson was our
senior vice president from September 2000 until the merger. From August 1999 to
September 2000, Mr. Thompson was vice president of merchandising, and from
January 1999 to August 1999 he was director of brand management. From 1998 to
1999, Mr. Thompson was responsible for home computing products for Circuit City.
From 1995 to 1998, Mr. Thompson served as senior director, business solutions
and in other management positions for CompUSA. From January 1986 to July 1993,
he served as national merchant and in other management positions for Highland
Superstores.

     Virginia Bunte joined us in 1995 and has been our vice president and chief
financial officer since January 2003. From 1995 to 2003, Ms. Bunte served in
positions for Golfsmith including assistant controller, controller and vice
president of finance.

     Kenneth Brugh joined us in 1981 and has been our vice president of
operations since the merger. Prior to that, Mr. Brugh was vice president since
May 2001. From 1981 to 2001, Mr. Brugh served in positions including vice
president, general manager and sales associate.

     Fred Quandt joined us in 1995 and has been our vice president of
merchandising since October 2002. From 1995 until the merger, Mr. Quandt served
as director of merchandising and divisional merchandise manager and in various
other merchandising positions for us.

     Kiprian Miles joined us in October 2002 as our vice president and chief
information officer. From April 1999 until June 2002, Mr. Miles was responsible
for technology decisions, information infrastructure and marketing and sales
support systems as vice president, marketing systems and chief architect, at
Office Depot, Inc. From August 1997 to April 1999, Mr. Miles was chief architect
at Alcoa Inc., where he was responsible for developing and managing the
technology infrastructure.

     James Loden, Jr. joined us in February 2003 as our vice president of retail
operations. From May of 1997 until he joined our company in 2003, Mr. Loden was
with CompUSA, where he served as a general manager, a regional manager, and then
the senior director of business development. Prior to that, he was with Circuit
City for five years as a general manager.

     Jeff Sheets has been our vice president of research and development since
April 2002. Prior to that, he was responsible for product development at Wilson
Sporting Goods and also served as director of

                                        52
research and development for Spalding, Ben Hogan and Founders Club golf
companies over the past decade. Mr. Sheets initially began his golf career
working on the PGA Tour as a fitting specialist equipment fittings and equipment
technician for Brunswick Golf (now Royal Precision) and Founders Club.

     James Grover became a vice president and a director upon the completion of
the merger. Mr. Grover has been a vice president at First Atlantic since August
2000. From July 1998 until August 2000, Mr. Grover was an associate with First
Atlantic. Prior to joining First Atlantic in 1998, Mr. Grover was an associate
and business analyst at New York Consulting Partners, Inc.

     Noel Wilens became a vice president and a director upon the completion of
the merger. Mr. Wilens has been a principal at First Atlantic since May 2001.
Prior to that, Mr. Wilens was a general partner and managing director of
Bradford Equities Fund, L.L.C., a New York-based private equity firm focused on
the acquisition of small and medium size U.S. industrial manufacturers and
distributors. Previously, Mr. Wilens was a principal of The Invus Group, Ltd., a
private equity firm specializing in food industry acquisitions on behalf of
European investors.

     Charles Shaw became a director upon the completion of the merger. Mr. Shaw
has been a managing director at First Atlantic since 2001. From 1997 to 2000,
Mr. Shaw was a senior advisor to First Atlantic. He was a senior partner at
McKinsey & Company, Inc. for twenty-five of his thirty-five year tenure which
ended in 2000. In addition to consulting with many Fortune 500 companies and
their international equivalents, Mr. Shaw served on McKinsey's board for
eighteen years and had a variety of management positions worldwide. Also, he was
deeply involved in investment activities at McKinsey as a trustee of the profit
sharing retirement plan and as a member of the investment committee.

     Roberto Buaron became a director upon the completion of the merger. Mr.
Buaron has been the chairman and chief executive officer of First Atlantic since
he founded the firm in 1989. Prior to that, Mr. Buaron was a senior partner with
Overseas Partners Inc., a firm which invested international funds in leveraged
buyouts in the United States. From 1983 to 1986, Mr. Buaron was a first vice
president of First Century, Inc., and a general partner of its venture capital
affiliate, First Century Partnership. Prior to joining First Century, Mr. Buaron
was a partner of McKinsey & Company, Inc. During his nine-year tenure at
McKinsey, Mr. Buaron counseled senior management at a number of Fortune 500
companies on improving their strategic position and operating performance.

     Thomas G. Hardy became a director upon the completion of the merger. Mr.
Hardy is currently vice chairman of OR International, a developer of specialty
surgical hospitals, and a Member of the Advisory Board of Main Street Resources,
a private equity fund specializing in mid-sized management buy-outs. From 1993
to 1999, Mr. Hardy was the president and chief operating officer of
Trans-Resources, Inc., a multinational manufacturer and distributor of
industrial and organic chemicals. Prior to that, Mr. Hardy was a partner for 15
years with McKinsey & Company, Inc.

     James Long became a director upon the completion of the merger. Mr. Long
has been a managing director at First Atlantic since 1991. Prior to joining
First Atlantic, Mr. Long was a managing director at Kleinwort Benson North
America during 1990. From 1975 to 1989, Mr. Long was an executive vice president
of mergers, acquisitions and strategic planning at Primerica Corporation
(formerly American Can Company). From 1970 to 1975, Mr. Long was director of
acquisitions for The Sperry and Hutchinson Company.

     Carl Paul founded Golfsmith in 1967. He has been a director since
completion of the merger. Mr. Paul was chairman of the board and chief executive
officer of Golfsmith from 1967 until the merger.

     All executive officers are appointed by our board of directors and serve
until their successors have been appointed or until they are removed by a
majority vote of the board of directors. Each director is elected for a one-year
term by a majority vote of our stockholders at the annual statutory stockholder
meeting, or until his successor is duly elected.

                                        53
BOARD COMPOSITION

     Our board of directors is comprised of eight directors. Pursuant to a
stockholders agreement, which is described under "Related Party
Transactions -- Stockholders Agreement," certain of our stockholders have the
right to elect one person to our board of directors for so long as Carl Paul,
Frank Paul and their families own more than 50% of the shares of common stock of
Holdings that they received upon the closing of the merger. Carl Paul is that
director. In addition, pursuant to the stockholders agreement, Atlantic Equity
Partners III is entitled to nominate all other directors to fill the remaining
board seats so long as it owns at least 25% of the voting stock of Holdings.

AUDIT COMMITTEE

     Our audit committee makes recommendations to our board of directors
regarding the selection of independent auditors, reviews the scope of audit and
other services by our independent auditors, reviews the accounting principles
and auditing practices and procedures to be used for our financial statements
and reviews the results of those audits. The members of our audit committee are
James Grover and Thomas Hardy.

DIRECTOR COMPENSATION

     Each of our directors who is not an officer and who is affiliated with
First Atlantic receives reimbursement of reasonable and necessary costs and
expenses incurred due to attendance of board meetings. Our outside director who
is not one of our officers and is not affiliated with First Atlantic receives,
in addition to reimbursement of reasonable and necessary costs and expenses
incurred, a fee of $5,000 for each regular and special meeting of the board that
he or she attends.

EXECUTIVE COMPENSATION

     The following table sets forth information concerning the compensation paid
to our chief executive officer and our four other most highly compensated
executive officers for the fiscal years 2001, 2002, and

                                        54
2003. Our chief executive officer and such other executive officers are
collectively referred to as the "named executive officers."

                           SUMMARY COMPENSATION TABLE
LONG-TERM
                                                                            COMPENSATION
                                         ANNUAL COMPENSATION               --------------
                             -------------------------------------------     SECURITIES
                                                          OTHER ANNUAL       UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR    SALARY     BONUS    COMPENSATION(1)   OPTIONS (#)(2)   COMPENSATION(3)
---------------------------  ----   --------   -------   ---------------   --------------   ---------------
James D. Thompson(4)......   2003   $297,000   $55,000       $3,561           400,000          $     --
  Chief Executive Officer    2002    212,231    50,000        4,589            50,000           519,650
                             2001    177,308    25,000        3,141            20,000                --

Kenneth Brugh(5)..........   2003    200,000    24,750           --            90,000                --
  Vice President --          2002    200,000    48,404           --                --           786,900
  Operations                 2001    200,018        --           --                --                --

Virginia Bunte(6).........   2003    159,808    20,000        5,585            90,000                --
  Chief Financial Officer    2002     91,358    18,578        3,303             5,000           124,463
                             2001     74,808     2,884        2,161             5,000                --

Kiprian Miles(7)..........   2003    175,000        --        2,423            90,000                --
  Vice President -- Chief    2002     23,558    50,000           --                --                --
  Informational Officer      2001         --        --           --                --                --

James Loden, Jr.(8).......   2003    131,869    45,907           --            90,000                --
  Vice President -- Retail   2002         --        --           --                --                --
                             2001         --        --           --                --                --
---------------

(1) Amounts represent matching contributions made by us under our Retirement
    Savings Plan.

(2) In connection with the merger, all existing options, including those listed
    in this column for 2001 and 2002, vested and were either canceled in
    exchange for the right to receive cash or surrendered in exchange for equity
    units entitling the holder thereof to shares of common stock of Holdings.
    Amounts for fiscal 2003 represent grants of options to purchase shares of
    common stock of Holdings under the Golfsmith International Holdings, Inc.
    2002 Incentive Stock Plan.

(3) Represents cash received as consideration for the cancellation of options in
    connection with the merger in October 2002.

(4) Mr. Thompson became our chief executive officer and president upon
    completion of the merger in October 2002. Mr. Thompson holds 149,750 equity
    units entitling him to 149,750 shares of common stock of Holdings with a
    value at April 3, 2004 of $449,250.

(5) Mr. Brugh holds 128,100 equity units entitling him to 128,100 shares of
    common stock of Holdings with a value at April 3, 2004 of $384,300.

(6) Ms. Bunte became our chief financial officer in January 2003. Prior to that,
    Ms. Bunte was our vice president of finance. Ms. Bunte holds 12,563 equity
    units entitling her to 12,563 shares of common stock of Holdings with a
    value at April 3, 2004 of $37,869.

(7) Mr. Miles became our vice president of and chief information officer in
    October 2002.

(8) Mr. Loden became our vice president of retail operations in February 2003.

OPTION GRANTS IN FISCAL 2003

     The following table sets forth information relating to stock options
granted during fiscal 2003 to our named executive officers. Also shown below is
the potential realizable value over the terms of the options (the period from
the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually from the date the options were
granted. The potential realizable value is

                                        55
net of the applicable exercise price. We have not granted any stock appreciation
rights. All options were granted under Holdings' 2002 Incentive Stock Plan
described below and are exercisable for shares of common stock of Holdings. No
options were exercised by the named executive officers in fiscal 2003 or since
the inception of the 2002 Incentive Stock Plan and all options listed below
remain outstanding as of January 3, 2004. In accordance with each individual
optionee's vesting schedule, no options were exercisable as of January 3, 2004.
All options vest on the same schedule over a seven-year period in increments
depending on our financial performance. After seven years, all options become
vested for optionees then employed by us. There is no established public trading
market for any class of Holdings' common equity.
INDIVIDUAL GRANTS                        POTENTIAL REALIZABLE VALUE
                       -----------------------------------------------------------     AT ASSUMED ANNUAL RATES
                          NUMBER OF      PERCENT OF TOTAL                            OF STOCK PRICE APPRECIATION
                         SECURITIES      OPTIONS GRANTED    EXERCISE OR EXPIRATION         FOR OPTION TERM
                         UNDERLYING      TO EMPLOYEES IN    ----------------------   ---------------------------
NAME                   OPTIONS GRANTED     FISCAL YEAR      BASE PRICE     DATE          5%             10%
----                   ---------------   ----------------   ----------   ---------   -----------   -------------
James D. Thompson....      400,000             21.7%          $3.00      June 2013    $754,674      $1,912,491
Kenneth Brugh........       90,000              4.9%          $3.00      June 2013     169,802         430,310
Virginia Bunte.......       90,000              4.9%          $3.00      June 2013     169,802         430,310
Kiprian Miles........       90,000              4.9%          $3.00      June 2013     169,802         430,310
James Loden, Jr. ....       90,000              4.9%          $3.00      June 2013     169,802         430,310
AGGREGATE OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR-END OPTION VALUES

     No options were exercised by the named executive officers in fiscal 2003.
The following table sets forth information concerning the number of unexercised
options with respect to the named executive officers as of January 3, 2004. As
of such date, no established published trading market exists for Holdings'
common stock. As of January 3, 2004, the fair market value of the underlying
stock equals the exercise price of the respective stock options.
NUMBER OF SECURITIES
                                                                UNDERLYING UNEXERCISED
                                                              OPTIONS AT JANUARY 3, 2004
                                                              ---------------------------
NAME                                                          EXERCISABLE   UNEXERCISABLE
----                                                          -----------   -------------
James D. Thompson...........................................      --           400,000
Kenneth Brugh...............................................      --            90,000
Virginia Bunte..............................................      --            90,000
Kiprian Miles...............................................      --            90,000
James Loden, Jr. ...........................................      --            90,000
EMPLOYMENT AGREEMENTS

     We have entered into the employment agreements described below.

     Under Mr. Thompson's employment agreement entered into in October 2002, Mr.
Thompson is our president and chief executive officer and his initial base
salary is $297,000 per year with an annual bonus calculated based upon
attainment of financial targets for that fiscal year. Mr. Thompson receives
stock options in our parent company at the discretion of our board of directors,
subject to the terms and conditions of our 2002 Incentive Stock Plan described
below. The term of Mr. Thompson's employment agreement is three years, with
automatic successive one-year extensions unless terminated by either party. If
Mr. Thompson is terminated without cause, or he resigns for good reason, he will
be entitled to receive his earned but unpaid base salary plus 100% of his
current total annual base salary and the earned bonus for the year of
termination. Should Mr. Thompson's employment be terminated for cause, or if he
resigns without good reason, he will have the right to receive only his earned
but unpaid salary up to the date of termination.

                                        56
Under Ms. Bunte's agreement entered into in January 2003, Ms. Bunte is our
chief financial officer and her initial base salary is $165,000 per year with an
annual bonus calculated based upon attainment of financial targets for that
fiscal year. Ms. Bunte receives stock options in our parent company at the
discretion of our board of directors, subject to the terms and conditions of our
2002 Incentive Stock Plan described below. The term of Ms. Bunte's employment
agreement is one year, with automatic successive one-year extensions unless
terminated by either party. If Ms. Bunte is terminated without cause, or she
resigns for good reason, she will be entitled to receive her earned but unpaid
base salary plus 100% of her current total annual base salary and the earned
bonus for the year of termination. Should Ms. Bunte's employment be terminated
for cause, or if she resigns without good reason, she will have the right to
receive only her earned but unpaid salary up to the date of termination.

     Under the employment agreements for Carl Paul, one of our directors, and
Frank Paul, one of our stockholders, each receives an initial base salary of
$50,000 per year, with no provision for bonus payments. Each acts as a senior
advisor to Golfsmith's Golf Club Components Division and renders services on an
"as needed" basis, as mutually agreed upon by the parties. The term of each of
the agreements is one year, with automatic successive one-year extensions unless
terminated by either party. The board of directors may terminate the employment
of Carl Paul or Frank Paul at any time, with or without cause, and either may
resign from his position at any time. Upon termination or resignation of either
Carl Paul or Frank Paul, or both, we are only obligated to pay any earned but
unpaid salary, if any, up to the date of termination.

2004 MANAGEMENT INCENTIVE PLAN

     In 2004, we established our 2004 Management Incentive Plan under which we
agreed to pay specified bonuses to eligible management employees based upon
their individual and company-wide performance. The bonuses are payable within 90
days of the end of the applicable measurement period.

2002 INCENTIVE STOCK PLAN

     Subsequent to the merger, we adopted a new stock option plan, the 2002
Incentive Stock Plan. Our 2002 Incentive Stock Plan provides for the grant of
incentive stock options to our employees and nonstatutory stock options, stock
grants and stock appreciation rights to our employees, directors and
consultants. An aggregate of 2.85 million shares of the common stock of Holdings
has been reserved for issuance under this plan.

     Our board of directors or the compensation committee of our board of
directors administers the plan and determines the terms of options, stock grants
and stock appreciation rights, including the exercise price, the stock
appreciation rights' value, the number of shares subject to individual option
awards, stock grants and stock appreciation rights, the vesting period of
options, the exercise period for any stock appreciation rights and the
conditions on any stock grant. The exercise price of nonstatutory options will
be determined by the compensation committee. The exercise price of incentive
stock options cannot be lower than 100% of the fair market value of our common
stock on the date of grant and, in the case of incentive stock options granted
to holders of shares representing more than 10% of our voting power, not less
than 110% of the fair market value. The value of stock appreciation rights
cannot be less than fair market value. The term of an incentive stock option
cannot exceed 10 years, and the term of an incentive stock option granted to a
holder of more than 10% of our voting power cannot exceed five years. The
exercise period for a stock appreciation right cannot exceed ten years.

     Options, stock grants and stock appreciation rights granted under the plan
will accelerate and become fully vested in the event we are acquired or merge
with another company. Under the plan, our board of directors will not be
permitted, without the adversely affected optionee's or grantee's prior written
consent, to amend, modify or terminate our stock plan if the amendment,
modification or termination would impair the rights of optionees or grantees.
The plan will terminate in 2012 unless terminated earlier by our board of
directors.

                                        57
401(k) PLAN

     We have a retirement savings plan which permits eligible employees to make
contributions to the plan on a pretax basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. For employees that satisfy certain
eligibility requirements, we make a matching contribution of 50% of the
employee's pretax contribution, up to 6% of the employee's compensation, in any
calendar year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Compensation decisions for executive officers are made by our board of
directors and the compensation committee which is composed of Mr. Shaw and Mr.
Wilens. The purpose of the compensation committee is to establish and execute
compensation policy and programs for our executives and employees. For example,
the compensation committee recommends the compensation arrangements for senior
management and directors. It also determines the allocation of options to be
granted under our stock option plan. Mr. Shaw is a managing director and Mr.
Wilens is a principal at First Atlantic, which is a party to the management
consulting agreement described more fully in "Related Party Transactions --
Management Consulting Agreement." Mr. Wilens is one of our executive officers,
but does not receive any compensation in such capacity.

     Certain key members of our management are employed under employment
agreements. You should read the information set forth above under "-- Employment
Agreements" for a description of these agreements. Directors who are officers,
employees or otherwise an affiliate of us receive no compensation for their
services as directors.

                                        58
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                             OWNERS AND MANAGEMENT

     All of our common stock is owned by Golfsmith International Holdings, Inc.,
our parent company. The following table sets forth information regarding the
beneficial ownership of the common stock of Holdings, which is the parent
company of Golfsmith International, Inc., the issuer of the notes, as of April
3, 2004, by:

     - our named executive officers;

     - each of our directors;

     - all of our executive officers and directors as a group; and

     - each person known to us to be a beneficial owner of more than 5% of the
       outstanding common stock,

in each case, before and after giving effect to the exchange of all of the notes
beneficially owned by Atlantic Equity Partners III, L.P. for shares of common
stock of Holdings (assuming that Holdings will issue 1,526,109 shares of its
common stock to Atlantic Equity Partners III in this exchange, which assumes
that Holdings will sell the notes offered by this prospectus for an offering
price of 83.8478% of the principal amount at maturity, the book value of such
notes as of July 2, 2004) in a private transaction. See "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder."

     All shares indicated below as beneficially owned are held with sole voting
and investment power except as otherwise indicated. Certain of our stockholders
are parties to a stockholders agreement that contains certain voting agreements.
You should read the description of the stockholders agreement set forth under
"Related Party Transactions" for more information regarding the voting
arrangements. Unless otherwise indicated, the address for each stockholder on
this table is c/o Golfsmith International, Inc., 11000 N. IH-35, Austin, Texas
78753-3195. As of April 3, 2004, 21,594,597 shares of Holdings' common stock
were issued and outstanding.
SHARES BENEFICIALLY OWNED     SHARES BENEFICIALLY OWNED
                                            BEFORE EXCHANGE               AFTER EXCHANGE
                                      ---------------------------   ---------------------------
                                                       PERCENT OF                    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER    NUMBER           CLASS        NUMBER           CLASS
------------------------------------  -----------      ----------   -----------      ----------
Atlantic Equity Partners III,
  L.P.............................     21,594,597(1)     100.0%      23,120,706(1)     100.0%
Carl Paul.........................     21,594,597(2)     100.0%      23,120,706(2)     100.0%
Franklin Paul.....................     21,594,597(3)     100.0%      23,120,706(3)     100.0%
Roberto Buaron....................     21,594,597(4)     100.0%      23,120,706(4)     100.0%
James D. Thompson.................             --(5)        --               --(5)        --
Kenneth Brugh.....................             --(6)        --               --(6)        --
Viginia Bunte.....................             --(7)        --               --(7)        --
Kiprian Miles.....................             --           --               --           --
James Loden, Jr...................             --           --               --           --
Charles Shaw......................             --(8)        --               --(8)        --
James Grover......................             --(9)        --               --(9)        --
Thomas G. Hardy...................         89,043(10)        *           89,043(10)        *
James Long........................             --(11)       --               --(11)       --
Noel Wilens.......................             --(12)       --               --(12)       --
All directors and executive officers
  as a group (17 persons).........     21,594,597        100.0%      23,120,706        100.0%
59
---------------

   *  Represents less than 1% of the number of outstanding shares.

 (1) Includes 3,505,709 shares owned by other stockholders that are subject to
     the stockholders agreement and attributable to Atlantic Equity Partners
     III, L.P. Atlantic Equity Partners III disclaims beneficial ownership of
     these shares. Atlantic Equity Partners III's address is c/o First Atlantic
     Capital Ltd., 135 East 57th Street, New York, New York 10022.

 (2) Includes (i) 2,234,158 shares of common stock and (ii) 19,360,439
     (20,886,548 shares after giving effect to the exchange) shares owned by
     other stockholders that are subject to the stockholders agreement and
     attributable to Carl Paul. Carl Paul disclaims beneficial ownership of the
     shares listed in clause (ii) of the preceding sentence. Does not include
     equity units held by Mr. Paul which entitle the holder therof to 39,375
     shares of common stock.

 (3) Includes (i) 1,182,508 shares of common stock and (ii) 20,412,089
     (21,938,198 shares after giving effect to the exchange) shares owned by
     other stockholders that are subject to the stockholders agreement and
     attributable to Franklin Paul. Franklin Paul disclaims beneficial ownership
     of the shares listed in clause (ii) of the preceding sentence. Does not
     include equity units held by Mr. Paul which entitle the holder therof to
     39,375 shares of common stock.

 (4) Includes 18,088,888 (19,614,997 shares after giving effect to the exchange)
     shares owned by Atlantic Equity Partners III, L.P. and an additional
     3,505,709 shares owned by other stockholders that are subject to the
     stockholders agreement and attributable to Atlantic Equity Partners III,
     L.P. Mr. Buaron is the sole member of Buaron Capital Corporation III, LLC.
     Buaron Capital Corporation III is the managing member of Atlantic Equity
     Associates III, LLC. Atlantic Equity Associates III, LLC is the sole
     general partner of Atlantic Equity Associates III, L.P. which is the sole
     general partner of Atlantic Equity Partners III, L.P. and, as such,
     exercises voting and investment power over shares of capital stock owned by
     Atlantic Equity Partners III, L.P., including shares of the common stock of
     Holdings. Mr. Buaron, as the sole member of Buaron Capital Corporation III,
     has voting and investment power, and may be deemed to beneficially own, the
     shares of the common stock of Holdings owned by Atlantic Equity Partners
     III, L.P. Mr. Buaron disclaims beneficial ownership of these shares. Mr.
     Buaron's address is c/o First Atlantic Capital Ltd., 135 East 57th Street,
     New York, New York 10022.

 (5) Does not include equity units held by Mr. Thompson which entitle the holder
     thereof to 149,750 shares of common stock.

 (6) Does not include equity units held by Mr. Brugh which entitle the holder
     thereof to 128,100 shares of common stock.

 (7) Does not include equity units held by Ms. Bunte which entitle the holder
     thereof to 12,563 shares of common stock.

 (8) Mr. Shaw's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

 (9) Mr. Grover's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

(10) Mr. Hardy's address is 935 Park Avenue, New York, New York 10028.

(11) Mr. Long's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

(12) Mr. Wilens's address is c/o First Atlantic Capital Ltd., 135 East 57th
     Street, New York, New York 10022.

                                        60
RELATED PARTY TRANSACTIONS

MERGER AGREEMENT

     On October 15, 2002, BGA Acquisition Corp., a wholly owned subsidiary of
Golfsmith International Holdings, Inc., merged with and into Golfsmith
International, Inc. Golfsmith is the surviving corporation and is a wholly owned
subsidiary of Holdings. Contingent consideration of $6,250,000 was placed in an
escrow account by the selling stockholders to secure certain indemnification
obligations of the sellers. The merger agreement contains a provision for
post-closing adjustment to the merger consideration paid to the selling
stockholders based on the difference between expected and actual amounts of
assets and liabilities, as detailed in a statement of working capital of
Golfsmith as of the date the merger was completed. In accordance with this
provision, on May 20, 2003, the parties determined that an adjustment in the
merger consideration of $25,000 was payable to us based on the post-merger
review of Golfsmith's working capital. This amount was paid out of the escrow
account on June 20, 2003. We have adjusted the purchase price allocation
accordingly. On July 24, 2003, $1,107,579 was paid to us from the selling
stockholders escrow account for the repayment of certain obligations owed by the
selling stockholders that were paid by us. On April 15, 2004, all remaining
escrow funds of $5,117,421 were disbursed to the selling stockholders.

     Carl Paul, one of our directors, and Frank Paul have agreed to indemnify us
or Holdings up to an additional $6.25 million for the required post-closing
adjustments to the merger consideration, or any indemnification obligations for
any losses that we or Holdings incur, that exceed the available amounts in
escrow. Carl Paul and Frank Paul have also agreed to indemnify us or Holdings up
to an additional $6.25 million for any losses we or Holdings incur as a result
of fraud by certain of our officers prior to the merger.

ISSUANCES OF COMMON STOCK OF HOLDINGS

     Holdings intends to issue additional shares of common stock and cash to its
majority stockholder, Atlantic Equity Partners III, L.P., in exchange for
$7,250,000 aggregate principal amount at maturity of notes in a private
transaction. The number of shares of common stock of Holdings to be issued to
Atlantic Equity Partners III in this exchange will be equal to the aggregate
sale price for the notes sold by Holdings in this offering, after deducting the
expenses related to this offering and the amount of the cash payment described
below, divided by approximately $3.85 (the fair market value of each share of
common stock of Holdings as previously determined by an independent appraisal).
The amount of cash to be paid by Holdings to Atlantic Equity Partners III is
intended to be an amount sufficient for Atlantic Equity Partners III or its
partners, as applicable, to discharge any federal, state and local tax liability
arising from Atlantic Equity Partners III's sale of the notes. For this purpose,
Holdings and Atlantic Equity Partners III have agreed that each partner of
Atlantic Equity Partners III will be assumed to be subject to tax at the highest
marginal rate for an individual taxpayer resident in New York City, New York and
that any gain from the sale of the notes will be long term capital gain for
federal income tax purposes. The notes to be acquired by Holdings in this
exchange are being registered by the registration statement of which this
prospectus is a part for sale by Holdings. Atlantic Equity Partners III, L.P.
purchased $7,250,000 aggregate principal amount at maturity of the notes in the
initial offering on October 15, 2002.

     On July 24, 2003, in conjunction with our acquisition of Don Sherwood Golf
Shop, Atlantic Equity Partners III, L.P., Holdings' majority stockholder,
purchased 1,427,623 shares of Holdings' common stock for an aggregate purchase
price of $4.3 million. Five of Holdings' directors, including Holdings' chairman
of the board, hold positions with First Atlantic, as described in "Management."

     On May 28, 2003, Holdings issued 83,333 shares of its common stock to
Thomas G. Hardy, one of Holdings' directors, for an aggregate purchase price of
$249,999, or $3.00 per share. On July 24, 2003, in conjunction with our
acquisition of Don Sherwood Golf Shop, Holdings issued 5,710 shares of its
common stock to Thomas G. Hardy for an aggregate purchase price of $17,131, or
$3.00 per share.

                                        61
STOCKHOLDERS AGREEMENT

     In connection with the merger, Holdings, Atlantic Equity Partners III, L.P.
and the members of our management who own equity securities of Holdings,
including but not limited to James Thompson, Virginia Bunte, Curt Young, Ken
Brugh, Barry Rinke, Fred Quandt, Carl Paul, Franklin Paul and all of Holdings'
other stockholders following the merger, entered into a stockholders agreement.
Under the stockholders agreement, the parties are required:

     - to vote their shares of Holdings' common stock owned by each of them in
       favor of the election of one director nominated by Carl Paul, Frank Paul
       and their families and all of the directors nominated by Atlantic Equity
       Partners III to fill all of the remaining board seats so long as each of
       the parties maintains a minimum level of stock ownership;

     - to consent to a sale of Holdings if board of directors of Holdings and
       Atlantic Equity Partners III approve of such sale and if:

      - stockholders would receive as consideration cash or specified kinds of
        securities;

      - each stockholder would receive as consideration the same proportion of
        the aggregate consideration that such stockholder would receive if
        Holdings were liquidated;

      - any stockholders are given an option as to the form and amount of
        consideration, all stockholders are given the same option;

      - all holders of rights to acquire shares of common stock of Holdings are
        given certain rights with respect to proceeds from the sale;

      - except in certain circumstances, any economic benefits available to any
        stockholder with respect to its shares will be available to all
        stockholders on a pro rata basis; and

      - the expenditures required to be paid by the stockholders and any
        representations and warranties required to be made by the stockholders
        in connection with the sale do not exceed certain limitations;

     - to cause Holdings to register shares of its common stock held by parties
       to the stockholders agreement upon the request of Atlantic Equity
       Partners III in certain circumstances;

     - except in certain circumstances, to cause Holdings to give certain
       parties to the stockholders agreement preemptive rights to purchase
       common stock;

     - not to transfer shares of common stock of Holdings unless certain
       conditions are met; and

     - in the case of certain members of our management, grant Holdings
       repurchase rights with respect to the shares of Holdings' common stock
       owned by them.

     The stockholders agreement will terminate upon the earliest of:

     - the sale of Holdings;

     - an initial public offering of the common stock of Holdings;

     - the dissolution or liquidation of Holdings;

     - the approval of such termination by us, Atlantic Equity Partners III and
       the holders of at least 50% of the shares held by the other stockholders
       of Holdings; and

     - October 15, 2022.

MANAGEMENT CONSULTING AGREEMENT

     Upon completion of the merger, we and Holdings entered into a management
consulting agreement with First Atlantic under which First Atlantic advises us
and Holdings on management matters that relate to proposed financial
transactions, acquisitions and other senior management matters. We and Holdings
                                        62
have agreed to pay First Atlantic for these services an annual fee of $600,000
in equal monthly installments and will reimburse First Atlantic for its
expenses. During the period from October 16, 2002 through December 28, 2002, the
fiscal year ended January 3, 2004 and the three months ended April 3, 2004, we
paid approximately $150,000, $812,000 and $131,000 to First Atlantic under this
agreement. In addition, First Atlantic received a closing fee of $1,252,500 and
reimbursement of its expenses for services rendered in connection with the
merger. First Atlantic may receive additional fees from us under the agreement
in connection with future financings or dispositions or acquisitions by us or
Holdings. Under the terms of the agreement, such additional fees will not exceed
an amount equal to:

     - in the case of a transaction involving less than $50,000,000 in total
       enterprise value, 2% of such total enterprise value;

     - in the case of a transaction involving $50,000,000 or more but less than
       $100,000,000 in total enterprise value, $1,000,000; and

     - in the case of a transaction involving $100,000,000 or more in total
       enterprise value, 1% of such total enterprise value.

     With respect to a transaction involving a sale of Holdings, First Atlantic
will be paid a fee equal to 1% of the total enterprise value of our company.

     The management consulting agreement has a term of 10 years but will
automatically terminate if Atlantic Equity Partners III and its affiliates
collectively own less than 50% of the shares of the common stock of Holdings, or
upon an initial public offering of the common stock of Holdings. Five of our
directors, including our chairman of the board, hold positions with First
Atlantic, as described in "Management."

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements with James D. Thompson, our
president and chief executive officer, and with Virginia Bunte, our chief
financial officer. We also entered into employment agreements with Carl Paul and
Franklin Paul to provide advising services. You should read the information set
forth in "Management -- Employment Agreements," for a description of these
agreements.

AGREEMENT TO PROVIDE HEALTH BENEFITS TO OUR FOUNDERS

     In connection with the merger, we agreed to amend our group health plan so
that Carl Paul and Franklin Paul, our founders, will continue to be eligible to
participate in our health plan on the same basis as full-time employees. We
report these benefits under the plan as non-taxable benefits, based on our
determination that such reporting is permissible. Neither we nor Carl Paul or
Franklin Paul have agreed to indemnify the other party for any losses that
either of us may suffer as a result of this tax reporting or the amendment to
the plan.

INDEMNIFICATION AGREEMENTS

     In connection with the merger, we agreed to indemnify our directors prior
to the completion of the merger, including Carl Paul, one of our current
directors, in the event that any of them suffer losses as a result of actions
taken or statements made on behalf of us and in their capacities as our
directors, officers or agents.

                                        63
SELLING NOTEHOLDER

     The selling noteholder is Golfsmith International Holdings, Inc., our
parent company. Upon consummation of the private transaction described below,
Holdings will become the beneficial owner of $7,250,000 aggregate principal
amount at maturity of the notes, representing 7.7% of the outstanding notes as
of the date of this prospectus. Atlantic Equity Partners III, L.P., Holdings'
majority stockholder, purchased $7,250,000 aggregate principal amount at
maturity of the notes in the initial offering on October 15, 2002. In connection
with our initial issuance of the notes, we entered into a registration rights
agreement in which we granted certain registration rights to the noteholders. In
July 2003, pursuant to our obligations under the registration rights agreement,
we conducted an exchange offer in which we offered to exchange all of the
outstanding unregistered notes for substantially identical notes that were
registered under the Securities Act. As an affiliate of us, Atlantic Equity
Partners III, L.P. was not eligible to participate in the exchange offer.

     Atlantic Equity Partners III, L.P. intends to exchange the $7,250,000
aggregate principal amount at maturity of unregistered notes beneficially owned
by it for cash and a number of shares of common stock of Holdings equal to the
aggregate sale price for the notes sold by Holdings in this offering, after
deducting the expenses related to this offering and the amount of the cash
payment described below, divided by approximately $3.85 (the fair market value
of each share of common stock of Holdings as previously determined by an
independent appraisal) in a private transaction. The amount of cash to be paid
by Holdings to Atlantic Equity Partners III is intended to be an amount
sufficient for Atlantic Equity Partners III or its partners, as applicable, to
discharge any federal, state and local tax liability arising from Atlantic
Equity Partners III's sale of the notes. For this purpose, Holdings and Atlantic
Equity Partners III have agreed that each partner of Atlantic Equity Partners
III will be assumed to be subject to tax at the highest marginal rate for an
individual taxpayer resident in New York City, New York and that any gain from
the sale of the notes will be long term capital gain for federal income tax
purposes. The notes offered under this prospectus are being registered to permit
Holdings to sell these notes to the public. Holdings will own no notes after the
completion of this offering.

                                        64
DESCRIPTION OF SENIOR CREDIT FACILITY

CREDIT FACILITY

     General.  Our senior credit facility, as amended, is a revolving agreement
in an amount equal to $12.5 million and expires on April 15, 2007. The senior
credit facility also provides for the issuance of letters of credit, within the
overall borrowing availability. The amount available to be borrowed under our
senior credit facility is limited for each borrower to 85% of the net amount of
eligible receivables of such borrower plus the lesser of 65% of the value of
eligible inventory (valued on a lower of cost or market basis) of such borrower
and 60% of the net orderly liquidation value of eligible inventory of such
borrower. The lender agent under our senior credit facility also retains the
right from time to time to establish or modify advance rates, standards of
eligibility and reserves against availability. The borrowers have agreed with
the lender agent that, in addition to other reserves that the lender agent may
impose, they will maintain an availability reserve at all times of $500,000. As
a result, the amount of borrowings available under the senior credit facility
may at no time exceed $12.0 million, unless the lender agent releases that
reserve. Several of our subsidiaries are borrowers under the senior credit
facility. All borrowings will be on a joint and several basis.

     Interest Rate.  The senior credit facility bears interest, at the
borrower's option, at either a variable rate based on the London Interbank
Offered Rate (LIBOR) plus 2.5%, or the base rate on corporate loans quoted in
the Wall Street Journal plus 1.0%.

     Borrowers.  Golfsmith International, L.P., Golfsmith NU, L.L.C. and
Golfsmith USA, L.L.C.

     Guarantees.  Holdings and each of its domestic subsidiaries (other than the
borrowers), including us, guarantee the borrowers' obligations pursuant to the
senior credit facility.

     Security.  The senior credit facility is secured by a first priority lien
on substantially all of the current and future assets (other than real property,
fixtures, equipment and proceeds thereof owned by us, Holdings or our
subsidiaries) of each borrower or guarantor, including all of our stock and
equivalent equity interests of all of our subsidiaries (limited to 65% of voting
stock and 100% of non-voting stock of foreign subsidiaries owned by a domestic
subsidiary and excluding any stock owned by a foreign subsidiary), all accounts
receivable, inventory, intellectual property rights (including patents,
trademarks and service marks) and all other tangible and intangible property.

     Covenants and Events of Default.  In addition to the usual and customary
affirmative and negative covenants, the senior credit facility limits our and
our subsidiaries' ability to: (1) incur additional debt, leasehold obligations
and contingent liabilities; (2) pay dividends and other distributions on capital
stock; and (3) be a party to mergers, consolidations or similar transactions.
The senior credit facility also requires satisfaction of certain financial
covenants and provides for usual and customary events of default as well as
other appropriate events of default, including a cross-default to our and each
borrower's other financial obligations (including the notes).

     Conditions to Borrowing.  The obligations of the lenders to provide the
financing under the senior credit facility are subject to the satisfaction or
waiver of certain conditions, including, among others: (1) the accuracy of the
representations and warranties made by us with respect to the financing; (2)
compliance with certain covenants, including certain financial covenants; and
(3) the absence of any other events of default under the senior credit facility.

     Interest Coverage Ratio.  The senior credit facility requires us to
maintain a specified interest coverage ratio throughout the term of the senior
credit facility. Pursuant to the senior credit facility, our interest coverage
ratio is calculated by:

     - dividing our interest expense deducted in the determination of our
       consolidated net income,

      - less the amortization of capitalized fees and expenses incurred in
        connection with the merger, the initial offering of the notes and the
        senior credit facility, if included in such interest expense;

     - by our EBITDA less our capital expenditures.
                                        65
EBITDA is defined as:

     - our consolidated net income less:

      - any income tax credits;

      - interest income;

      - gain from extraordinary items (net of losses);

      - any aggregate net gain (but not any aggregate net losses) arising from
        the sale or disposition of capital assets;

      - any other non-cash gains; and

      - certain other expenditures made in connection with the closing of the
        merger, the offering of the notes and the senior credit facility;

     - plus:

      - any provision for income taxes;

      - interest expenses;

      - depreciation and amortization;

      - amortized debt discount;

      - any deduction resulting from a grant of stock to management; and

      - certain expenses relating to the merger, the offering of the notes and
        the senior credit facility.

     At the end of each of our fiscal quarters, we are required to have an
interest coverage ratio for the twelve months then ending of not less than the
following:
REQUIRED INTEREST
QUARTER                                                        COVERAGE RATIO
-------                                                       -----------------
FISCAL 2002
  Fourth Quarter............................................        1.60
FISCAL 2003
  First Quarter.............................................        1.60
  Second Quarter............................................        1.50
  Third Quarter.............................................        1.40
  Fourth Quarter............................................        1.60
FISCAL 2004
  First Quarter.............................................        1.00
  Second Quarter............................................        1.20
  Third Quarter.............................................        1.60
  Fourth Quarter............................................        1.80
FISCAL 2005
  First Quarter.............................................        1.80
  Second Quarter............................................        1.80
  Third Quarter.............................................        1.90
  Fourth Quarter............................................        1.90
66
REQUIRED INTEREST
QUARTER                                                        COVERAGE RATIO
-------                                                       -----------------
FISCAL 2006
  First Quarter.............................................        1.90
  Second Quarter............................................        2.00
  Third Quarter.............................................        2.00
  Fourth Quarter............................................        2.00
FISCAL 2007
  First Quarter.............................................        2.00
Minimum EBITDA.  The senior credit facility requires us to have a minimum
amount of EBITDA, as calculated above, throughout the term of the senior credit
facility. At the end of each of our fiscal quarters, we are required to have
EBITDA for the twelve months then ending of not less than the following:
QUARTER                                                       MINIMUM EBITDA
-------                                                       --------------
FISCAL 2002
  Fourth Quarter............................................   $15,864,000
FISCAL 2003
  First Quarter.............................................    17,292,000
  Second Quarter............................................    17,763,000
  Third Quarter.............................................    18,006,000
  Fourth Quarter............................................    18,720,000
FISCAL 2004
  First Quarter.............................................    14,550,000
  Second Quarter............................................    17,220,000
  Third Quarter.............................................    19,980,000
  Fourth Quarter............................................    20,400,000
FISCAL 2005
  First Quarter.............................................    20,760,000
  Second Quarter............................................    21,120,000
  Third Quarter.............................................    21,480,000
  Fourth Quarter............................................    21,840,000
FISCAL 2006
  First Quarter.............................................    22,640,000
  Second Quarter............................................    23,440,000
  Third Quarter.............................................    24,240,000
  Fourth Quarter............................................    25,040,000
FISCAL 2007
  First Quarter.............................................    26,020,000
67
Limitation on Capital Expenditures.  The senior credit facility prohibits
us from making capital expenditures that exceed in the aggregate the following
amounts in each of the specified fiscal years:
CAPITAL EXPENDITURE
FISCAL YEAR                                                          LIMIT
-----------                                                   -------------------
2002........................................................      $5,400,000
2003........................................................       6,250,000
2004........................................................       6,800,000
2005........................................................       7,200,000
2006........................................................       8,400,000
INTERCREDITOR AGREEMENT

     An intercreditor agreement, dated as of October 15, 2002, among us, the
guarantors, General Electric Capital Corporation, as agent for the lenders under
the senior credit facility, and U.S. Bank Trust National Association, as trustee
and collateral agent under the indenture, sets forth the relative rights to our
collateral of the lenders under the senior credit facility, on the one hand, and
the holders of notes on the other hand. Proceeds from the sale of collateral in
which the lenders have a security interest will be used first to satisfy
obligations under the senior credit facility and, thereafter, the notes. You
should read the information set forth under "Description of the
Notes -- Security" and "-- Intercreditor Agreement" for more information
relating to the collateral securing the senior credit facility and the
intercreditor arrangements.

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DESCRIPTION OF THE NOTES

     The notes were issued under an indenture dated as of October 15, 2002,
among our company, the Guarantors and U.S. Bank Trust National Association, as
trustee. The indenture is subject to and governed by the Trust Indenture Act of
1939. The following is a summary of the material provisions of the indenture. It
does not include all of the provisions of the indenture. You should read the
indenture, including the definitions of certain terms contained therein and
those terms made part of the indenture by reference to the Trust Indenture Act,
in its entirety for provisions that may be important to you. The indenture will
be incorporated by reference into the registration statement of which this
prospectus is a part. You can find definitions of certain capitalized terms used
in this description under "-- Certain Definitions." For purposes of this
"Description of the Notes," references to "our company," "we," "our" or "us"
refer solely to Golfsmith International, Inc. and not any of our Subsidiaries.

GENERAL

     The notes are our senior obligations and rank equal in right of payment
with all of our other senior obligations and senior in right of payment with all
of our Indebtedness which by its terms is subordinated to the notes. The notes
are guaranteed, jointly and severally on a senior secured basis by the
Guarantors set forth under "-- Guarantees" below.

     We issued the notes in fully registered form in denominations of $1,000 and
integral multiples thereof. The trustee is acting as paying agent and registrar
for the notes. The notes may be presented for registration of transfer or
exchange at the offices of the registrar. No service charge will be made for any
registration of transfer or exchange or redemption of notes, but we may require
payment in certain circumstances of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. We may change
any paying agent and registrar without notice to holders of the notes. We will
pay principal (and premium, if any) on the notes at the trustee's corporate
office in New York, New York. At our option, interest may be paid at the
trustee's corporate trust office or by check mailed to the registered address of
holders.

PRINCIPAL, MATURITY AND INTEREST

     We initially issued $93.75 million in aggregate principal amount at
maturity of notes. We may issue additional notes from time to time after this
offering provided that we comply with the covenant described below under the
caption "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness." The notes were issued at a discount to yield gross proceeds of
$75.0 million. The notes and any additional notes will be substantially
identical other than the issuance dates and the dates from which interest will
accrue. The notes and any additional notes will be treated as a single class of
notes under the indenture and will vote together as a single class. Because,
however, any additional notes may not be fungible with the notes for federal
income tax purposes, they may have a different CUSIP number or numbers, be
represented by a different global note or notes, and otherwise be treated as a
separate class or classes of notes for other purposes.

     The notes will mature on October 15, 2009. Interest on the notes accrues at
the rate of 8.375% per annum and is payable semiannually in cash on each March 1
and September 1 to the persons who are registered holders at the close of
business on the February 15 or August 15 immediately preceding the applicable
interest payment date. Interest on the notes accrues from the most recent date
to which interest has been paid or, if no interest has been paid, from and
including the date of issuance. Interest is computed on the basis of a 360-day
year comprised of twelve 30-day months.

                                        69
On each interest payment date beginning March 1, 2008, in addition to
accrued interest due on that date, we will make a payment (the "HYDO Payment")
on each note in cash in immediately available funds, which payment will reduce
the outstanding principal amount at maturity of the note, in an amount equal to
the excess, if any, of:

     - the total amount of interest and original issue discount (as determined
       under the Internal Revenue Code of 1986, as amended (the "Code")) accrued
       on the note through such interest payment date, over

     - the sum of:

      - all amounts of interest and original issue discount paid in cash with
        respect to such note (or any predecessor note) through and including
        such interest payment date;

      - all HYDO Payments previously made by us; and

      - the annual "yield to maturity" applicable for purposes of the accrual of
        original issue discount under the Code multiplied by the original
        principal amount at maturity of the note.

     Any reduction as described above will reduce the principal amount of the
note for all purposes under the indenture. As a result of making these HYDO
payments, we will not be subject to special rules (applicable to some high-yield
debt obligations with significant amounts of unpaid original issue discount
after five years from their issue date), that would otherwise limit the amount
of interest expense we could deduct on the notes for U.S. federal income tax
purposes.

SECURITY

     Pursuant to the terms of the Collateral Agreements, we and our Domestic
Restricted Subsidiaries granted to the Collateral Agent or one or more
sub-Collateral Agents appointed under the intercreditor agreement, security
interests in substantially all of our respective assets, including all of the
stock of domestic Subsidiaries directly owned by us or any Domestic Restricted
Subsidiary, 65% of the capital stock entitling the holders thereof to vote in
the election of members of the board of directors, which we refer to as voting
stock, of foreign Subsidiaries directly owned by us or any Domestic Restricted
Subsidiary and 100% of the non-voting Stock of foreign Subsidiaries directly
owned by us or any Domestic Restricted Subsidiary, but excluding certain
"excluded assets" (including leasehold interests existing on the Issue Date). In
addition, Holdings granted a security interest in all of its assets (including
its stock in our company). Security interests in all such assets (other than
real property, fixtures, equipment and proceeds thereof) secure the obligations
under the Credit Agreement on a first priority basis and the obligations under
the notes, the guarantees and the indenture on a second priority basis, subject
in each case to Permitted Liens. Security interests in real property, fixtures,
equipment and proceeds thereof will secure the obligations under the notes, the
guarantees and the indenture on a first priority basis, subject to the Permitted
Liens.

     Upon an Event of Default, the proceeds from the sale of Collateral securing
the notes will likely be insufficient to satisfy our obligations under the
notes. No appraisals of any of the Collateral have been prepared in connection
with this offering. Moreover, the amount to be received upon such a sale would
be dependent upon numerous factors, including the condition, age and useful life
of the Collateral at the time of such sale, as well as the timing and manner of
such sale. By its nature, all or some of the Collateral will be illiquid and may
have no readily ascertainable market value. Accordingly, there can be no
assurance that the Collateral, if saleable, can be sold in a short period of
time or at an appropriate price.

     We have the ability to issue additional notes as part of the same series of
notes, which may also be secured by the Collateral. We and the Guarantors can
increase our Indebtedness but there can be no assurance that there will be a
proportionate increase in the value of the Collateral as a percentage of the
aggregate principal amount at maturity of outstanding notes.

     A significant portion of our assets consists of leasehold improvements.
Because leasehold improvements may be deemed to be a part of either the real
property covered by the lease (which real
                                        70
property is not owned by us or our Restricted Subsidiaries) or our current real
estate leasehold interests (which interests are not included in the Collateral
securing the notes), there can be no assurance as to whether or to what extent
such assets would be available as collateral securing the notes. Moreover, the
ability of the Collateral Agent to obtain possession of Collateral located on
leaseholds may be subject to conflicting claims of landlords. We believe,
however, that the realizable value of such leasehold interests upon our
liquidation would not be material.

     To the extent third parties hold Permitted Liens, such third parties may
have rights and remedies with respect to the property subject to such Liens
that, if exercised, could adversely affect the value of the Collateral. Given
the intangible nature of certain of the Collateral, any sale of such Collateral
separately from our company and our Restricted Subsidiaries as a whole may not
be feasible. Additionally, the inclusion of our and our Restricted Subsidiaries'
fixtures in the Collateral securing the notes will be limited by the extent to
which (a) such fixtures are deemed not to be personal property and (b) any
applicable state laws would, for purposes of perfecting security interests with
respect thereto, require that the Collateral Agent effectuate certain filings in
applicable real estate land records. Our and our Restricted Subsidiaries'
ability to grant a first (or second) priority security interest in certain
Collateral may be limited by legal or other logistical considerations. The
ability of the holders of notes to realize upon the Collateral may be subject to
certain bankruptcy law limitations in the event of a bankruptcy. See "-- Certain
Bankruptcy Limitations."

     We are only permitted to form new Subsidiaries and to transfer all or a
portion of the Collateral to one or more of our Subsidiaries if such formation
and transfer is in accordance with the provisions described under "-- Certain
Covenants -- Additional Subsidiary Guarantees."

     Subject to the restrictions on incurring Indebtedness set forth herein, we
and our Subsidiaries will have the right to grant (and suffer to exist) Liens
securing Purchase Money Indebtedness respecting fixed assets and to acquire any
such assets subject to such Liens. Liens created by the Collateral Agreements
are intended to be, and will be, at all times automatically subordinate in
priority to all such Liens.

     The Collateral release provisions of the indenture permit the release of
Collateral without substitution of Collateral of at least equal value under
certain circumstances, including asset sales made in compliance with the
indenture.

     Neither we nor any of our Restricted Subsidiaries will encumber any asset
or property of our company or such Restricted Subsidiaries or suffer to exist
any Lien thereon, other than Permitted Liens or as otherwise expressly permitted
by the indenture.

     So long as no Event of Default has occurred and is continuing, and subject
to certain terms and conditions in the indenture, the Credit Agreement, the
Collateral Agreements and the intercreditor agreement, we will be entitled to
receive all cash dividends, interest and other payments made upon or with
respect to the Capital Stock of any of our Subsidiaries held as Collateral and
to exercise any voting, consensual and other rights pertaining to such Capital
Stock. Upon the occurrence and during the continuance of an Event of Default,
subject to the terms of the intercreditor agreement and the documents securing
the Credit Agreement, upon notice from the Collateral Agent, (a) all of our
rights to exercise such voting, consensual or other rights will cease and all
such rights will become vested in the Collateral Agent, which, to the extent
permitted by law, will have the sole right to exercise such voting, consensual
or other rights, (b) all of our rights to receive all cash dividends, interest
and other payments made upon or with respect to the Collateral will cease, and
such cash dividends, interest and other payments will be paid to the Collateral
Agent or the lenders under the Credit Agreement, and (c) the Collateral Agent
may sell the Collateral or any part thereof in accordance with, and subject to
the terms of, the Collateral Agreements subject to the prior rights of the
lenders under the Credit Agreement. All funds distributed under the Collateral
Agreements by the Collateral Agent will be distributed by the Collateral Agent
in accordance with the provisions of the intercreditor agreement and the
indenture.

                                        71
The Collateral Agreements will terminate, subject to the intercreditor
agreement, and the pledged Collateral will be released from the liens created
thereunder, upon:

     - payment in full of all amounts due in respect of the notes;

     - satisfaction and discharge of the indenture in accordance with its terms;
       and

     - a legal defeasance or covenant defeasance in accordance with the
       provisions described below under "-- Legal Defeasance and Covenant
       Defeasance."

     Liens securing the notes will be released, in part, with respect to any
asset constituting Collateral:

     - that is sold or otherwise disposed of by us or one of the Subsidiary
       Guarantors to a Person other than us or a Subsidiary Guarantor in a
       transaction permitted by the indenture, at the time of such sale or
       disposition;

     - that is owned or at any time acquired by a Subsidiary Guarantor that has
       been released from its Guarantee concurrently with the release of the
       Guarantee (including by virtue of such Restricted Guarantor becoming an
       Unrestricted Subsidiary); or

     - to the extent that we mail written notice of our request to release the
       lien relating to such asset to the trustee and the holders of the notes
       and we do not receive written objections from holders of at least 25% in
       aggregate principal amount at maturity of the notes within 20 business
       days after the mailing, provided that if we receive such objections, then
       we will not be entitled to the release unless we obtain the consent of
       holders of at least a majority in principal amount at maturity of the
       notes.

CERTAIN BANKRUPTCY LIMITATIONS

     The right of the Collateral Agent to repossess and dispose of the
Collateral upon the occurrence of an Event of Default is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy proceeding
were to be commenced by or against us or any of the Guarantors prior to the
Collateral Agent having repossessed and disposed of the Collateral or otherwise
completed the realization of the Collateral securing the notes. Under the
Bankruptcy Code, a secured creditor such as the Collateral Agent is prohibited
from repossessing its security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without bankruptcy court
approval. Moreover, the Bankruptcy Code permits the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable
debt instruments; provided that, under the Bankruptcy Code, the secured creditor
is given "adequate protection." The meaning of the term "adequate protection"
may vary according to circumstances, but it is intended in general to protect
the value of the secured creditor's interest in the collateral securing the
obligations owed to it and may include cash payments or the granting of
additional security, if and at such times as the bankruptcy court in its
discretion so determines, for any diminution in the value of such collateral as
a result of the stay of repossession or disposition or any use of the Collateral
by the debtor during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how long
payments under the notes could be delayed following commencement of a bankruptcy
case, whether or when the Collateral Agent could repossess or dispose of the
Collateral or whether or to what extent holders of the notes would be
compensated for any delay in payment or loss of value of the Collateral through
the requirement of "adequate protection."

     The intercreditor agreement prohibits the holders of the notes or the
Collateral Agent from seeking adequate protection with respect to the Collateral
which also secures the Credit Agreement and requires the Collateral Agent and
the holders of the notes not to object to the Lender Agent or the Lenders
seeking adequate protection with respect to such Collateral.

     The Collateral Agent and the holders of the notes have agreed not to seek
relief from the automatic stay in respect of Collateral securing the obligations
under the Credit Agreement so long as any amounts remain outstanding under the
Credit Agreement (or if the Credit Agreement is a debtor-in-possession
                                        72
facility in whole or in part, any commitment thereunder is in effect), and not
to object to any motion by the Lender Agent for relief from the automatic stay.
The Lender Agent and the Lenders agreed not to object to any motion by the
Collateral Agent or any holder of notes for relief from the automatic stay in
respect of the Collateral securing the indenture, the notes and the Guarantees
on a first priority basis. The Collateral Agent and the holders of the notes
have agreed not to object to any debtor-in-possession financing priming the
security interest with respect to the Collateral securing the notes and the
Credit Agreement so long as the Lenders agree to such financing priming the
corresponding security interest of the Lenders and certain related matters. The
holders of the notes have also agreed not to vote their secured claims for any
plan of reorganization that does not provide for the payment in full in cash on
the effective date of the plan of all obligations of the Lenders or such other
treatment that may be acceptable to the Lenders. The Collateral Agent and the
holders of the notes have agreed not to challenge the right of the Lenders to
receive post-petition interest, fees and expenses with respect to Collateral
securing the Credit Agreement and the lenders and the Lender Agent have agreed
not to challenge the right of the holders of the notes to receive post-petition
interest, fees and expenses with respect to the Collateral securing the
indenture, the notes and the Guarantees.

INTERCREDITOR AGREEMENT

     On October 15, 2002, we, the Guarantors, the Lender Agent, on behalf of
itself and the Lenders, the trustee and the Collateral Agent, on behalf of the
holders of the notes, entered into the intercreditor agreement. The
intercreditor agreement, among other things, provides that the obligations of
our company and our subsidiaries under the Credit Agreement are secured by
substantially all of the assets (other than real property, fixtures, equipment
and proceeds thereof) of our company, Holdings and our domestic subsidiaries on
a first priority basis and the obligations of our company, Holdings and our
subsidiaries under the notes, the guarantees and the indenture are secured by
the real property, fixtures, equipment and proceeds thereof of our company,
Holdings and our Domestic Restricted Subsidiaries on a first priority basis and
all of the other assets of our company, Holdings and our Domestic Restricted
Subsidiaries on a second priority basis, and provides that upon and during the
continuance of an event of default under the Credit Agreement, the Lender Agent
is entitled to manage all aspects of, including exercising or refraining from
exercising all rights and remedies with respect to, the Collateral securing the
Credit Agreement.

     Pursuant to the intercreditor agreement, neither the Collateral Agent nor
any holder of notes may challenge the Liens securing obligations under the
Credit Agreement and neither the Lender Agent nor any Lender may challenge the
Liens securing obligations under the indenture and the notes. In addition, while
the Credit Agreement remains in effect, or any borrowings are outstanding
thereunder, neither the Collateral Agent nor any holder of notes may take any
action to enforce the Liens securing obligations under the indenture and the
notes. The Collateral Agent and the holders of the notes also agree to turn over
to the Lender Agent any proceeds of Collateral securing the obligations under
the Credit Agreement which it or any of them obtains so long as any amounts are
outstanding under the Credit Agreement.

     The Collateral Agent and all holders of notes:

     - agree to waive all claims against the Lenders and the Lender Agent with
       respect to the Collateral securing obligations under the Credit Agreement
       (other than those arising from willful misconduct or breach of the
       intercreditor agreement),

     - must postpone exercising any rights with respect to such Collateral until
       the Credit Agreement is terminated and paid in full, and

     - acknowledge that the Lenders and the Lender Agent owe no duty to the
       Collateral Agent or the holders of the notes, other than (a) turning over
       control of Collateral to the trustee following the termination of the
       Credit Agreement and payment of all amounts thereunder and (b) following
       such events, executing and delivering such instruments as are necessary
       to evidence any transfer by subrogation to the trustee and the holders of
       the notes of an interest in the Credit Agreement resulting from, among
       other things, any turnover by the trustee and/or the holders of the notes
       of proceeds from Collateral to the Lender Agent and the Lenders.
                                        73
DEFAULT PURCHASE OPTION

     Pursuant to the Credit Agreement, one or more of the holders of the notes
will be entitled to purchase, for cash at a price equal to all amounts owing
under the Credit Agreement, all amounts owing under the Credit Agreement and all
rights under the Credit Agreement (other than obligations (excluding the
principal of, interest and premium (if any) on and fees relating to any
indebtedness and contingent reimbursement obligations in respect of amounts
drawn under letters of credit) for taxes, costs, indemnifications,
reimbursements, damages and other liabilities in respect of which no claim or
demand for payment has been made or, in the case of obligations for
indemnification, no notice for indemnification has been given at such time),
including the security interests granted under the Credit Agreement, during a
period beginning on the date that either:

     - the commitment under the Credit Agreement is terminated, or

     - all amounts outstanding thereunder become accelerated and any letters of
       credit issued thereunder are required to be cash collateralized,

and ending on the 20th business day following the delivery by the Lender Agent
or any Lender of notice of the occurrence of either such date.

GUARANTEES

     The full and prompt payment of our obligations under the notes and the
indenture are and will be guaranteed, jointly and severally, by Holdings (the
"Parent Guarantee") and by all of our present and future Domestic Restricted
Subsidiaries (the "Subsidiary Guarantees" and, together with the Parent
Guarantee, the "Guarantees"). The guarantors under the Subsidiary Guarantees are
referred to as the "Subsidiary Guarantors" and, together with Holdings are
referred to as the "Guarantors." Holdings currently has no material assets other
than the common stock of our company. As of the Issue Date, all of our
subsidiaries were Domestic Restricted Subsidiaries. Each Guarantor has fully and
unconditionally guaranteed on a senior basis, jointly and severally, to each
holder and the trustee, the full and prompt performance of our obligations under
the indenture, the notes and the Collateral Agreements, including the payment of
principal of, interest on and premium, if any, on the notes. The Guarantee of
each Guarantor ranks senior in right of payment to all subordinated indebtedness
of such Guarantor and equal in right of payment with all other senior
obligations of such Guarantor, including borrowings or guarantees of borrowings
under the Credit Agreement. The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the indenture, will result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. The net worth of any Guarantor
for such purpose will include any claim of such Guarantor against us for
reimbursement and any claim against any other Guarantor for contribution. Each
Guarantor may consolidate with or merge into or sell its assets to us or another
Guarantor without limitation. See "-- Certain Covenants -- Mergers,
Consolidation and Sale of Assets" and "-- Limitation on Asset Sales." The rights
of the holders of the notes to participate in any distribution of assets of the
guarantors (or proceeds therefrom) upon a bankruptcy will be subject to the
claims of the senior lenders under our credit facility. See "Risk Factors -- The
collateral which secures both the notes and borrowings under our senior credit
facility is subject to control by the lenders under our senior credit facility.
If there is a default, the proceeds from the collateral may not be sufficient to
repay both the lenders under our senior credit facility and the holders of the
notes and the lenders under the senior credit facility will be repaid before the
holders of the notes."

REDEMPTION

     Mandatory Redemption.  On each of October 15, 2007 and October 15, 2008, we
must make a pro rata partial redemption of the principal amount of each note
equal to 20% and 10%, respectively, of the
                                        74
original principal amount at maturity of such note. In addition, we must pay
accrued and unpaid interest on the principal amount of the notes redeemed to the
redemption date. If we issue additional notes after the Issue Date, these
percentages will be reduced by multiplying the relevant percentage by a
fraction, the numerator of which is the principal amount at maturity of notes
issued on the Issue Date and the denominator of which is the sum of the
principal amount at maturity of such notes and the principal amount at maturity
of any additional notes.

     However, the principal amount at maturity of notes we must redeem on the
dates set forth above may be reduced by the aggregate principal amount at
maturity of notes we have previously repurchased pursuant to the excess cash
flow offers described below.

     Any mandatory redemption payment will be made in the same manner as
ordinary interest payments on the notes.

     Any redemption as described above will reduce the principal amount at
maturity of each note for all purposes under the indenture.

     We may elect to credit against these mandatory redemptions an amount equal
to 100% of the principal amount at maturity of any notes that we have redeemed
or otherwise acquired pursuant to "-- Excess Cash Flow Offer" and delivered to
the trustee for cancellation. We will, no later than the August 15 in the year
in which a mandatory redemption is required, provide the trustee with an
officers' certificate stating the aggregate principal amount of each note to be
redeemed pursuant to the provisions of the first paragraph of this section and
setting forth the aggregate principal amount at maturity of notes to be credited
against the next mandatory redemption. We will deliver the notes which are to be
so credited to the trustee with such officers' certificate (if not previously
delivered to the trustee for cancellation) for retention and credit in
accordance with such officers' certificate.

     Optional Redemption Prior to October 15, 2006.  At any time prior to
October 15, 2006, we may, at our option, on one or more occasions redeem all or
part of the notes at a redemption price equal to the greater of (1) 100% of the
Accreted Value of the notes being redeemed and (2) the sum of the present values
of 106.50% of the Accreted Value of the notes being redeemed and scheduled
payments of interest on such notes to and including October 15, 2006 discounted
to the date of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points,
together in either case with accrued and unpaid interest, if any, to the date of
redemption.

     "Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption period.

     "Comparable Treasury Issue" means the United States Treasury security
selected by a Reference Treasury Dealer appointed by us as having a maturity
comparable to the remaining term of the notes (as if the final maturity of the
notes was October 15, 2006) that would be utilized at the time of selection and
in accordance with customary financial practice in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes (as if the final maturity of the notes was October 15, 2006).

     "Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (2) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations (as defined below) for such
redemption date, after excluding the highest and lowest such Reference Treasury
Dealer Quotation or (B) if we obtain fewer than three such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
                                        75
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by us, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to us by such
Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such
redemption date.

     "Reference Treasury Dealer" means any primary U.S. government securities
dealer in the City of New York (a "Primary Treasury Dealer") selected by us.

     Optional Redemption on or After October 15, 2006.  We may, at our option,
redeem the notes in whole or in part at any time on or after October 15, 2006,
at the following redemption prices (expressed as percentages of the Accreted
Value thereof) if redeemed during the twelve-month period beginning on October
15 of the year set forth below:
YEAR                                                          REDEMPTION PRICE
----                                                          ----------------
2006........................................................       106.50%
2007........................................................       103.25%
2008 and thereafter.........................................       100.00%
In addition, we must pay accrued and unpaid interest on the notes redeemed
to the redemption date.

     Optional Redemption upon Equity Offerings.  At any time on or prior to
October 15, 2005, we may, at our option, on one or more occasions, use the net
cash proceeds of one or more Equity Offerings to redeem up to 35% of the
principal amount at maturity of the notes originally issued under the indenture
at a redemption price of 113.00% of the Accreted Value thereof, plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that:

          (1) at least 65% of the principal amount at maturity of notes issued
     under the indenture remains outstanding immediately after any such
     redemption; and

          (2) we make such redemption not more than 120 days after the
     consummation of any such Equity Offering.

     "Equity Offering" means any public or private offering of our Qualified
Capital Stock.

SELECTION AND NOTICE OF REDEMPTION

     In the event that we are redeeming less than all of the notes pursuant to
one of our optional redemption rights, selection of the notes for redemption
will be made by the trustee either:

          (1) in compliance with the requirements of the principal national
     securities exchange, if any, on which the notes are listed; or

          (2) on a pro rata basis, by lot or by such method as the trustee may
     reasonably determine is fair and appropriate;

provided that no partial redemption will reduce the principal amount at maturity
of a note not redeemed to less than $1,000; and provided, further, that any such
partial redemption made with the proceeds of an Equity Offering will be made
only on a pro rata basis or on as nearly a pro rata basis as is practicable
(subject to the procedures of DTC or any other depository). We will mail notice
of redemption by first-class mail, postage prepaid, at least 30 but not more
than 60 days before the redemption date to each holder of notes to be redeemed
at its registered address. On and after the redemption date, interest will cease
to accrue on notes or portions thereof called for redemption as long as we have
deposited with the paying agent funds in satisfaction of the applicable
redemption price.

REPURCHASE UPON CHANGE OF CONTROL

     Upon the occurrence of a Change of Control, each holder will have the right
to require us to purchase all or a portion of such holder's notes using
immediately available funds pursuant to the offer described

                                        76
below, at a purchase price equal to 101% of the Accreted Value thereof plus
accrued and unpaid interest to the date of purchase.

     Within 30 days following the date upon which the Change of Control
occurred, we must send, by first-class mail, postage prepaid, an offer to each
holder, with a copy to the trustee, which offer will govern the terms of the
Change of Control offer. Such offer will state, among other things:

     - the purchase price;

     - the purchase date, which must be no earlier than 30 days nor later than
       60 days from the date such notice is mailed, other than as may be
       required by law;

     - that a Change of Control has occurred;

     - that any note not tendered will continue to accrue interest;

     - that unless we default on the payment of the purchase price, any notes
       accepted for payment pursuant to the Change of Control offer will cease
       to accrue interest after the purchase date; and

     - certain procedures that a holder of notes must follow to accept the
       Change of Control offer or to withdraw such acceptance.

     Holders electing to have a note purchased pursuant to a Change of Control
offer will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the third business day prior to the purchase date.

     On the purchase date, we will, to the extent lawful:

     - accept for payment all notes or portions thereof properly tendered
       pursuant to the Change of Control offer;

     - deposit with the paying agent an amount equal to the purchase price in
       respect of all notes or portions thereof so tendered; and

     - deliver or cause to be delivered to the trustee the notes so accepted
       together with an officers' certificate stating the aggregate principal
       amount at maturity of notes or portions thereof being purchased by us.

     The paying agent will promptly mail to each holder of notes so tendered the
purchase price for such notes, and the trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each holder a note equal in
principal amount at maturity to any unpurchased portion of the notes
surrendered; provided that each such note will be in a principal amount at
maturity of $1,000 or an integral multiple thereof.

     We will not be required to make a Change of Control offer upon a Change of
Control if a third party makes the Change of Control offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control offer made by us and purchases all
notes validly tendered and not withdrawn under such Change of Control offer.

     The trustee may not waive the covenant to offer to purchase the notes upon
a Change of Control. Restrictions in the indenture on our and our Restricted
Subsidiaries' ability to incur additional Indebtedness, to grant liens on its
property, to make Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of our company, whether favored or opposed by
our management or our board of directors. These restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances, make
more difficult or discourage any leveraged buyout of our company or any of our
Subsidiaries by our management. Consummation of any such transaction in certain
circumstances may require a repurchase of the notes, and neither we nor the
acquiring party may have sufficient financial resources to effect such
repurchase. In addition, the terms of the Credit Agreement and the indenture may
restrict our ability to obtain the financing necessary to fund a Change of
Control offer.

                                        77
Our failure to purchase tendered notes following a Change of Control, whether
because of a lack of financial resources, a provision in our Credit Agreement or
in the indenture, or otherwise, would constitute an Event of Default under the
indenture which, in turn, would constitute a default under the Credit Agreement.
While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the indenture
may not afford the holders protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring,
merger, recapitalization or similar transaction.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to a Change of Control offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Change of Control" provisions
of the indenture, we will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
"Change of Control" provisions of the indenture by virtue thereof.

EXCESS CASH FLOW OFFER

     Within 120 days after the end of each fiscal year (beginning with the first
full fiscal year after the Issue Date), we will make an offer to purchase to all
holders to purchase the maximum principal amount of notes that may be purchased
with 50% of Excess Cash Flow for such fiscal year (the "Excess Cash Flow Offer
Amount"), at a purchase price in cash equal to 100% of the Accreted Value of the
notes to be purchased, plus accrued and unpaid interest to the date of such
purchase. The indenture provides for each Excess Cash Flow offer to remain open
for a period of 20 business days, unless a longer period is required by law.
Promptly after the termination of the Excess Cash Flow offer period, we will
purchase and mail or deliver payment for the Excess Cash Flow Offer Amount for
the notes or portions thereof tendered, pro rata or by such other method as may
be required by law, or, if less than the Excess Cash Flow Offer Amount has been
tendered, all notes tendered pursuant to the Excess Cash Flow offer. If the
aggregate amount of notes tendered pursuant to any Excess Cash Flow offer is
less than the Excess Cash Flow Offer Amount, we may, subject to the other
provisions of the indenture and the Collateral Agreements, use any such excess
cash flow for general corporate purposes. Upon receiving notice of the Excess
Cash Flow offer, holders may elect to tender their notes, in whole or in part,
in integral multiples of $1,000 in exchange for cash.

     No later than 30 days prior to the required purchase date, we must send, by
first-class mail, postage prepaid, an offer to each holder, with a copy to the
trustee, which offer will govern the terms of the Excess Cash Flow offer. Such
offer will state, among other things:

     - the purchase price;

     - the purchase date, which must be no earlier than 30 days nor later than
       60 days from the date such notice is mailed, other than as may be
       required by law;

     - that we are making an Excess Cash Flow offer;

     - that any note not tendered will continue to accrue interest;

     - that unless we default on the payment of the purchase price, any notes
       accepted for payment pursuant to the Excess Cash Flow offer will cease to
       accrue interest after the purchase date; and

     - certain procedures that a holder of notes must follow to accept the
       Excess Cash Flow offer or to withdraw such acceptance.

     Holders electing to have a note purchased pursuant to an Excess Cash Flow
offer will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the third business day prior to the purchase date.

                                        78
On the purchase date, we will, to the extent lawful:

     - accept for payment all notes or portions thereof properly tendered
       pursuant to the Excess Cash Flow offer;

     - deposit with the paying agent an amount equal to the purchase price in
       respect of all notes or portions thereof so tendered; and

     - deliver or cause to be delivered to the trustee the notes so accepted
       together with an officer's certificate stating the aggregate principal
       amount at maturity of notes or portions thereof being purchased by us.

     The paying agent will promptly mail to each holder of notes so tendered the
purchase price for such notes, and the trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each holder a note equal in
principal amount at maturity to any unpurchased portion of the notes
surrendered; provided that each such note will be in a principal amount at
maturity of $1,000 or an integral multiple thereof.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to an Excess Cash Flow offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Excess Cash Flow Offer"
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the "Excess Cash Flow Offer" provisions of the indenture by virtue thereof.

CERTAIN COVENANTS

     The indenture contains, among others, the following covenants:

     Limitation on Capital Expenditures.  The aggregate amount of our and our
Restricted Subsidiaries' Capital Expenditures in any consecutive four fiscal
quarter period is limited to the greater of (1) one-third of our EBITDA in the
consecutive four fiscal quarter period ending with the latest fiscal quarter for
which financial statements are required to be delivered pursuant to the
indenture and (2) the Capital Expenditure Basket.

     Limitation on Incurrence of Additional Indebtedness.  We will not, and will
not permit any of our Restricted Subsidiaries to, directly or indirectly,
create, incur, assume, guarantee, acquire, become liable with respect to, or
otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if no
Default or Event of Default will have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, we or any of our
Restricted Subsidiaries that is or, upon such incurrence, becomes a Guarantor
may incur Indebtedness (including, without limitation, Acquired Indebtedness)
and any Restricted Subsidiary that is not or will not, upon such incurrence,
become a Guarantor may incur Acquired Indebtedness, in each case if on the date
of the incurrence of such Indebtedness, after giving effect to the incurrence
thereof, our Consolidated Fixed Charge Coverage Ratio is at least equal to:

     - 2.0 to 1.0, if such proposed incurrence is to be consummated on or prior
       to October 15, 2004;

     - 2.25 to 1.0, if such proposed incurrence is to be consummated on or prior
       to October 15, 2005; and

     - 2.5 to 1.0, if such proposed incurrence is to be consummated thereafter.

     Limitation on Restricted Payments.  We will not, and will not cause or
permit any of our Restricted Subsidiaries to, directly or indirectly (each, a
"Restricted Payment"):

          (1) declare or pay any dividend or make any distribution (other than
     dividends or distributions payable in our Qualified Capital Stock,
     dividends and distributions payable to us or any Restricted Subsidiary and
     pro rata dividends or distributions made by a Restricted Subsidiary that is
     not a

                                        79
Wholly-Owned Subsidiary) on or in respect of our Capital Stock or Capital
     Stock of our Restricted Subsidiaries to holders of such Capital Stock;

          (2) purchase, redeem or otherwise acquire or retire for value any of
     our Capital Stock or Capital Stock of our Restricted Subsidiaries (other
     than any such Capital Stock of a Restricted Subsidiary held by us or a
     Guarantor);

          (3) make any principal payment on, purchase, defease, redeem, prepay,
     decrease or otherwise acquire or retire for value, prior to any scheduled
     final maturity, scheduled repayment or scheduled sinking fund payment, any
     Indebtedness of our company or any Guarantor that is subordinate or junior
     in right of payment to the notes or a Guarantee (other than Indebtedness
     permitted under clause (6) of the definition of "Permitted Indebtedness");
     or

          (4) make any Investment (other than any Permitted Investment);

     if at the time of such Restricted Payment or immediately after giving
effect thereto,

             (i) a Default or an Event of Default will have occurred and be
        continuing; or

             (ii) we are not able to incur at least $1.00 of additional
        Indebtedness (other than Permitted Indebtedness) in compliance with the
        covenant described under "-- Limitation on Incurrence of Additional
        Indebtedness;" or

             (iii) the aggregate amount of all Restricted Payments (including
        such proposed Restricted Payment) made subsequent to the Issue Date (the
        amount expended for such purposes, if other than in cash, being the Fair
        Market Value of such property as determined in good faith by our board
        of directors at the time of the making thereof) will exceed the sum of:

                (w) 50% of our cumulative Consolidated Net Income (or if
           cumulative Consolidated Net Income will be a loss, minus 100% of such
           loss) earned subsequent to the Issue Date and ending on the last day
           of our last fiscal quarter for which financial statements are
           available (the "Reference Date") (treating such period as a single
           accounting period); plus

                (x) 100% of the aggregate net cash proceeds received by us from
           any Person (other than a Subsidiary of ours) as a contribution to our
           capital or from the issuance and sale subsequent to the Issue Date
           and on or prior to the Reference Date of our Qualified Capital Stock
           (including upon the exercise of options, warrants or rights); plus

                (y) 100% of the aggregate net cash proceeds received from the
           issuance of our Indebtedness that have been converted into or
           exchanged for our Qualified Capital Stock subsequent to the Issue
           Date and on or prior to the Reference Date; plus

                (z) an amount equal to the sum of (i) the net reduction in the
           Investments (other than Permitted Investments) made by us or any
           Restricted Subsidiary in any Person resulting from repurchases,
           repayments or redemptions of such Investments by such Person,
           proceeds realized on the sale of such Investment and proceeds
           representing the return of capital (excluding dividends and
           distributions), in each case received by us or any Restricted
           Subsidiary, and (ii) to the extent such Person is an Unrestricted
           Subsidiary, the portion (proportionate to our equity interest in such
           Subsidiary) of the fair market value of the net assets of such
           Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
           designated a Restricted Subsidiary; provided, however, that the
           foregoing sum will not exceed, in the case of any such Person or
           Unrestricted Subsidiary, the amount of Investments (excluding
           Permitted Investments) previously made (and treated as a Restricted
           Payment) by us or any Restricted Subsidiary in such Person or
           Unrestricted Subsidiary; provided further, however, that no amount
           will be included under this clause (z) to the extent it is already
           included in our Consolidated Net Income in clause (w) above.

                                        80
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:

          (1) the payment of any dividend or redemption of any Capital Stock
     within 60 days after the date of declaration or call for redemption
     thereof, if at such date of declaration or call for redemption such payment
     or redemption would have been permitted;

          (2) the purchase, redemption or other acquisition or retirement for
     value of any of our Capital Stock, either (i) solely in exchange for our
     Qualified Capital Stock or (ii) through the application of net proceeds of
     a substantially concurrent sale for cash (other than to a Subsidiary) of
     our Qualified Capital Stock;

          (3) the purchase, redemption, defeasance or other acquisition or
     retirement for value of any Indebtedness of our company or the Guarantors
     that is subordinate or junior in right of payment to the notes and
     Guarantees either (i) solely in exchange for our Qualified Capital Stock,
     or (ii) through the application of net proceeds of a substantially
     concurrent sale for cash (other than to a Subsidiary) of (a) our Qualified
     Capital Stock or (b) Refinancing Indebtedness;

          (4) an Investment acquired as a result of the capital contribution (i)
     or in exchange for, or out of the proceeds of a substantially concurrent
     (ii) offering (other than to one or more of our Subsidiaries) of, our
     Qualified Capital Stock;

          (5) payments or distributions to stockholders pursuant to appraisal
     rights required under applicable law in connection with any consolidation,
     merger or transfer of assets that complies with the covenant described
     under "-- Merger, Consolidation and Sale of Assets";

          (6) if no Default or Event of Default will have occurred and be
     continuing, repurchases, redemptions, acquisitions or retirements of (or
     payments to Holdings to permit Holdings to repurchase, redeem, acquire or
     retire) our, Holdings' or any Restricted Subsidiary's Qualified Capital
     Stock from employees, former employees, directors or former directors of
     our company or any of our Restricted Subsidiaries or their authorized
     representatives upon the death, disability or termination of employment of
     such employees, former employees, directors or former directors; provided,
     however, that the aggregate amount paid for all repurchased, redeemed,
     acquired or retired Qualified Capital Stock does not exceed $500,000 during
     any twelve-month period (excluding any such repurchases, redemptions,
     acquisitions or retirements with the proceeds of any life insurance policy
     or policies maintained by us or under which we are the beneficiary);

          (7) repurchases, redemptions, acquisitions or retirements of our
     Qualified Capital Stock deemed to occur upon the exercise of options,
     warrants or other rights under employee benefit plans of our company or our
     Subsidiaries if such Qualified Capital Stock represents all or a portion of
     the exercise price thereof;

          (8) if no Default or Event of Default will have occurred and be
     continuing, the redemption, repurchase, acquisition or retirement of
     Capital Stock of any Restricted Subsidiary; provided that if our company or
     any Restricted Subsidiary incurs Indebtedness in connection with such
     redemption, repurchase, acquisition or retirement, after giving effect to
     such incurrence and such redemption, repurchase, acquisition or retirement,
     we could incur $1.00 of additional Indebtedness (other than Permitted
     Indebtedness) in compliance with the covenant described under
     "-- Limitation on Incurrence of Additional Indebtedness";

          (9) dividends or distributions paid by us to Holdings to be used by
     Holdings to pay Federal, state and local taxes payable by Holdings and
     directly attributable or which arise as a result of our and our Restricted
     Subsidiaries' operations; provided that such dividends or distributions do
     not exceed the amount we and our Restricted Subsidiaries would be required
     to pay as a stand-alone taxpayer;

                                        81
(10) any Restricted Payment pursuant to or contemplated by, or to pay
     amounts due under (whether such Restricted Payment is made to third parties
     or to Holdings for payment to third parties), the merger agreement or the
     management consulting agreement; and

          (11) if no Default or Event of Default will have occurred and be
     continuing, Restricted Payments (in addition to those permitted by clauses
     (1) through (10) of this paragraph) in an aggregate amount not to exceed
     $2.0 million subsequent to the Issue Date.

     In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii), 3(ii)(a), (4), (6)
and (11) will be included in such calculation.

     Not later than the date of making any Restricted Payment, we will deliver
to the trustee an officers' certificate stating that such Restricted Payment
complies with the indenture and setting forth in reasonable detail the basis
upon which the required calculations were computed, which calculations may be
based upon our latest available internal quarterly financial statements.

     Limitation on Sale/Leaseback Transactions.  We will not, and will not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (1) immediately after giving effect to such
transaction, we or such Restricted Subsidiary would be entitled to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "-- Limitation on Incurrence of Additional Indebtedness"
covenant and (2) to the extent such Sale/ Leaseback Transaction is an Asset
Sale, we comply with the covenant described under "-- Limitation on Asset
Sales."

     Limitation on Asset Sales.  We will not, and will not permit any of our
Restricted Subsidiaries to, consummate an Asset Sale unless:

          (1) we or the applicable Restricted Subsidiary, as the case may be,
     receive consideration at the time of such Asset Sale at least equal to the
     Fair Market Value of the assets sold or otherwise disposed of (as
     determined in good faith by our board of directors); and

          (2) at least 75% of the consideration received by us or the Restricted
     Subsidiary, as the case may be, from such Asset Sale will be in the form of
     cash and/or Cash Equivalents and is received at the time of such
     disposition. For purposes of this provision, the following will be deemed
     to be cash: (A) the amount of any liabilities (as shown on the most recent
     applicable balance sheet) of our company or such Restricted Subsidiary
     (other than liabilities that are by their terms subordinated to the notes)
     that are assumed by the transferee of any such assets so long as the
     documents governing such liabilities provide that there is no further
     recourse to us or any of our Subsidiaries with respect to such liabilities
     and (B) notes, securities or other similar obligations received by us or
     any Restricted Subsidiary from such transferee that are converted, sold or
     exchanged, within 180 days of the related Asset Sale, by us or our
     Restricted Subsidiaries into cash (with such amount actually realized being
     the portion deemed to be cash).

     Upon the consummation of an Asset Sale, we may apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 180 days of receipt thereof either:

     - to repay Indebtedness under the Credit Agreement;

     - to make an investment (or to enter into a legally binding agreement to
       invest) in Replacement Assets or to repay any Indebtedness incurred
       within 180 days prior to such Asset Sale and used to acquire Replacement
       Assets in contemplation of such Asset Sale; or

     - a combination of prepayment and investment permitted by the foregoing
       clauses.

     Pending the application of any such Net Cash Proceeds, we may temporarily
reduce Indebtedness or otherwise invest such Net Cash Proceeds in any manner
that is not prohibited by the indenture. If any such legally binding agreement
to invest such Net Cash Proceeds is terminated, then we may, within 90 days of
such termination or within 180 days of such Asset Sale, whichever is later,
invest such Net
                                        82
Cash Proceeds as provided in the immediately preceding paragraph (without regard
to the parenthetical contained in the second bullet point thereof). The amount
of such Net Cash Proceeds not so used as set forth in the immediately preceding
paragraph or in this paragraph constitutes "Excess Proceeds." Notwithstanding
the foregoing, for purposes of determining whether an Excess Proceeds offer is
required, pursuant to the immediately following paragraph, Excess Proceeds at
any time will be reduced by the Accreted Value of notes acquired (and
surrendered to the trustee for cancellation) by us through open market purchases
or optional redemption subsequent to the date of the Asset Sale giving rise to
the Excess Proceeds.

     When the aggregate amount of Excess Proceeds exceeds $5.0 million, we will,
not less than 30 nor more than 60 days following such date, make an offer to
purchase from all holders and all holders of other Indebtedness that ranks pari
passu in right of payment with the notes containing provisions requiring the
redemption or prepayment or offers to purchase with the proceeds of sales of
assets on a pro rata basis, that amount of notes equal to the amount of the
Excess Proceeds at a price equal to 100% of the Accreted Value of the notes to
be purchased, plus accrued and unpaid interest, if any, thereon to the date of
purchase (provided that in the case where such other Indebtedness is outstanding
under a revolving credit or similar agreement, the commitment to lend thereunder
is concurrently or permanently reduced). The aggregate Accreted Value of notes
to be purchased pursuant to an Excess Proceeds offer may be reduced by the
Accreted Value of notes acquired by us through open market purchases or optional
redemption subsequent to the date of the Asset Sale giving rise to the Excess
Proceeds offer and surrendered to the trustee for cancellation.

     In the event of the transfer of substantially all (but not all) of the
property and assets of our company and our Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," which transaction does not constitute a Change of Control,
the successor corporation will be deemed to have sold the properties and assets
of our company and our Restricted Subsidiaries not so transferred for purposes
of this covenant, and will comply with the provisions of this covenant with
respect to such deemed sale as if it constituted an Asset Sale. In addition, the
Fair Market Value of such properties and assets deemed to be sold will be deemed
to be Net Cash Proceeds for purposes of this covenant.

     Each notice of an Excess Proceeds offer will be mailed to the record
holders as shown on the register of holders, with a copy to the trustee, and
will comply with the procedures set forth in the indenture. Upon receiving
notice of the Excess Proceeds offer, holders may elect to tender their notes in
whole or in part in integral multiples of $1,000 in exchange for cash. To the
extent holders tender notes in an amount less than the Excess Proceeds, we may
use the deficiency for any purpose not otherwise prohibited by the indenture. To
the extent holders properly tender notes in an amount exceeding the Excess
Proceeds offer amount, we will purchase notes of tendering holders on a pro rata
basis (based on amounts tendered). An Excess Proceeds offer will remain open for
a period of 20 business days or such longer period as may be required by law.

     We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of notes
pursuant to an Excess Proceeds offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Limitation on Asset Sales"
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the "Limitation on Asset Sales" provisions of the indenture by virtue thereof.

     Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.  We will not, and will not cause or permit any of our Restricted
Subsidiaries to, directly or indirectly, create or

                                        83
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:

          (1) pay dividends or make any other distributions on or in respect of
     its Capital Stock to us;

          (2) make loans or advances or to pay any Indebtedness or other
     obligation owed to us or any other Restricted Subsidiary; or

          (3) transfer any of its property or assets to us or any other
     Restricted Subsidiary,

except, in each case, for such encumbrances or restrictions existing under or by
reason of:

          (a) applicable law;

          (b) the indenture, the notes, the Guarantees and the Collateral
     Agreements;

          (c) customary non-assignment provisions of any contract or any lease
     governing a leasehold interest of any Restricted Subsidiary;

          (d) any instrument governing Acquired Indebtedness, which encumbrance
     or restriction is not applicable to any Person, or the properties or assets
     of any Person, other than the Person or the properties or assets of the
     Person so acquired;

          (e) agreements existing on the Issue Date, including, without
     limitation, the Credit Agreement;

          (f) any contract for sale of assets permitted by the covenant
     contained in "-- Limitation on Asset Sales" with respect to the assets to
     be sold pursuant to such contract;

          (g) in the case of clause (3) above, restrictions contained in
     security agreements or mortgages securing Indebtedness of a Restricted
     Subsidiary permitted under the indenture to the extent such restrictions
     restrict the transfer of the property subject to such security agreements
     or mortgages; and

          (h) amendments, modifications, renewals, Refinancings, replacements or
     substitutions of an instrument or agreement referred to in clause (b), (d)
     or (e) above; provided, however, that the provisions relating to such
     encumbrances or restrictions contained in any such Indebtedness, taken as a
     whole, are no less favorable to us in any material respect as determined by
     our board of directors in their reasonable and good faith judgment than the
     provisions relating to such encumbrances or restrictions contained in the
     agreements or instruments so amended, modified, renewed, Refinanced,
     replaced or substituted.

     Limitation on Issuances and Sales of Capital Stock of Subsidiaries.  We
will not permit or cause any of our Restricted Subsidiaries to issue or sell any
Capital Stock (other than director's qualifying shares and other than to us or
to a Wholly-Owned Subsidiary) or permit any Person (other than us or a Wholly-
Owned Subsidiary) to own or hold any Capital Stock of any Restricted Subsidiary
or any Lien or security interest therein (other than the lenders under the
Credit Agreement); provided, however, that this provision will not prohibit the
sale of all of the Capital Stock of a Restricted Subsidiary in compliance with
the provisions of the "-- Limitation on Asset Sales" covenant.

     Limitation on Liens.  We will not, and will not cause or permit any of our
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens (other than Permitted Liens) of any kind
against or upon any property or assets of our company or any of our Restricted
Subsidiaries whether owned on the Issue Date or acquired after the Issue Date,
or any proceeds therefrom, or assign or otherwise convey any right to receive
income or profits therefrom.

     Merger, Consolidation and Sale of Assets.  We will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary to sell, assign, transfer, lease,
convey or

                                        84
otherwise dispose of) all or substantially all of our properties and assets
(determined on a consolidated basis for our company and our Restricted
Subsidiaries) to any Person unless:

          (1) either:

             (a) we will be the surviving or continuing corporation; or

             (b) the Person (if other than our company) formed by or surviving
        such consolidation or merger or the Person which acquires by sale,
        assignment, transfer, lease, conveyance or other disposition all or
        substantially all of the properties and assets of our company and our
        Restricted Subsidiaries:

                (x) will be a corporation organized and validly existing under
           the laws of the United States or any state thereof or the District of
           Columbia; and

                (y) will expressly assume, by supplemental indenture (in form
           and substance reasonably satisfactory to the trustee), executed and
           delivered to the trustee, our obligation for the due and punctual
           payment of the principal of, premium, if any, and interest on all of
           the notes and the performance of every covenant of the notes, the
           indenture, the Collateral Agreements and the Registration Rights
           Agreement on our part to be performed or observed;

          (2) immediately after giving effect to such transaction, our company
     or such surviving entity, as the case may be will be able to incur at least
     $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
     compliance with the "-- Limitation on Incurrence of Additional
     Indebtedness" covenant; provided that this clause (2) does not apply if, in
     the good faith determination of our board of directors, whose determination
     will be evidenced by a board resolution, which includes a certification of
     an secretary or assistant secretary and which resolution is in full force
     and effect or the date of such certification, the principal purpose of such
     transaction is to change the state of incorporation of our company and any
     such transaction will not have as one of its purposes the evasion of the
     foregoing limitations; and

          (3) immediately after giving effect to such transaction or series of
     related transactions, no Default or Event of Default will have occurred or
     be continuing.

     In connection with any such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition, we or the surviving Person
must deliver to the trustee, in form and substance reasonably satisfactory to
the trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of the indenture and that all conditions precedent in the indenture
relating to such transaction have been satisfied.

     The indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of our company in
accordance with the foregoing, in which we are not the continuing corporation,
the successor Person formed by such consolidation or into which we are merged or
to which such conveyance, lease or transfer is made will succeed to, and be
substituted for, and may exercise every right and power of, us under the
indenture and the notes with the same effect as if such surviving entity had
been named as such. Upon such substitution we and any Guarantors that remain
Subsidiaries of us will be released from the indenture and the notes.

     Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the indenture in connection
with any transaction complying with the provisions of "-- Limitation on Asset
Sales") will not, and we will not cause or permit any Guarantor to, consolidate

                                        85
with or merge with or into any Person other than us or any other Guarantor that
is a Wholly-Owned Restricted Subsidiary unless:

          (1) the entity formed by or surviving any such consolidation or merger
     (if other than the Guarantor) or to which such sale, lease, conveyance or
     other disposition will have been made is a corporation organized and
     existing under the laws of the United States, any state thereof or the
     District of Columbia;

          (2) such entity assumes by supplemental indenture all of the
     obligations of the Guarantor on the Guarantee;

          (3) immediately after giving effect to such transaction, no Default or
     Event of Default will have occurred and be continuing; and

          (4) immediately after giving effect to such transaction and the use of
     any net proceeds therefrom on a pro forma basis, we could satisfy the
     provisions of clause (2) of the first paragraph of this covenant.

     In connection with any such consolidation or merger, we must deliver to the
trustee, in form and substance reasonably satisfactory to the trustee, an
officers' certificate and an opinion of counsel, each stating that such
consolidation or merger and supplemental indenture comply with the applicable
provisions of the indenture and that all conditions precedent in the indenture
relating to such transaction have been satisfied. Any merger or consolidation of
a Guarantor with and into our company (with our company being the surviving
Person) or another Guarantor that is a Wholly-Owned Restricted Subsidiary of our
company need only comply with this paragraph.

     Limitations on Transactions with Affiliates.  We will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into any
contract, agreement, understanding, loan, advance, guarantee or other
transaction or series of related transactions with, or for the benefit of, any
Affiliate of us or any Restricted Subsidiary (other than us or a Restricted
Subsidiary including any Person that becomes a Restricted Subsidiary as a result
of such transaction) (collectively, "Interested Persons"), unless:

     - such transaction or series of transactions are on terms that are no less
       favorable to us or such Restricted Subsidiary, as the case may be, than
       would have been able to be obtained at the time for a comparable
       transaction in arm's-length dealings with third-parties that are not
       Interested Persons;

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $500,000 and less than
       $1.0 million, we will have delivered an officers' certificate to the
       trustee certifying that such transaction or series of transactions
       complies with the previous bullet point;

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $1.0 million and less
       than $5.0 million, (x) such transaction or series of related transactions
       will be approved by a majority of the disinterested members of our board
       of directors or the board of directors of such Restricted Subsidiary, as
       the case may be, such approval to be evidenced by a board resolution
       stating that such board of directors has determined that such transaction
       or series of related transactions complies with the foregoing provisions
       or (y) we will have obtained a written opinion from an Independent
       Financial Advisor certifying that such transaction or series of related
       transactions is fair to us or our Restricted Subsidiary, as the case may
       be, from a financial point of view; and

     - with respect to any transaction or series of related transactions
       involving aggregate value equal to or greater than $5.0 million, we will
       have obtained a written opinion from an Independent Financial Advisor
       certifying that such transaction or series of related transactions is
       fair to us or our Restricted Subsidiary, as the case may be, from a
       financial point of view.

                                        86
The restrictions of this covenant will not apply to:

          (1) reasonable fees and compensation (including stock options and
     other awards pursuant to our or our Restricted Subsidiaries' employee
     benefit plans) paid to, and indemnity provided on behalf of, officers,
     directors, employees or consultants of our company or any Restricted
     Subsidiary as determined in good faith by our board of directors or senior
     management;

          (2) transactions exclusively between or among our company and any of
     our Restricted Subsidiaries or exclusively between or among such Restricted
     Subsidiaries, provided such transactions are not otherwise prohibited by
     the indenture;

          (3) transactions pursuant to or contemplated by any agreement as in
     effect as of the Issue Date (including, without limitation, the merger
     agreement, the stockholders agreement and the management consulting
     agreement), or any amendment, modification, renewal, Refinancing,
     replacement or substitution thereof so long as any such amendment,
     modification, renewal, Refinancing, replacement or substitution thereof is
     not more disadvantageous to the holders in any material respect than the
     original agreement as in effect on the Issue Date;

          (4) loans and advances to, and reimbursement of expenses incurred by,
     officers, directors and employees in the ordinary course of business of our
     company or any Restricted Subsidiary;

          (5) any issuance or sale of our Qualified Capital Stock; or

          (6) Restricted Payments permitted by the indenture.

     Additional Subsidiary Guarantees.  If we or any of our Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Subsidiary that, following
such transaction or series of related transactions is a Domestic Restricted
Subsidiary but is not a Guarantor, or if we or any of our Subsidiaries organize,
acquire or otherwise invest in another Subsidiary that, following such
organization, acquisition or investment is a Domestic Restricted Subsidiary but
is not a Guarantor, then such transferee or acquired or other Subsidiary will:

          (1) execute and deliver to the trustee a supplemental indenture in
     form reasonably satisfactory to the trustee pursuant to which such
     Subsidiary will unconditionally guarantee on a senior secured basis all of
     our obligations under the notes and the indenture on the terms set forth in
     the indenture;

          (2) (a) execute and deliver to the Lender Agent such amendments to the
     intercreditor agreement as the Lender Agent deems necessary or advisable in
     order to make such Subsidiary a party to the intercreditor agreement; (b)
     execute and deliver to the Collateral Agent and the trustee such amendments
     to the Collateral Agreements as the Collateral Agent deems necessary or
     advisable in order to grant to the Collateral Agent, for the benefit of the
     holders and the Lenders, a perfected security interest in the Capital Stock
     of such new Subsidiary and the debt securities of such new Subsidiary,
     subject only to Permitted Liens, which are owned by us or any Subsidiary
     and required to be pledged pursuant to the security agreement dated as of
     the Issue Date and made by us and the Guarantors in favor the Collateral
     Agent, which we call the security agreement and (c) deliver to the
     Collateral Agent the certificates representing such Capital Stock and debt
     securities, together with (i) in the case of such Capital Stock, undated
     stock powers or instruments of transfer, as applicable, endorsed in blank,
     and (ii) in the case of such debt securities, endorsed in blank, in each
     case executed and delivered by an officer of our company or such
     Subsidiary, as the case may be;

          (3) take such actions necessary or advisable to grant to the
     Collateral Agent for the benefit of the holders and the trustee a perfected
     security interest in the assets of such new Subsidiary, subject only to
     Permitted Liens, including the filing of Uniform Commercial Code financing
     statements in such jurisdictions as may be required by the security
     agreement or by law or as may be reasonably requested by the Collateral
     Agent;

                                        87
(4) take such further action and execute and deliver such other
     documents specified in the indenture or otherwise reasonably requested by
     the trustee or the Collateral Agent to effectuate the foregoing; and

          (5) deliver to the trustee an opinion of counsel that such
     supplemental indenture and any other documents required to be delivered
     have been duly authorized, executed and delivered by such Restricted
     Subsidiary and constitute legal, valid, binding and enforceable obligations
     of such Restricted Subsidiary and such other opinions regarding the
     perfection of such liens in the Collateral of or consisting of the Capital
     Stock of such Restricted Subsidiary as provided for in the indenture.

Thereafter, such Restricted Subsidiary will be a Subsidiary Guarantor for all
purposes of the indenture.

     Impairment of Security Interest.  Neither we nor any of the Guarantors will
take or omit to take any action which would adversely affect or impair the Liens
in favor of the Collateral Agent, on behalf of itself, the trustee and the
holders of the notes, with respect to the Collateral. Neither we nor any of our
Restricted Subsidiaries will grant to any Person, or permit any Person to retain
(other than the Collateral Agent or a Sub-Collateral Agent), any interest
whatsoever in the Collateral other than Permitted Liens. Neither we nor any of
our Restricted Subsidiaries will enter into any agreement that requires the
proceeds received from any sale of Collateral to be applied to repay, redeem,
defease or otherwise acquire or retire any Indebtedness of any Person, other
than as permitted or required by the indenture, the notes, the intercreditor
agreement, the Credit Agreement or the Collateral Agreements. We will, and will
cause each Guarantor to, at our sole cost and expense, execute and deliver all
such agreements and instruments as the Collateral Agent or the trustee will
reasonably request to more fully or accurately describe the property intended to
be Collateral or the obligations intended to be secured by the Collateral
Agreements. We will, and will cause each Guarantor to, at its sole cost and
expense, file any such notice filings or other agreements or instruments as may
be reasonably necessary or desirable under applicable law to perfect the Liens
created by the Collateral Agreements at such times and at such places as the
Collateral Agent may reasonably request.

     Real Estate Mortgages and Filings.  With respect to any real property,
other than a leasehold (individually and collectively, the "Premises"), (i)
acquired after the Issue Date with a purchase price or (ii) as of the Issue
Date, with a Fair Market Value, of greater than $500,000:

          (1) we will deliver to the Collateral Agent, as mortgagee, fully
     executed counterparts of Mortgages, each dated as of the date of
     acquisition of such property, duly executed by us or the applicable
     Subsidiary, together with evidence of the completion (or satisfactory
     arrangements for the completion), of all recordings and filings of such
     Mortgage as may be necessary or, in the reasonable opinion of the
     Collateral Agent desirable, to create a valid, perfected Lien, subject to
     Permitted Liens, against the properties purported to be covered thereby;

          (2) the Collateral Agent will have received mortgagee's title
     insurance policies in favor of the Collateral Agent, as mortgagee for the
     ratable benefit of the Collateral Agent, the trustee and the holders in
     amounts and in form and substance and issued by insurers reasonably
     acceptable to the Collateral Agent, with respect to the property purported
     to be covered by such Mortgage, insuring that title to such property is
     marketable and that the interests created by the Mortgage constitute valid
     Liens thereon free and clear of all liens, defects and encumbrances other
     than Permitted Liens, and such policies will also include, to the extent
     available, a revolving credit endorsement and such other endorsements as
     the Collateral Agent will reasonably request and will be accompanied by
     evidence of the payment in full of all premiums thereon; and

          (3) we will deliver to the Collateral Agent, with respect to each of
     the covered Premises, filings, surveys, local counsel opinions and fixture
     filings, along with such other documents, instruments, certificates and
     agreements as the Collateral Agent and its counsel will reasonably request.

     Leasehold Mortgages and Filings.  We and each of our Restricted
Subsidiaries will deliver Mortgages with respect to our leasehold interests in
the premises (the "Leased Premises") occupied by us pursuant

                                        88
to leases entered into after the Issue Date (collectively, the "Leases," and
individually, a "Lease"), other than renewals of leases existing on the Issue
Date.

     Prior to the effective date of any Lease, we and such Restricted
Subsidiaries will provide to the trustee all of the items described in clauses
(2) and (3) of "-- Real Estate Mortgages and Filings" above and in addition will
use its reasonable commercial efforts to obtain an agreement executed by the
lessor of the Lease, whereby the lessor consents to the Mortgage and waives or
subordinates its landlord Lien (whether granted by the instrument creating the
leasehold estate or by applicable law), if any, and which will be entered into
by the Collateral Agent.

     Conduct of Business.  We and our Restricted Subsidiaries will not engage in
any businesses which are not the same, similar, reasonably related or ancillary
to the businesses in which we and our Restricted Subsidiaries are engaged on the
Issue Date.

     Reports to Holders.  Whether or not required by the rules and regulations
of the SEC, so long as any notes are outstanding, we will furnish the trustee
and, upon request, to the holders of notes:

          (1) all quarterly and annual financial information that would be
     required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
     we were required to file such Forms, including a "Management's Discussion
     and Analysis of Financial Condition and Results of Operations" that
     describes the financial condition and results of operations of us and our
     consolidated Subsidiaries (showing in reasonable detail, either on the face
     of the financial statements or in the footnotes thereto and in Management's
     Discussion and Analysis of Financial Condition and Results of Operations,
     the financial condition and results of operations of us and our Restricted
     Subsidiaries separate from the financial condition and results of
     operations of our Unrestricted Subsidiaries, if any, but only to the extent
     such Unrestricted Subsidiaries are material to our or Holdings', as
     applicable, consolidated results of operations or financial condition) and,
     with respect to the annual information only, a report thereon by our
     certified independent accounts; and

          (2) all current reports that would be required to be filed with the
     SEC on Form 8-K if we were required to file such reports;

          in each case within the time periods specified in the SEC's rules and
     regulations; provided, however, that so long as Holdings is a Guarantor of
     the notes and complies with the requirements of Rule 3-10 of Regulation S-X
     promulgated by the SEC (or any successor provision), the reports,
     information and other documents required to be filed and provided as
     described hereunder may, at our option, be filed by and be those of
     Holdings rather than us.

     In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the SEC, we will file a copy of all such information and reports
with the SEC for public availability within the time periods specified in the
SEC's rules and regulations (unless the SEC will not accept such a filing). In
addition, we have agreed that, prior to the consummation of the Exchange Offer,
for so long as any notes remain outstanding, we will furnish to the holders upon
their request, the information required to be delivered pursuant to Rule
144(A)(d)(4) under the Securities Act.

POSSESSION, USE AND RELEASE OF COLLATERAL

     Unless an Event of Default will have occurred and be continuing, we will
have the right to remain in possession and retain exclusive control of the
Collateral (other than as set forth in the Collateral Agreements), to freely
operate the Collateral and to collect, invest and dispose of any income
therefrom.

     Release of Collateral.  Upon compliance by us with the conditions set forth
below in respect of any release of items of Collateral, and upon delivery by us
to the Collateral Agent of an opinion of counsel to the effect that such
conditions have been met, the Collateral Agent will release the Released
Interests (as hereinafter defined) from the Lien of the Collateral Agreements
and reconvey the Released Interests to us.

                                        89
Asset Sale Release.  We have the right to obtain a release of Liens
securing the notes with respect to items of Collateral (the "Released
Interests") subject to an Asset Sale permitted hereunder upon delivery to the
Collateral Agent of the following:

          (1) notice from us requesting the release of Released Interests: (i)
     describing the proposed Released Interests; (ii) specifying the value of
     such Released Interests on a date within 60 days of such notice (the
     "Valuation Date"); (iii) stating that the purchase price received is at
     least equal to the Fair Market Value of the Released Interests; (iv)
     stating that the release of such Released Interests would not be expected
     to interfere in any material respect with the Collateral Agent's ability to
     realize the value of the remaining Collateral and will not impair in any
     material respect the maintenance and operation of the remaining Collateral;
     and (v) certifying that such Asset Sale complies with the terms and
     conditions of the indenture with respect thereto; and

          (2) an officers' certificate stating that: (i) such Asset Sale covers
     only the Released Interests and complies with the terms and conditions of
     the indenture with respect to Asset Sales; (ii) there is no Default or
     Event of Default in effect or continuing on the date thereof, the Valuation
     Date or the date of such Asset Sale; (iii) the release of the Collateral
     will not result in a Default or Event of Default under the indenture; and
     (iv) all conditions precedent in the indenture relating to the release in
     question have been or will be complied with.

     Release of Inventory and Accounts Receivable Collateral.  Notwithstanding
any provision to the contrary in the indenture, Collateral comprised of accounts
receivable, inventory or (prior to an Event of Default) the proceeds of the
foregoing will be subject to release upon sales of such inventory and collection
of the proceeds of such receivables in the ordinary course of business. If we
request in writing, the Collateral Agent or the Sub-Collateral Agent will
execute and deliver such documents, instruments or statements and to take such
other action as we may reasonably request to evidence or confirm that the
Collateral falling under this "-- Release of Inventory and Accounts Receivable
Collateral" provision has been released from the Liens of each of the Security
Documents.

EVENTS OF DEFAULT

     The following events are defined in the indenture as "Events of Default":

          (1) the failure to pay premium, if any, interest on or any other
     amount (other than principal of the notes which is covered by clause (2)
     below) on any notes when the same becomes due and payable and the default
     continues for a period of 30 days;

          (2) the failure to pay the principal on any notes, when such principal
     becomes due and payable, at maturity, upon optional or mandatory
     redemption, required purchase or otherwise;

          (3) a default under the covenants described above under "Repurchase
     upon Change of Control" (other than a failure to purchase notes validly
     tendered which is covered by clause (2) above), "Excess Cash Flow Offer"
     (other than a failure to purchase notes validly tendered which is covered
     by clause (2) above) or under "-- Certain Covenants" (other than a failure
     to purchase notes validly tendered pursuant to "-- Limitation on Asset
     Sales" which is covered by clause (2) above), which default continues for a
     period of 30 days after we receive written notice specifying the default
     (and demanding that such default be remedied) from the trustee or the
     holders of at least 25% of the outstanding principal amount at maturity of
     the notes (except in the case of a default with respect to the "-- Merger,
     Consolidation and Sale of Assets" covenant, which will constitute an Event
     of Default with such notice requirement but without such passage of time
     requirement);

          (4) a default under any other agreement contained in the indenture or
     any Collateral Agreement, which default continues for a period of 60 days
     after we receive written notice specifying the default (and demanding that
     such default be remedied) from the trustee or the holders of at least 25%
     of the outstanding principal amount at maturity of the notes;

                                        90
(5) the failure to pay at final maturity (giving effect to any
     applicable grace periods and any extensions thereof) the principal amount
     of any Indebtedness of ours or any Restricted Subsidiary, or the
     acceleration of the final stated maturity of any such Indebtedness (which
     acceleration is not rescinded, annulled or otherwise cured within 20 days
     from the date of acceleration) if the aggregate principal amount of such
     Indebtedness, together with the principal amount of any other such
     Indebtedness in default for failure to pay principal at final maturity or
     which has been accelerated (in each case with respect to which the 20-day
     period described above has elapsed), aggregates $5.0 million or more at any
     one time;

          (6) one or more judgments in an aggregate amount in excess of $5.0
     million (which are not covered by a reputable and solvent third party
     insurer as to which such insurer has not disclaimed coverage) will have
     been rendered against us or any of our Restricted Subsidiaries and such
     judgments remain undischarged, unbonded, unpaid or unstayed for a period of
     60 days after such judgment or judgments become final and non-appealable;

          (7) certain events of bankruptcy affecting us or any of our
     Significant Subsidiaries;

          (8) any Collateral Agreement at any time for any reason will cease to
     be in full force and effect (other than as provided by the terms of the
     Collateral Agreements and the indenture), or ceases to give the Collateral
     Agent the Liens, rights, powers and privileges purported to be created
     thereby, superior to and prior to the rights of all third Persons other
     than the Lenders and other than the holders of Permitted Liens and subject
     to no other Liens except as expressly permitted by the applicable
     Collateral Agreement;

          (9) we or any of our Subsidiaries, directly or indirectly, contest in
     any manner the effectiveness, validity, binding nature or enforceability of
     any Collateral Agreement; or

          (10) any Guarantee of a Significant Subsidiary ceases to be in full
     force and effect or any Guarantee of a Significant Subsidiary is declared
     to be null and void and unenforceable or any Guarantee of a Significant
     Subsidiary is found to be invalid or any Guarantor that is a Significant
     Subsidiary denies its liability under its Guarantee (in each case, other
     than by reason of release of a Guarantor in accordance with the terms of
     the indenture).

     If an Event of Default (other than an Event of Default specified in clause
(7) above with respect to the us) will occur and be continuing and has not been
waived, the trustee or the holders of at least 25% in principal amount at
maturity of outstanding notes may declare the Accreted Value of and accrued and
unpaid interest on all the notes to be due and payable by notice in writing to
us and the trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same will become
immediately due and payable.

     If an Event of Default specified in clause (7) above with respect to us
occurs and is continuing, then the Accreted Value of and accrued and unpaid
interest on all of the outstanding notes will become immediately due and payable
without any declaration or other act on the part of the trustee or any holder.

     At any time after a declaration of acceleration with respect to the notes
as described in the preceding paragraph, the holders of a majority in principal
amount at maturity of the notes may rescind and cancel such declaration and its
consequences if:

          (1) the rescission would not conflict with any judgment or decree;

          (2) all existing Events of Default have been cured or waived except
     nonpayment of principal or interest that has become due solely because of
     the acceleration;

          (3) to the extent the payment of such interest is lawful, interest on
     overdue installments of interest and overdue principal and premium, if any,
     which has become due otherwise than by such declaration of acceleration,
     has been paid;

          (4) we have paid the trustee its reasonable compensation and
     reimbursed the trustee for its expenses, disbursements and advances; and
                                        91
(5) in the event of the cure or waiver of an Event of Default of the
     type described in clause (7) of the description above of Events of Default,
     the trustee will have received an officers' certificate and an opinion of
     counsel that such Event of Default has been cured or waived.

     No such rescission will affect any subsequent Default or impair any right
consequent thereto.

     The holders of a majority in principal amount at maturity of the notes may
waive any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes or in respect of a covenant or provision which under the indenture
cannot be modified or amended without the consent of the holder of each note
then outstanding.

     Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the trustee, the trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders, unless such
holders have offered to the trustee reasonable indemnity. Subject to the
provisions of the indenture and applicable law, the holders of a majority in
aggregate principal amount at maturity of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.

     If a default or an Event of Default exists and is known to the trustee, the
trustee will mail to each holder of the notes notices of the default or Event of
Default within 10 days after the occurrence thereof. Except in the case of a
payment default, the trustee may withhold the notice to the holders of such
notes if a committee of its trust officers in good faith determines that
withholding the notice is in the interests of the holders of the notes.

     Under the indenture, we must furnish to the trustee annual statements as to
the performance by our company and the Guarantors of their respective
obligations under the indenture and as to any default in such performance. We
also must notify the trustee promptly of the occurrence of any default or Event
of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

     No past, present or future director, officer, employee, incorporator, or
stockholder of our company, as such, will have any liability for any obligations
of our company or the Guarantors under the notes, the Guarantees or the
indenture or for any claim based on, in respect of, such obligations or their
creation. Each holder, by accepting a note, waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

     We may, at our option and at any time, elect to have our obligations and
the obligations of the Guarantors discharged with respect to the outstanding
notes ("Legal Defeasance"). Such Legal Defeasance means that we will be deemed
to have paid and discharged the entire indebtedness represented by the
outstanding notes, except for:

          (1) the rights of holders to receive payments in respect of the
     principal of, premium, if any, and interest on the notes when such payments
     are due;

          (2) our obligations with respect to the notes concerning issuing
     temporary notes, registration of notes, replacing mutilated, destroyed,
     lost or stolen notes and the maintenance of an office or agency for
     payments;

          (3) the rights, powers, trusts, duties and immunities of the trustee
     and our obligations in connection therewith; and

          (4) the Legal Defeasance provisions of the indenture.

                                        92
In addition, we may, at our option and at any time, elect to have our and
our Restricted Subsidiaries' obligations released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations will not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.

     In order to exercise either Legal Defeasance or Covenant Defeasance:

          (1) we must irrevocably deposit with the trustee, in trust, for the
     benefit of the holders cash in U.S. dollars, non-callable U.S. government
     obligations, or a combination thereof, in such amounts and at such times as
     will be sufficient, in the opinion of a nationally recognized firm of
     independent public accountants, to pay the principal of, premium, if any,
     and interest on the notes on the stated dates for payment or redemption, as
     the case may be;

          (2) in the case of Legal Defeasance, we must have delivered to the
     trustee an opinion of counsel in the United States reasonably acceptable to
     the trustee confirming that:

             (a) we have received from, or there has been published by, the
        Internal Revenue Service a ruling; or

             (b) since the date of the indenture, there has been a change in the
        applicable federal income tax law,

     in either case to the effect that, and based thereon such opinion of
     counsel will confirm that, the holders will not recognize income, gain or
     loss for federal income tax purposes as a result of such Legal Defeasance
     and will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Legal
     Defeasance had not occurred;

          (3) in the case of Covenant Defeasance, we must have delivered to the
     trustee an opinion of counsel reasonably acceptable to the trustee
     confirming that the holders will not recognize income, gain or loss for
     federal income tax purposes as a result of such Covenant Defeasance and
     will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Covenant
     Defeasance had not occurred;

          (4) no Default or Event of Default will have occurred and be
     continuing on the date of such deposit or insofar as Events of Default from
     bankruptcy or insolvency events are concerned, at any time in the period
     ending on the 91st day after the date of deposit (other than a Default or
     Event of Default resulting from the incurrence of Indebtedness, all or a
     portion of which will be used to defease the notes concurrently with such
     incurrence);

          (5) such Legal Defeasance or Covenant Defeasance will not result in a
     breach or violation of, or constitute a default under any material
     agreement or instrument (other than the indenture) to which we or any of
     our Subsidiaries is a party or by which the we or any of our Subsidiaries
     is bound;

          (6) we must have delivered to the trustee an officers' certificate
     stating that the deposit was not made by us with the intent of preferring
     the holders over any other of our creditors or with the intent of
     defeating, hindering, delaying or defrauding any other of our creditors or
     others;

          (7) we must have delivered to the trustee an officers' certificate and
     an opinion of counsel, each stating that all conditions precedent provided
     for or relating to the Legal Defeasance or the Covenant Defeasance have
     been complied with;

          (8) we must have delivered to the trustee an opinion of counsel to the
     effect that (A) the trust funds will not be subject to the rights of
     holders of our Indebtedness other than the notes and (B) assuming no
     intervening bankruptcy of our company between the date of deposit and the
     91st day following the date of deposit and that no holder is an insider of
     our company, after the 91st day following the date of deposit, the trust
     funds will not be subject to the effect of any
                                        93
applicable bankruptcy, insolvency, reorganization or similar laws affecting
     creditors' rights generally; and

          (9) certain other customary conditions precedent must be satisfied.

     Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all notes
not theretofore delivered to the trustee for cancellation (x) have become due
and payable or (y) will become due and payable on the maturity date within one
year under arrangements satisfactory to the trustee for the giving of notice of
redemption by the trustee in our name, and at our expense.

SATISFACTION AND DISCHARGE

     The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when:

          (1) either:

             (a) all the notes theretofore authenticated and delivered (except
        lost, stolen or destroyed notes which have been replaced or paid and
        notes for whose payment money has theretofore been deposited in trust or
        segregated and held in trust by us and thereafter repaid to us or
        discharged from such trust) have been delivered to the trustee for
        cancellation; or

             (b) all notes not theretofore delivered to the trustee for
        cancellation (i) have become due and payable, (ii) will become due and
        payable at their stated maturity within one year or (iii) are to be
        called for redemption within one year under arrangement satisfactory to
        the trustee, and we have irrevocably deposited or caused to be deposited
        with the trustee funds in an amount sufficient to pay and discharge the
        entire Indebtedness on the notes not theretofore delivered to the
        trustee for cancellation, for principal of, premium, if any, and
        interest on the notes to the date of deposit together with irrevocable
        instructions from us directing the trustee to apply such funds to the
        payment thereof at maturity or redemption, as the case may be;

          (2) we or any Guarantor have paid all other sums payable under the
     indenture by us; and

          (3) we have delivered to the trustee an officers' certificate and an
     opinion of counsel stating that all conditions precedent under the
     indenture relating to the satisfaction and discharge of the indenture have
     been complied with.

MODIFICATION OF THE INDENTURE

     From time to time, we, the Guarantors and the trustee, without the consent
of the holders, may amend the indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the trustee, adversely affect the rights of any of
the holders in any material respect. In formulating its opinion on such matters,
the trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the indenture may be made with the consent of
the holders of a majority in principal amount at maturity of the then
outstanding notes issued under the indenture, except that, without the consent
of each holder affected thereby, no amendment may:

          (1) reduce the principal amount at maturity of notes whose holders
     must consent to an amendment, supplement or waiver of any provision of the
     indenture or the notes;

          (2) reduce the rate of or change or have the effect of changing the
     time for payment of interest, including defaulted interest, on any notes;

          (3) reduce the principal of or change or have the effect of changing
     the fixed maturity of any notes, or change the date on which any notes may
     be subject to redemption or reduce the redemption price therefor;
                                        94
(4) make any notes payable in money other than that stated in the
     notes;

          (5) make any change in provisions of the indenture protecting the
     right of each holder to receive payment of principal of and interest on
     such note on or after the due date thereof or to bring suit to enforce such
     payment, or permitting holders of a majority in principal amount at
     maturity of notes to waive Defaults or Events of Default;

          (6) after our obligation to purchase notes arises thereunder, amend,
     change or modify in any material respect our obligation to make and
     consummate a Change of Control offer in the event of a Change of Control or
     make and consummate an offer with respect to any Asset Sale that has been
     consummated or, after such Change of Control has occurred or such Asset
     Sale has been consummated, modify any of the provisions or definitions with
     respect thereto;

          (7) modify or change any provision of the indenture or the related
     definitions affecting the ranking of the notes or any Guarantee in a manner
     which adversely affects the holders;

          (8) release any Guarantor that is a Significant Subsidiary from any of
     its obligations under its Guarantee or the indenture otherwise than in
     accordance with the terms of the indenture;

          (9) release all or substantially all of the Collateral; or

          (10) make any change in the preceding amendment and waiver provisions.

GOVERNING LAW

     The indenture provides that it, the notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law, of another jurisdiction would be
required thereby.

THE TRUSTEE

     The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.

     The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the trustee, should it become a creditor of ours,
to obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
Trust Indenture Act, the trustee will be permitted to engage in other
transactions; provided that if the trustee acquires any conflicting interest as
described in the Trust Indenture Act, it must eliminate such conflict or resign.

CERTAIN DEFINITIONS

     Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

                                        95
"Accreted Value" means, as of any date (the "Specified Date"), with respect
to each $1,000 principal amount at maturity of notes:

          (1) if the Specified Date is one of the following dates (each, a
     "Semi-Annual Accrual Date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRUAL DATE                                       ACCRETED VALUE
------------------------                                       --------------
Issue Date..................................................     $  800.00
March 1, 2003...............................................     $  809.64
September 1, 2003...........................................     $  822.64
March 1, 2004...............................................     $  835.86
September 1, 2004...........................................     $  849.28
March 1, 2005...............................................     $  862.93
September 1, 2005...........................................     $  876.79
March 1, 2006...............................................     $  890.87
September 1, 2006...........................................     $  905.18
March 1, 2007...............................................     $  919.72
September 1, 2007...........................................     $  934.49
March 1, 2008...............................................     $  949.51
September 1, 2008...........................................     $  964.76
March 1, 2009...............................................     $  980.25
September 1, 2009...........................................     $  996.00
October 15, 2009............................................     $1,000.00
(2) if the Specified Date occurs between two Semi-Annual Accrual
     Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
     immediately preceding the Specified Date and (B) an amount equal to the
     product of (a) the difference of (x) the Accreted Value for the immediately
     following Semi-Annual Accrual Date and (y) the Accreted Value for the
     immediately preceding Semi-Annual Accrual Date and (b) a fraction, the
     numerator of which is the number of days actually elapsed from the
     immediately preceding Semi-Annual Accrual Date to the Specified Date and
     the denominator of which is the number of days between the two Semi-Annual
     Accrual Dates.

     "Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with or into us or any of our Subsidiaries
or assumed in connection with the acquisition of assets from such Person and in
each case not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, and which Indebtedness is without recourse to us or any of our
Restricted Subsidiaries or to any of their respective properties or assets other
than the Person or the assets to which such Indebtedness related prior to the
time such Person becomes a Restricted Subsidiary or the time of such
acquisition, merger or consolidation. Acquired Indebtedness shall be deemed to
be incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Restricted Subsidiary.

     "Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.

     "Asset Acquisition" means (1) an Investment by us or any Restricted
Subsidiary in any other Person pursuant to which such Person will become a
Restricted Subsidiary, or will be merged with or into us or

                                        96
any Restricted Subsidiary, or (2) the acquisition by us or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprise any division or line of business of such Person or any other properties
or assets of such Person other than in the ordinary course of business.

     "Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by us or any of our
Restricted Subsidiaries (including any Sale/Leaseback Transaction) to any Person
other than our company or a Subsidiary Guarantor of: (1) any Capital Stock of
any Restricted Subsidiary; or (2) any other property or assets of our company or
any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that the term "Asset Sale" will not include: (a) a
transaction or series of related transactions for which we or our Restricted
Subsidiaries receive aggregate consideration of less than $2,500,000; (b) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of our company as permitted under "-- Merger, Consolidation
and Sale of Assets"; (c) any Restricted Payment permitted by the "-- Limitation
on Restricted Payments" covenant or that constitutes a Permitted Investment; (d)
the sale of cash or Cash Equivalents, (e) the sale of used, worn out, damaged,
obsolete or surplus assets; (f) the lease, assignment or sublease of any real or
personal property in the ordinary course of business; and (g) any sale or
disposition deemed to occur in connection with creating, granting or exercising
remedies in respect of any Liens permitted pursuant to the indenture.

     "Capital Expenditure Basket" means, in any four fiscal quarter period, (x)
$7.0 million plus (y) the amount, if any, of the Excess Cash Flow offer made and
not accepted by the holders during the previous four fiscal quarter period
ending immediately prior to such four fiscal quarter period plus (z) any Capital
Expenditure Basket amounts (not to exceed $1.0 million) not previously applied
by us as Capital Expenditures.

     "Capital Expenditures" means for any period all direct or indirect (by way
of acquisition of securities of a Person or the expenditure of cash or the
transfer of Property or the incurrence of Indebtedness) expenditures in respect
of the purchase or other acquisition of fixed or capital assets determined in
conformity with accounting principles generally accepted in the United States,
or GAAP, excluding (i) normal replacement and maintenance programs properly
charged to current operations, and (ii) the purchase price of equipment to the
extent that the consideration therefor consists of used, worn out, damaged,
obsolete or surplus equipment being traded in at such time or the proceeds of a
concurrent sale of such used, worn out, damaged, obsolete or surplus equipment.

     "Capital Stock" means, with respect to any Person:

          (1) any and all shares, interests, participations, rights in or other
     equivalents (however designated) of such Person's capital stock, other
     equity interests, whether now outstanding or issued after the date of the
     indenture, partnership interests (whether general or limited), any other
     interest or participation that confers on a Person the right to receive a
     share of the profits and losses of, or distributions of assets of, the
     issuing Person; and

          (2) any warrants, options or other rights (other than debt securities
     exchangeable for or convertible into any such Capital Stock referred to in
     the previous bullet point) exchangeable for or convertible into such
     Capital Stock.

     "Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date will be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

     "Cash Equivalents" means:

          (1) securities issued or directly and fully guaranteed by the United
     States government or any agency or instrumentality thereof (provided that
     the full faith and credit of the United States is

                                        97
pledged in support thereof) having a maturity of not more than one year
     from the date of acquisition thereof;

          (2) securities issued or directly and fully guaranteed by any state of
     the United States of America or the District of Columbia, or any political
     subdivision of any such state or the District of Columbia or any public
     instrumentality thereof, having a maturity of not more than one year from
     the date of acquisition thereof and, at the time of acquisition, having one
     of the two highest ratings obtainable from either Standard & Poor's Ratings
     Group ("S&P") or Moody's Investors Service, Inc. ("Moody's");

          (3) commercial paper maturing no more than one year after the date of
     acquisition thereof and, at the time of acquisition, having a rating of at
     least A-1 from S&P or at least P-1 from Moody's;

          (4) certificates of deposit or bankers' acceptances having a maturity
     of not more than one year from the date of acquisition thereof issued by
     any bank organized under the laws of the United States of America or any
     state thereof or the District of Columbia or any U.S. branch of a foreign
     bank having at the date of acquisition thereof combined capital and surplus
     of not less than $250.0 million;

          (5) repurchase obligations with a term of not more than seven days for
     underlying securities of the types described in clauses (1), (2) and (4)
     above entered into with any bank meeting the qualifications specified in
     clause (4) above; and

          (6) investments in money market funds which invest substantially all
     their assets in securities of the types described in clauses (1) through
     (5) above.

     "Change of Control" means the occurrence of one or more of the following
events:

          (1) prior to the earlier to occur of the first public offering of
     common stock (an "IPO") of our company or Holdings, the Permitted Holders
     cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
     under the Exchange Act), directly or indirectly, of a majority in the
     aggregate of the total voting power of the voting stock of our company,
     whether as a result of issuance of securities of the Parent or our company,
     any merger, consolidation, liquidation or dissolution of Holdings or our
     company, or any direct or indirect transfer of securities by Holdings or
     otherwise (for purposes of this clause (1) and clause (2) below, the
     Permitted Holders will be deemed to beneficially own any voting stock of a
     Person (the "specified person") held by any other Person (the "parent
     entity") so long as the Permitted Holders beneficially own (as so defined),
     directly or indirectly, in the aggregate a majority of the voting power of
     the voting stock of the parent entity);

          (2) following an IPO of our company or Holdings, any "person" (as such
     term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
     one or more Permitted Holders, is or becomes the beneficial owner (as
     defined in clause (1) above, except that for purposes of this clause (2)
     such person will be deemed to have "beneficial ownership" of all shares
     that any such person has the right to acquire, whether such right is
     exercisable immediately or only after the passage of time), directly or
     indirectly, of more than 45% of the total voting power of the voting stock
     of our company; provided, however, that the Permitted Holders beneficially
     own (as defined in clause (1) above), directly or indirectly, in the
     aggregate a lesser percentage of the total voting power of the voting stock
     of our company than such other person and do not have the right or ability
     by voting power, contract or otherwise to elect or designate for election a
     majority of our board of directors (for the purposes of this clause (2),
     such other person will be deemed to beneficially own any voting stock of a
     specified person held by a parent entity, if such other person is the
     beneficial owner (as defined in this clause (2)), directly or indirectly,
     of more than 35% of the voting power of the voting stock of such parent
     entity and the Permitted Holders beneficially own (as defined in clause (1)
     above), directly or indirectly, in the aggregate a lesser percentage of the
     voting power of the voting stock of such parent entity and do not have the
     right or ability by voting power, contract or otherwise to elect or
     designate for election a majority of the board of directors of such parent
     entity);

                                        98
(3) during any consecutive two-year period, individuals who at the
     beginning of the period constituted our board of directors or the board of
     directors of Holdings (together with any new directors whose election by
     our board of directors or the board of directors of Holdings, as the case
     may be, or whose nomination for election by the stockholders of such Person
     was approved by a vote of a majority of the directors then in office who
     were either directors at the beginning of the period or whose election or
     nomination for election was previously so approved or approved by the
     Permitted Holders) cease for any reason to constitute a majority of our
     board of directors or the board of directors of Holdings then in office;

          (4) the adoption of a plan relating to the liquidation or dissolution
     of our company; or

          (5) the merger or consolidation of Holdings or our company with or
     into another Person or the merger of another Person with or into Holdings
     or our company, or the sale of all or substantially all the assets of
     Holdings or our company (determined on a consolidated basis) to another
     Person (other than, in all such cases, a Person that is controlled by the
     Permitted Holders), other than a transaction following which (A) in the
     case of a merger or consolidation transaction, holders of securities that
     represented 100% of the voting stock of Holdings or our company, as
     applicable, immediately prior to such transaction (or other securities into
     which such securities are converted as part of such merger or consolidation
     transaction) own directly or indirectly at least a majority of the voting
     power of the voting stock of the surviving Person in such merger or
     consolidation transaction immediately after such transaction and in
     substantially the same proportion as before the transaction and (B) in the
     case of a sale of assets transaction, each transferee becomes an obligor in
     respect of the notes and a Subsidiary of the transferor of such assets.

     "Collateral" means collateral as such term is defined in the security
agreement, all property mortgaged under the Mortgages and any other property,
whether now owned or hereafter acquired, upon which a Lien securing the
Obligations is granted or purported to be granted under any Collateral
Agreement.

     "Collateral Agent" means the collateral agent appointed pursuant to the
Indenture. The trustee is the initial Collateral Agent.

     "Collateral Agreements" means, collectively, the security agreement and
each Mortgage and each other contract, agreement or instrument creating or
purporting to create a lien, security interest, charge or similar encumbrance on
Collateral in favor of the Collateral Agent for the benefit of the holders of
the notes, in each case, as the same may be in force from time to time.

     "Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.

     "Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of:

          (1) Consolidated Net Income; and

          (2) to the extent Consolidated Net Income has been reduced thereby:

             (a) all income taxes of such Person and our Restricted Subsidiaries
        paid or accrued in accordance with GAAP for such period;

             (b) Consolidated Interest Expense, amortization expense and
        depreciation expense; and

             (c) Consolidated Non-cash Charges less any non-cash items
        increasing Consolidated Net Income for such period,

all as determined on a consolidated basis for such Person and our Restricted
Subsidiaries in accordance with GAAP.

                                        99
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction or event giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio for which financial statements are available (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" will be calculated after giving effect on a pro forma basis for the
period of such calculation to:

          (1) the incurrence or repayment of any Indebtedness of such Person or
     any of our Restricted Subsidiaries (and the application of the proceeds
     thereof) giving rise to the need to make such calculation and any
     incurrence or repayment of other Indebtedness (and the application of the
     proceeds thereof), other than the incurrence or repayment of Indebtedness
     in the ordinary course of business for working capital purposes pursuant to
     working capital facilities, occurring during the Four Quarter Period or at
     any time subsequent to the last day of the Four Quarter Period and on or
     prior to the Transaction Date, as if such incurrence or repayment, as the
     case may be (and the application of the proceeds thereof), occurred on the
     first day of the Four Quarter Period; and

          (2) any Asset Sale or other disposition or Asset Acquisition
     (including, without limitation, any Asset Acquisition giving rise to the
     need to make such calculation as a result of such Person or one of our
     Restricted Subsidiaries (including any Person who becomes a Restricted
     Subsidiary as a result of any such Asset Acquisition) incurring, assuming
     or otherwise being liable for Acquired Indebtedness during the Four Quarter
     Period or at any time subsequent to the last day of the Four Quarter Period
     and on or prior to the Transaction Date), as if such Asset Sale or other
     disposition or Asset Acquisition (including the incurrence, assumption or
     liability for any such Indebtedness or Acquired Indebtedness and also
     including any Consolidated EBITDA associated with such Asset Acquisition)
     occurred on the first day of the Four Quarter Period; provided that the
     Consolidated EBITDA of any Person acquired will be included only to the
     extent that it would be includible pursuant to the definition of
     "Consolidated Net Income." If such Person or any of our Restricted
     Subsidiaries directly or indirectly guarantees Indebtedness of a third
     Person, the preceding sentence will give effect to the incurrence of such
     guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
     such Person had directly incurred or otherwise assumed such guaranteed
     Indebtedness.

     Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":

          (1) interest on outstanding Indebtedness determined on a fluctuating
     basis as of the Transaction Date (including Indebtedness actually incurred
     on the Transaction Date) and which will continue to be so determined
     thereafter will be deemed to have accrued at a fixed rate per annum equal
     to the average rate of interest on such Indebtedness during the Four
     Quarter Period ending on or prior to the Transaction Date; and

          (2) notwithstanding clause (1) above, interest on Indebtedness
     determined on a fluctuating basis, to the extent such interest is covered
     by agreements relating to Interest Swap Obligations, will be deemed to
     accrue at the rate per annum resulting after giving effect to the operation
     of such agreements.

     "Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:

          (1) Consolidated Interest Expense (excluding amortization or write-off
     of deferred financing costs and debt issuance costs of such Person and its
     consolidated Restricted Subsidiaries during such period and any premium or
     penalty paid in connection with redeeming or retiring Indebtedness of such
     Person and its consolidated Restricted Subsidiaries prior to the stated
     maturity thereof pursuant to the agreements governing such Indebtedness);
     plus

                                       100
(2) the product of (x) the amount of all dividend payments on any
     series of Preferred Stock of such Person (other than dividends paid in
     Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
     during such period times (y) a fraction, the numerator of which is one and
     the denominator of which is one minus the then current effective
     consolidated federal, state and local tax rate of such Person, expressed as
     a decimal.

     "Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense of such Person and our Restricted
Subsidiaries for such period, on a consolidated basis, as determined in
accordance with GAAP, and including, without duplication, (a) all amortization
of original issue discount; (b) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and our Restricted Subsidiaries during such period; and (c) net cash costs under
all Interest Swap Obligations (including amortization of fees), other than any
cash costs paid to unwind Interest Rate Obligations existing on and prior to the
Issue Date.

     "Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and our Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there will be excluded therefrom:

          (1) after-tax gains and losses from Asset Sales or abandonments or
     reserves relating thereto;

          (2) after-tax items classified as extraordinary or nonrecurring gains
     or losses;

          (3) the net income (but not loss) of any Restricted Subsidiary of the
     referent Person to the extent that the declaration of dividends or similar
     distributions by that Restricted Subsidiary of that income is restricted by
     a contract, operation of law or otherwise;

          (4) the net income of any Person, other than a Restricted Subsidiary
     of the referent Person, except to the extent of cash dividends or
     distributions paid to the referent Person or to a Wholly-Owned Subsidiary
     of the referent Person by such Person;

          (5) income or loss attributable to discontinued operations (including,
     without limitation, operations disposed of during such period whether or
     not such operations were classified as discontinued);

          (6) all gains and losses realized on or because of the purchase or
     other acquisition by such Person or any of our Restricted Subsidiaries of
     any securities of such Person or any of our Restricted Subsidiaries; and

          (7) in the case of a successor to the referent Person by consolidation
     or merger or as a transferee of the referent Person's assets, any earnings
     of the successor corporation prior to such consolidation, merger or
     transfer of assets.

     "Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and our Restricted Subsidiaries reducing Consolidated Net Income of
such Person and our Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
requires an accrual of or a reserve for cash charges for any future period).

     "Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among Holdings, us, the borrowers, the Lenders and the Lender Agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended, supplemented or otherwise modified from time to time, including any
agreement (and related documents) adding Restricted Subsidiaries as additional
borrowers or guarantors thereunder, or extending the maturity of, refinancing,
replacing or otherwise restructuring or adding Restricted Subsidiaries as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders, in each case
as certified by us to the Collateral Agent.

                                       101
"Currency Agreement" means any spot or forward foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect us or any Restricted Subsidiary against or manage fluctuations in
currency values.

     "Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.

     "Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except in each case, upon the occurrence of a Change of Control) on or
prior to the first final maturity date of the notes for cash or is convertible
into or exchangeable for debt securities of our company or our Subsidiaries at
any time prior to such anniversary.

     "Domestic Restricted Subsidiary" means any Restricted Subsidiary of our
company other than a Foreign Restricted Subsidiary.

     "Excess Cash Flow" means, for any fiscal year, our Consolidated EBITDA for
such year, adjusted as follows: (i) minus the cash portion of our Consolidated
Interest Expense (net of interest income) for such year, (ii) minus all federal,
state and foreign income taxes accrued or paid (without duplication) by us and
our Subsidiaries during such year, (iii) minus all Capital Expenditures made
during such year by us and our Subsidiaries and (iv) minus any net increase in
the difference between (x) current assets, other than cash and Cash Equivalents,
and (y) current liabilities of our company and our Subsidiaries for such year.

     "Exchange Offer" means the offer that may be made by us, pursuant to the
Registration Rights Agreement, to exchange for any and all the notes a like
aggregate principal amount at maturity of notes registered under the Securities
Act having substantially identical terms to the notes (except that the exchange
notes will not contain terms with respect to transfer restrictions or interest
rate increases as described herein).

     "Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value will
be determined by our board of directors acting reasonably and in good faith and
will be evidenced by a Board Resolution of our board of directors delivered to
the trustee.

     "Foreign Restricted Subsidiary" means any Restricted Subsidiary of our
company which is organized under the laws of a jurisdiction other than the
United States of America, any state thereof or the District of Columbia.

     "Indebtedness" means, with respect to any Person, without duplication:

          (1) all Obligations of such Person for borrowed money;

          (2) all Obligations of such Person evidenced by bonds, debentures,
     notes or other similar instruments;

          (3) all Capitalized Lease Obligations of such Person;

          (4) all Obligations of such Person issued or assumed as the deferred
     purchase price of property, all conditional sale obligations and all
     Obligations under any title retention agreement (but excluding trade
     accounts payable and other accrued liabilities arising in the ordinary
     course of business that are not overdue by 90 days or more or are being
     contested in good faith by appropriate proceedings promptly instituted and
     diligently conducted and any deferred purchase price represented by earn
     outs consistent with our past practice);

                                       102
(5) all Obligations for the reimbursement of any obligor on any letter
     of credit, banker's acceptance or similar credit transaction;

          (6) guarantees and other contingent obligations in respect of
     Indebtedness referred to in clauses (1) through (5) above and clause (8)
     below;

          (7) all Obligations of any other Person of the type referred to in
     clauses (1) through (6) which are secured by any lien on any property or
     asset of such Person, the amount of such Obligation being deemed to be the
     lesser of the Fair Market Value of such property or asset or the amount of
     the Obligation so secured;

          (8) all Interest Swap Obligations and all Obligations under Currency
     Agreements of such Person; and

          (9) all Disqualified Capital Stock issued by such Person with the
     amount of Indebtedness represented by such Disqualified Capital Stock being
     equal to the greater of its voluntary or involuntary liquidation preference
     and its maximum fixed repurchase price, but excluding accrued dividends, if
     any.

     For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
will be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value will be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock.

     "Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of national standing: (1) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in our company; and (2) which, in the judgment of
our board of directors, is otherwise independent and qualified to perform the
task for which it is to be engaged.

     "Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
will include, without limitation, interest rate swaps, caps, floors, collars and
similar agreements.

     "Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition for value by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" will exclude direct or indirect
advances to customers or suppliers in the ordinary course of business that are,
in conformity with GAAP, recorded as accounts receivable, prepaid expenses or
deposits on our or any Restricted Subsidiary's balance sheet, endorsements for
collection or deposit arising in the ordinary course of business and extensions
of trade credit by our company and our Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of our company or
such Restricted Subsidiary, as the case may be. For the purposes of the
"-- Limitation on Restricted Payments" covenant, the amount of any Investment
will be the original cost of such Investment plus the cost of all additional
Investments by our company or any of our Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts will reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If we
or any Restricted Subsidiary sell or otherwise dispose of any Common Stock of
any direct or indirect Restricted Subsidiary such that,
                                       103
after giving effect to any such sale or disposition, we no longer own, directly
or indirectly, 100% of the outstanding Common Stock of such Restricted
Subsidiary, we will be deemed to have made an Investment on the date of any such
sale or disposition equal to the Fair Market Value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.

     "Issue Date" means the date of original issuance of the notes.

     "Lender Agent" means General Electric Capital Corporation, as agent for the
Lenders, or any successor in that capacity.

     "Lenders" means the lenders party from time to time to the Credit
Agreement.

     "Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
security interest).

     "Mortgages" means the mortgages, deeds of trust, deeds to secure debt or
other similar documents creating liens in favor of the Collateral Agent upon the
owned or leased real property constituting Collateral of our company or any of
our Domestic Restricted Subsidiaries from time to time.

     "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
our company or any of our Restricted Subsidiaries from such Asset Sale net of:

          (1) reasonable out-of-pocket expenses and fees relating to such Asset
     Sale (including, without limitation, legal, accounting and investment
     banking fees and sales commissions);

          (2) all taxes and other costs and expenses actually paid or estimated
     by us (in good faith) to be payable in cash in connection with such Asset
     Sale;

          (3) repayment of Indebtedness that is secured by the property or
     assets that are the subject of such Asset Sale and is required to be repaid
     in connection with such Asset Sale;

          (4) amounts required to be paid to any Person (other than us or any
     Restricted Subsidiary) owning a beneficial interest in or having a Lien on
     the assets subject to the Asset Sale;

          (5) all distributions and other payments required to be made to
     non-majority interest holders in Subsidiaries as a result of such Asset
     Sale; and

          (6) appropriate amounts to be provided by our company or any
     Restricted Subsidiary, as the case may be, as a reserve, in accordance with
     GAAP, against any liabilities associated with such Asset Sale and retained
     by our company or any Restricted Subsidiary, as the case may be, after such
     Asset Sale, including, without limitation, pension and other
     post-employment benefit liabilities, liabilities related to environmental
     matters and liabilities under any indemnification obligations associated
     with such Asset Sale.

provided, however, that if, after the payment of all taxes with respect to such
Asset Sale, the amount of estimated taxes, if any, pursuant to clause (2) above
exceeded the tax amount actually paid in cash in respect of such Asset Sale, the
aggregate amount of such excess will, at such time, constitute Net Cash
Proceeds.

     "Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.

     "Permitted Holders" means (i) Atlantic Equity Partners III, L.P., a fund
sponsored by First Atlantic Capital, Ltd., (ii) First Atlantic Capital, Ltd., or
(iii) any Affiliate thereof.

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"Permitted Indebtedness" means, without duplication, each of the following:

          (1) Indebtedness under the notes issued on the Issue Date (and
     exchange notes issued in exchange therefor) in an aggregate outstanding
     principal amount at maturity not to exceed $93.75 million or of any
     Guarantor pursuant to a Guarantee thereof;

          (2) Indebtedness incurred pursuant to the Credit Agreement in an
     aggregate principal amount at any one time outstanding not to exceed $10.0
     million;

          (3) other Indebtedness of us and our Restricted Subsidiaries
     outstanding on the Issue Date;

          (4) Interest Swap Obligations of our company or any Restricted
     Subsidiary covering Indebtedness of us or of any of our Restricted
     Subsidiaries; provided, however, that such Interest Swap Obligations are
     entered into for the purpose of fixing or hedging interest rates with
     respect to any fixed or variable rate Indebtedness that is permitted by the
     indenture to be outstanding to the extent that the notional amount of any
     such Interest Swap Obligation does not exceed the principal amount of
     Indebtedness to which such Interest Swap Obligation relates;

          (5) Indebtedness under Currency Agreements; provided that in the case
     of Currency Agreements which relate to Indebtedness, such Currency
     Agreements do not increase the Indebtedness of us and our Restricted
     Subsidiaries outstanding other than as a result of fluctuations in foreign
     currency exchange rates or by reason of fees, indemnities and compensation
     payable thereunder;

          (6) Indebtedness of a Restricted Subsidiary to us or to another
     Restricted Subsidiary for so long as such Indebtedness is held by us or a
     Restricted Subsidiary, in each case subject to no Lien held by a Person
     other than us or a Restricted Subsidiary; provided that (a) any such
     Indebtedness is unsecured and subordinated, pursuant to a written
     agreement, to such Restricted Subsidiary's obligations under the indenture
     and its Guarantee, if applicable, (b) if as of any date any Person other
     than us or a Restricted Subsidiary owns or holds any such Indebtedness or
     holds a Lien in respect of such Indebtedness, such date will be deemed the
     incurrence of Indebtedness not constituting Permitted Indebtedness by the
     issuer of such Indebtedness and (c) the aggregate amount of Indebtedness of
     Restricted Subsidiary that is not a Guarantor incurred pursuant to this
     clause (6) may not exceed $3.0 million at any one time outstanding;

          (7) our Indebtedness to a Restricted Subsidiary for so long as such
     Indebtedness is held by a Restricted Subsidiary, in each case subject to no
     Lien; provided that (a) any such Indebtedness is unsecured and
     subordinated, pursuant to a written agreement, to our obligations under the
     indenture and the notes and (b) if as of any date any Person other than a
     Restricted Subsidiary owns or holds any such Indebtedness or any Person
     holds a Lien in respect of such Indebtedness, such date will be deemed the
     incurrence of Indebtedness not constituting Permitted Indebtedness;

          (8) Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument inadvertently
     (except in the case of daylight overdrafts) drawn against insufficient
     funds in the ordinary course of business; provided, however, that such
     Indebtedness is extinguished within five business days of incurrence;

          (9) Indebtedness of us or any of our Restricted Subsidiaries
     represented by letters of credit for the account of us or such Restricted
     Subsidiary, as the case may be, in order to provide security for workers'
     compensation claims, payment obligations in connection with self-insurance
     or similar requirements in the ordinary course of business;

          (10) Indebtedness represented by Capitalized Lease Obligations and
     Purchase Money Indebtedness of us and our Restricted Subsidiaries incurred
     in the ordinary course of business (including Refinancings thereof that do
     not result in an increase in the aggregate principal amount of Indebtedness
     of such Person as of the date of such proposed Refinancing (plus the amount
     of any premium required to be paid under the terms of the instrument
     governing such Indebtedness and plus

                                       105
the amount of reasonable expenses incurred by us in connection with such
     Refinancing)) not to exceed $3.0 million at any one time outstanding;

          (11) Refinancing Indebtedness;

          (12) Guarantees by our company or a Restricted Subsidiary of
     Indebtedness incurred by our company or a Restricted Subsidiary so long as
     the incurrence of such Indebtedness by our company or any such Restricted
     Subsidiary is otherwise permitted by the terms of the indenture;

          (13) Indebtedness arising from agreements of our company or a
     Subsidiary providing for indemnification, adjustment of purchase price or
     similar obligations, in each case, incurred in connection with the
     disposition of any business, assets or Subsidiary, other than guarantees of
     Indebtedness incurred by any person acquiring all or any portion of such
     business, assets or Subsidiary for the purpose of financing such
     acquisition; provided that the maximum aggregate liability in respect of
     all such Indebtedness will at no time exceed the gross proceeds actually
     received by our company and the Subsidiary in connection with such
     disposition;

          (14) Indebtedness of our company or any Restricted Subsidiary to the
     extent the net proceeds thereof are promptly deposited to defease all
     outstanding notes as described below under "-- Legal Defeasance and
     Covenant Defeasance"; and

          (15) additional Indebtedness of our company and our Restricted
     Subsidiaries in an aggregate principal amount not to exceed $2.5 million at
     any one time outstanding.

     For purposes of determining compliance with the "-- Limitation on
Incurrence of Additional Indebtedness" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness described in clauses (1) through (15) above or is entitled to be
incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of
such covenant, we will, in our sole discretion, classify (or later reclassify)
such item of Indebtedness in any manner that complies with this covenant.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, and the payment of dividends on Disqualified Capital Stock
in the form of additional shares of the same class of Disqualified Capital Stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Capital Stock for purposes of the "-- Limitations on Incurrence of
Additional Indebtedness" covenant.

     "Permitted Investments" means:

          (1) Investments by our company or any Restricted Subsidiary in any
     Person that is or will become immediately after such Investment a
     Subsidiary Guarantor or that will merge or consolidate into our company or
     a Subsidiary Guarantor;

          (2) Investments in our company by any Restricted Subsidiary; provided
     that any Indebtedness evidencing such Investment is unsecured (except to
     the extent permitted by clause (14) of the definition of Permitted Liens),
     and subordinated pursuant to a written agreement, to our obligations under
     the notes and the indenture;

          (3) Investments in cash and Cash Equivalents;

          (4) loans and advances to employees, officers and directors of our
     company and our Restricted Subsidiaries in the ordinary course of business
     for bona fide business purposes not in excess of $1.0 million at any one
     time outstanding;

          (5) Currency Agreements and Interest Swap Obligations entered into in
     the ordinary course of our or our Restricted Subsidiaries' businesses and
     otherwise in compliance with the indenture;

          (6) Investments in the notes;

          (7) Investments in trade creditors or customers received pursuant to
     any plan of reorganization or similar arrangement upon the bankruptcy or
     insolvency of such trade creditors or customers;
                                       106
(8) Investments made by our company or our Restricted Subsidiaries as
     a result of consideration received in connection with any Asset Sale made
     in compliance with the "-- Limitation on Asset Sales" covenant;

          (9) any Investment existing on the Issue Date;

          (10) Investments in prepaid expenses, negotiable instruments held for
     collection and lease, utility and workers' compensation, performance and
     other similar deposits made in the ordinary course of business;

          (11) any Investment to the extent that the consideration therefor is
     our Qualified Capital Stock;

          (12) Investments in Foreign Restricted Subsidiaries in an amount not
     to exceed $3.0 million at any one time outstanding; and

          (13) additional Investments not to exceed $2.5 million at any one time
     outstanding.

     "Permitted Liens" means the following types of Liens:

          (1) Liens for taxes, assessments or governmental charges or claims
     either (a) not delinquent or (b) contested in good faith by appropriate
     proceedings and as to which our company or our Restricted Subsidiaries will
     have set aside on its books such reserves as may be required pursuant to
     GAAP;

          (2) statutory Liens of landlords and Liens of carriers, warehousemen,
     mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
     or pursuant to customary reservations or retentions of title incurred in
     the ordinary course of business for sums not yet delinquent or being
     contested in good faith, if such reserve or other appropriate provision, if
     any, as will be required by GAAP will have been made in respect thereof;

          (3) Liens incurred or deposits made in the ordinary course of business
     in connection with workers' compensation, unemployment insurance and other
     types of social security, including any Lien securing letters of credit
     issued in the ordinary course of business consistent with past practice in
     connection therewith, or to secure the performance of tenders, statutory
     obligations, surety and appeal bonds, bids, leases, government contracts,
     performance and return-of-money bonds and other similar obligations
     (exclusive of obligations for the payment of borrowed money);

          (4) judgment Liens not giving rise to an Event of Default so long as
     such Lien is adequately bonded and any appropriate legal proceedings which
     may have been duly initiated for the review of such judgment will not have
     been finally terminated or the period within which such proceedings may be
     initiated will not have expired;

          (5) easements, rights-of-way, zoning restrictions and other similar
     charges or encumbrances in respect of real property not interfering in any
     material respect with the ordinary conduct of the business of our company
     or any of our Restricted Subsidiaries;

          (6) any interest or title of a lessor under any Capitalized Lease
     Obligation permitted pursuant to clause (10) of the definition of
     "Permitted Indebtedness;" provided that such Liens do not extend to any
     property or assets which is not leased property subject to such Capitalized
     Lease Obligation;

          (7) Liens securing Capitalized Lease Obligations and Purchase Money
     Indebtedness permitted pursuant to clause (10) or clause (15) of the
     definition of "Permitted Indebtedness"; provided, however, that in the case
     of Purchase Money Indebtedness (a) the Indebtedness will not exceed the
     cost of such property or assets and will not be secured by any property or
     assets of our company or any Restricted Subsidiary other than the property
     and assets so acquired or constructed and (b) the Lien securing such
     Indebtedness will be created within 180 days of such acquisition or
     construction or, in the case of a refinancing of any Purchase Money
     Indebtedness, within 180 days of such refinancing;

                                       107
(8) Liens upon specific items of inventory or other goods and proceeds
     of any Person securing such Person's obligations in respect of bankers'
     acceptances issued or created for the account of such Person to facilitate
     the purchase, shipment or storage of such inventory or other goods;

          (9) Liens securing reimbursement obligations with respect to
     commercial letters of credit which encumber documents and other property
     relating to such letters of credit and products and proceeds thereof;

          (10) Liens encumbering deposits made to secure obligations arising
     from statutory, regulatory, contractual, or warranty requirements of our
     company or any of our Restricted Subsidiaries, including rights of offset
     and set-off;

          (11) Liens securing Interest Swap Obligations, which Interest Swap
     Obligations relate to Indebtedness that is otherwise permitted under the
     indenture;

          (12) Liens securing Indebtedness under Currency Agreements that are
     permitted under the indenture;

          (13) Liens securing Acquired Indebtedness incurred in accordance with
     the "-- Limitation on Incurrence of Additional Indebtedness" covenant;
     provided that:

             (a) such Liens secured such Acquired Indebtedness at the time of
        and prior to the incurrence of such Acquired Indebtedness by our company
        or a Restricted Subsidiary and were not granted in connection with, or
        in anticipation of, the incurrence of such Acquired Indebtedness by our
        company or a Restricted Subsidiary; and

             (b) such Liens do not extend to or cover any property or assets of
        our company or of any of our Restricted Subsidiaries other than the
        property or assets that secured the Acquired Indebtedness prior to the
        time such Indebtedness became Acquired Indebtedness of our company or a
        Restricted Subsidiary and are no more favorable to the lienholders than
        those securing the Acquired Indebtedness prior to the incurrence of such
        Acquired Indebtedness by our company or a Restricted Subsidiary;

          (14) Liens existing as of the Issue Date and securing Indebtedness
     permitted to be outstanding under clause (3) of the definition of
     "Permitted Indebtedness" to the extent and in the manner such Liens are in
     effect on the Issue Date;

          (15) Liens securing the notes and the Guarantees;

          (16) Liens securing Indebtedness under the Credit Agreement to the
     extent such Indebtedness is permitted under clause (2) or clause (15) of
     the definition of "Permitted Indebtedness";

          (17) any interest of third parties in any escrow account established
     pursuant to the Merger Agreement;

          (18) Liens for the benefit of our company or a Subsidiary Guarantor on
     assets of any Restricted Subsidiary;

          (19) Liens securing Refinancing Indebtedness which is incurred to
     Refinance any Indebtedness which has been secured by a Lien permitted under
     this paragraph and which has been incurred in accordance with the
     "-- Limitation on Incurrence of Additional Indebtedness" provisions of the
     indenture; provided, however, that such Liens: (i) are no less favorable to
     the holders and are not more favorable to the lienholders with respect to
     such Liens than the Liens in respect of the Indebtedness being Refinanced;
     and (ii) do not extend to or cover any property or assets of our company or
     any of our Restricted Subsidiaries not securing the Indebtedness so
     Refinanced; and

          (20) Liens incurred in the ordinary course of business securing assets
     of our company in addition to that described in clauses (1) through (19)
     above, so long as the obligations secured by such Liens do not exceed $1.0
     million at any one time outstanding and such obligations are not incurred
     in

                                       108
connection with the borrowing of money or the obtaining of advances or
     credit (other than trade credit in the ordinary course of business).

     "Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.

     "Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.

     "Purchase Money Indebtedness" means Indebtedness of our company and our
Restricted Subsidiaries incurred for the purpose of financing all or any part of
the purchase price, or the cost of installation, construction or improvement, of
property or equipment (including Indebtedness incurred within 180 days following
such purchase, construction or improvement), including Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed by us or a
Subsidiary in connection with the acquisition of assets from such Person;
provided, however, that any Lien on such Indebtedness shall not extend to any
property other than the property so acquired or constructed.

     "Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

     "Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
will have correlative meanings.

     "Refinancing Indebtedness" means any Refinancing by our company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the
"-- Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clauses (1), (2), and (11) of the definition of Permitted
Indebtedness), in each case that does not:

          (1) result in an increase in the aggregate principal amount of
     Indebtedness of such Person as of the date of such proposed Refinancing
     (plus the amount of any premium required to be paid under the terms of the
     instrument governing such Indebtedness and plus the amount of reasonable
     expenses incurred by our company in connection with such Refinancing); or

          (2) create Indebtedness with: (a) a Weighted Average Life to Maturity
     that is less than the Weighted Average Life to Maturity of the Indebtedness
     being Refinanced; or (b) a final maturity earlier than the final maturity
     of the Indebtedness being Refinanced; provided that (x) if such
     Indebtedness being Refinanced is Indebtedness of our company, then such
     Refinancing Indebtedness will be Indebtedness solely of our company or a
     Guarantor and (y) if such Indebtedness being Refinanced is subordinate or
     junior to the notes, then such Refinancing Indebtedness will be subordinate
     to the notes at least to the same extent and in the same manner as the
     Indebtedness being Refinanced;

          (3) change any of the respective obligors on such Refinancing
     Indebtedness;

          (4) affect the security, if any, for such Refinancing Indebtedness
     (except to the extent that less security is granted to holders of such
     Refinancing Indebtedness); or

          (5) afford the holders of such Refinancing Indebtedness covenants,
     defaults, rights or remedies more burdensome to the obligors than those
     contained in the Indebtedness being refinanced.

     "Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, between our company, the Guarantors and the Initial
Purchaser, as the same may be amended or modified from time to time in
accordance with the terms thereof.

     "Replacement Assets" means, with respect to any Asset Sale, properties and
assets (including Capital Stock of a Person) that replace the properties and
assets that were the subject of such Asset Sale or properties and assets
(including Capital Stock of a Person) that will be used in the business of our
company and the Restricted Subsidiaries or in businesses reasonably related or
ancillary thereto.

                                       109
"Restricted Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which at the time of determination is not an Unrestricted
Subsidiary.

     "Sale/Leaseback Transaction" means any direct or indirect arrangement with
any Person or to which any such Person is a party, providing for the leasing to
our company or a Restricted Subsidiary of any property, whether owned by our
company or any Restricted Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by our company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.

     "Significant Subsidiary" with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1-02(w) of Regulation S-X under the Exchange Act.

     "Subsidiary" means, with respect to any Person:

          (1) any corporation of which the outstanding Capital Stock having at
     least a majority of the votes entitled to be cast in the election of
     directors under ordinary circumstances will at the time be owned, directly
     or indirectly, by such Person; or

          (2) any other Person of which at least a majority of the voting
     interest under ordinary circumstances is at the time, directly or
     indirectly, owned by such Person.

     "Subsidiary Guarantor" means (1) all existing Domestic Restricted
Subsidiaries and (2) each of our Restricted Subsidiaries that in the future
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of the indenture as a Subsidiary Guarantor; provided that
any Person constituting a Subsidiary Guarantor as described above will cease to
constitute a Subsidiary Guarantor when its respective Guarantee is released in
accordance with the terms of the indenture.

     "Unrestricted Subsidiary" of any Person means:

          (1) any Subsidiary of such Person that at the time of determination
     will be or continue to be designated an Unrestricted Subsidiary by our
     board of directors of such Person in the manner provided below; and

          (2) any Subsidiary of an Unrestricted Subsidiary.

     Our board of directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, our company or any other Subsidiary that is not a Subsidiary of the
Subsidiary to be so designated, provided that:

          (1) we certify to the trustee that such designation complies with the
     "-- Limitation on Restricted Payments" covenant; and

          (2) each Subsidiary to be so designated and each of its Subsidiaries
     has not at the time of designation, and does not thereafter, create, incur,
     issue, assume, guarantee or otherwise become directly or indirectly liable
     with respect to any Indebtedness pursuant to which the lender has recourse
     to any of the assets of our company or any of our Restricted Subsidiaries.

     Our board of directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if:

          (1) all Liens and Indebtedness of such Unrestricted Subsidiary
     outstanding immediately following such designation would, after giving
     effect to the designation of the Subsidiary as an Unrestricted Subsidiary,
     have been permitted to be incurred for all purposes of the indenture; and

          (2) immediately before and immediately after giving effect to such
     designation, no Default or Event of Default will have occurred and be
     continuing.

                                       110
Any such designation by the board of directors will be evidenced to the
trustee by promptly filing with the trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.

     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

     "Wholly-Owned Subsidiary" means, with respect to any Person, any Restricted
Subsidiary of such Person of which all the outstanding Capital Stock (other than
in the case of a foreign Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by such Person or any Wholly-Owned Subsidiary of such
Person.

     "Working Capital Collateral" means that portion of the Collateral
consisting of cash, deposit accounts, receivables and inventory, together with
all documents of title, letters of credit, books, records and files (whether in
physical or electronic form) relating to the foregoing.

EXCHANGE OFFER; REGISTRATION RIGHTS

     As part of the sale of the notes to the Initial Purchaser pursuant to the
Purchase Agreement, we, the Guarantors and the Initial Purchaser entered into
the Registration Rights Agreement dated October 15, 2002. Pursuant to our
obligations under the Registration Rights Agreement, on July 29, 2003, we
consummated an exchange offer in which we exchanged notes that were registered
under the Securities Act for all unregistered notes that were tendered and not
validly withdrawn in the exchange offer. As our affiliate, Atlantic Equity
Partners III, L.P. was not eligible to participate in the exchange offer. All of
the notes, other than the $7,250,000 aggregate principal amount at maturity
beneficially owned by Atlantic Equity Partners III, L.P., were exchanged for
registered notes in the exchange offer.

BOOK-ENTRY; DELIVERY AND FORM

  THE GLOBAL NOTES

     The notes were initially issued in the form of one or more global
securities registered in the name of The Depository Trust Company, which we
refer to as "DTC," or its nominee. We expect that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount at maturity
of the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the initial
purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Holders may hold their interests in the
Global Notes directly through DTC if they are participants in such system, or
indirectly through organizations that are participants in such system.

     So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by such Global Notes for all purposes
under the indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the indenture with respect to the notes.

     Payments of the principal of, premium (if any), interest (including
additional interest) on, the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of
                                       111
us, the trustee or any paying agent will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.

     We expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including additional interest) on the
Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
at maturity of the Global Notes as shown on the records of DTC or its nominee.
We also expect that payments by participants to owners of beneficial interests
in the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.

     Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell notes to persons in
states which require physical delivery of the notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the indenture.

     DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount at maturity of notes as to which such
participant or participants has or have given such direction. However, if there
is an event of default under the indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.

     DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.

     Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the trustee nor we will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

  CERTIFICATED SECURITIES

     Certificated Securities will be issued in exchange for beneficial interests
in the Global Notes (i) if requested by a holder of such interests or (ii) if
DTC is at any time unwilling or unable to continue as a depositary for the
Global Notes and a successor depositary is not appointed by us within 90 days.

                                       112
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the material U.S. federal income tax
consequences of the ownership and disposition of notes. Unless otherwise stated
under the heading "Non-U.S. holders," below, this summary deals only with notes
held as capital assets by U.S. holders, as defined below. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currency or tax-exempt investors. This summary also does not
address the tax consequences to U.S. holders that have a functional currency
other than the U.S. Dollar, partnerships or other entities treated as
partnerships that hold notes, persons that hold notes as part of a straddle,
hedging, constructive sale or conversion transaction, or shareholders, partners
or beneficiaries of a holder of notes. It also does not include any description
of any tax consequences under the tax laws of any state or local government or
of any foreign government that may be applicable to the notes. This summary is
based on the Internal Revenue Code of 1986, as amended, which we refer to in
this prospectus as the Code, Treasury regulations under the Code, which we refer
to in this prospectus as the Treasury Regulations, and administrative and
judicial interpretations of the Code, as of the date of this prospectus, all of
which are subject to change, possibly on a retroactive basis.

     As used in this section, the term "U.S. holder" means any beneficial owner
of notes that is, for United States federal income tax purposes,

     - a citizen or resident of the United States,

     - a corporation (or other entity taxable as a corporation) created or
       organized in or under the laws of the United States, any state thereof or
       the District of Columbia,

     - an estate the income of which is subject to United States federal income
       taxation regardless of its source, or

     - a trust if (1) a court within the United States is able to exercise
       primary supervision over the administration of the trust and one or more
       United States persons have the authority to control all substantial
       decisions of the trust or (2) the trust has in effect a valid election to
       be treated as a domestic trust for United States federal income tax
       purposes.

     As used in this discussion, the term Non-U.S. holder means a beneficial
owner of notes that is not a U.S. holder and is not an entity organized in or
under the laws of the United States, any state thereof or the District of
Columbia.

     YOU SHOULD CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS WITH RESPECT TO AN INVESTMENT IN THE
NOTES.

U.S. HOLDERS

     Interest Income.  Stated interest on a note will be includible in a U.S.
holder's gross income as ordinary interest income at the time it is accrued or
received in accordance with the U.S. holder's method of accounting for United
States federal income tax purposes.

     Original Issue Discount.  The notes were issued with original issue
discount in an amount equal to the difference between the principal amount of
the notes and the original offering price of the notes. A U.S. holder of a note
must include original issue discount in income as ordinary interest income for
United States federal income tax purposes as it accrues under a constant yield
method in advance of receipt of the cash payments attributable to such income,
regardless of such U.S. holder's regular method of tax accounting. In general,
the amount of original issue discount included in income by the holder of a note
will be the sum of the daily portions of original issue discount with respect to
such note for each day during the taxable year (or portion of the taxable year)
on which such U.S. holder held such note. The "daily portion" of original issue
discount on a note is determined by allocating to each day in any accrual period
a ratable portion of the original issue discount allocable to that accrual
period. An "accrual period" may be of any length and the accrual periods may
vary in length over the term of the note, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs
                                       113
either on the final day of an accrual period or on the first day of an accrual
period. The amount of original issue discount allocable to each accrual period
is generally equal to the difference between:

     - the product of the note's adjusted issue price at the beginning of such
       accrual period and its yield to maturity (determined on the basis of
       compounding at the close of each accrual period and appropriately
       adjusted to take into account the length of the particular accrual
       period), and

     - the amount of any qualified stated interest payments allocable to such
       accrual period.

The "adjusted issue price" of a note at the beginning of any accrual period is
the sum of the issue price of the note plus the amount of original issue
discount allocable to all prior accrual periods minus the amount of any prior
payments on the note that were not stated interest payments. Under these rules,
U.S. holders generally will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods.

     As described in more detail under "Description of the Notes," we are
obligated to redeem 20% of the principal amount at maturity of each note, plus
accrued and unpaid interest to the redemption date, on October 15, 2007 and an
additional 10% of the original principal amount at maturity of each note on
October 15, 2008. This redemption of the principal amount at maturity will be
treated for federal income tax purposes as a payment of original issue discount
to the extent of any accrued but unpaid original issue discount and thereafter
as a repayment of principal. While these payments do not affect the total amount
of original issue discount on the notes, they will be taken into account in the
determination of the yield to maturity calculation used in determining the
amount of original issue discount allocable to any accrual period. We intend to
take the position that the yield to maturity on the notes will initially be
determined assuming that these redemption payments will be made in the full
amount of 20% and 10% of the original principal amount at maturity of the notes,
plus accrued and unpaid interest to the redemption date, on October 15, 2007 and
October 15, 2008, respectively, subject to readjustment during the period that
the notes are outstanding to the extent that we may reduce our obligation to
make these redemptions on account of redemptions of the notes pursuant to an
Excess Cash Flow offer, as described under "Description of the Notes -- Excess
Cash Flow Offer" and "Description of the Notes -- Redemption -- Mandatory
Redemption."

     We also have various optional redemption rights, some of which are subject
to contingencies and some of which are unrestricted. You also have the option to
require us to purchase all or a portion of your notes upon the occurrence of a
Change of Control. We do not believe that these redemption options will affect
the determination of the yield or deemed maturity date of the notes or otherwise
affect the amount or timing or accrual of original issue discount on the notes.
If this belief or our belief regarding the effect of mandatory redemption
payments described in the preceding paragraph is incorrect, the amount and
timing of original issue discount required to be taken into account by you may
be affected. You should consult your tax advisor regarding the possible effects,
if any, of these redemption rights on the calculation of original issue discount
on any notes that you buy.

     Sale, Exchange or Retirement of Notes.  Upon sale, exchange or retirement
of a note, a U.S. holder generally will recognize gain or loss equal to the
difference between the U.S. holder's adjusted tax basis in the note and the
amount realized on the sale, exchange, or retirement (less any accrued but
previously unpaid interest, which would be treated as a payment of previously
accrued interest on the notes). A U.S. holder's adjusted tax basis in a note
will generally equal the issue price of such note, increased by the amount of
original issue discount previously included in income by such holder with
respect to such note and reduced by any principal payments received by the U.S.
holder. Gain or loss so recognized will be capital gain or loss and will be
long-term capital gain or loss if, at the time of the sale, exchange, or
retirement, the note was held for more than one year. Under current law, net
capital gains of non-corporate taxpayers, under certain circumstances, are taxed
at lower rates than items of ordinary income. The deduction of capital losses is
subject to certain limitations.

                                       114
NON-U.S. HOLDERS

     Interest Income.  Generally, interest income (including original issue
discount) of a Non-U.S. holder that is not effectively connected with a United
States trade or business will be subject to a withholding tax at a 30% rate or,
if applicable, a lower tax rate specified by a treaty. However, interest income
(including original issue discount) earned on the notes by a Non-U.S. holder may
qualify for the "portfolio interest" exemption and therefore not be subject to
United States federal income tax or withholding tax, if such interest income is
not effectively connected with a United States trade or business of the Non-U.S.
holder and if:

     - the Non-U.S. holder does not actually or constructively own 10% or more
       of the total combined voting power of all classes of our stock entitled
       to vote,

     - the Non-U.S. holder is not a controlled foreign corporation that is
       related to us through stock ownership,

     - the Non-U.S. holder certifies to us or our agent, under penalties of
       perjury, that it is not a U.S. holder and provides its name and address
       or otherwise satisfies applicable identification requirements, and

     - neither we nor our paying agent knows or has reason to know that the
       conditions of the exemption are, in fact, not satisfied.

     In the case of notes held by partnerships, the certification described
above must be provided by the partners, rather than by the partnerships and the
partnership must provide certain information, including a U.S. taxpayer
identification number. A look through rule applies in the case of tiered
partnerships.

     Unless an applicable treaty otherwise provides, a Non-U.S. holder generally
will be taxed in the same manner as a U.S. holder with respect to interest
(including original issue discount) if the interest income is effectively
connected with a United States trade or business of the Non-U.S. holder and, in
the case of a Non-U.S. holder that is eligible for benefits of an income tax
treaty with the United States, is attributable to a permanent establishment
maintained by the Non-U.S. holder in the United States. Such effectively
connected interest received or accrued by a corporate Non-U.S. holder may also,
under certain circumstances, be subject to an additional "branch profits" tax at
a 30% rate or, if applicable, a lower tax rate specified by a treaty. Even
though such effectively connected interest is subject to U.S. income tax and may
be subject to the branch profits tax, it is not subject to U.S. withholding tax
if the holder delivers a properly executed IRS Form W-8ECI (or a suitable
substitute form) to us or our paying agent and neither we nor our paying agent
knows or has reason to know that the information on the form is incorrect.

     Sale, Exchange, or Retirement of Notes.  A Non-U.S. holder generally will
not be subject to United States federal income tax or withholding tax on any
gain realized on the sale, exchange, or retirement of notes unless

     - the gain is effectively connected with a United States trade or business
       of the Non-U.S. holder, or

     - in the case of a Non-U.S. holder who is an individual, such holder is
       present in the United States for a period or periods aggregating 183 days
       or more during the taxable year of the disposition, and either such
       holder has a "tax home" in the United States or the disposition is
       attributable to an office or other fixed place of business maintained by
       such holder in the United States.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

     In general, information reporting on IRS Form 1099 will apply to payments
to a U.S. Holder of principal, premium, if any, and interest on a note and the
proceeds of the sale of a note. Backup withholding tax may apply to such
payments to a non-corporate U.S. holder if that U.S. holder:

     - fails to furnish or certify its correct taxpayer identification number to
       us or our paying agent in the manner required,
                                       115
- is notified by the IRS that it has failed to report payments of interest
       or dividends properly, or

     - under certain circumstances, fails to certify that it has not been
       notified by the IRS that it is subject to backup withholding for failure
       to report interest or dividend payments.

     Information reporting on IRS Form 1099 and backup withholding tax will not
apply to payments of interest on notes to a Non-U.S. holder if the certification
or identification requirements described in "-- Non-U.S. Holders -- Interest
Income" are satisfied by the holder, unless the payor knows or has reason to
know that the holder is not entitled to an exemption from information reporting
or backup withholding tax. However, we may report payments of interest on the
notes to a Non-U.S. holder on IRS Form 1042-S regardless of whether a Non-U.S.
holder provides the certification or identification requirements described
above.

     Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of notes effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless the broker is a United States person or has
certain connections to the United States. Payment of the proceeds of any such
sale effected outside the United States by a foreign office of a broker
described in the preceding sentence will not be subject to backup withholding
tax, but will be subject to information reporting requirements, unless the
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale to
or through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of the
notes provides the certification described in "Non-U.S. Holders -- Interest
Income" or otherwise establishes an exemption.

     Any amounts withheld under the backup withholding rules will be allowed as
a credit against that holder's United States federal income tax liability and
may entitle the holder to a refund, provided that the required information is
furnished to the I.R.S. The rate for backup withholding tax is 28% for tax years
beginning in 2003 and 2004.

     You are urged to consult with your own tax advisor with regard to the U.S.
federal income tax consequences of an investment in the notes as well as the
consequences under state, local and foreign income tax law. Non-U.S. holders are
urged to consult their own tax advisors as to the effect of income tax treaties
and reporting requirements with regard to an investment in the notes.

EFFECT OF HYDO PAYMENTS ON OUR ABILITY TO DEDUCT INTEREST ON THE NOTES

     On each payment date beginning March 1, 2008, in addition to accrued
interest due on that date, we will make a payment, which we call a HYDO payment,
on each note in cash in an amount equal to the excess, if any, of:

     - the total amount of interest and original issue discount accrued on the
       note through that date, over

     - the sum of:

      - all amounts of interest and original issue discount paid in cash with
        respect to such note through and including that date;

      - all HYDO payments previously made by us on the note; and

      - the annual "yield to maturity" applicable for purposes of the accrual of
        original issue discount multiplied by the original principal amount of
        the note.

     As a result of making these HYDO payments, we will not be subject to
special rules that would otherwise limit the amount of interest expense we could
deduct on the notes for U.S. federal income tax purposes. If the notes did not
provide for HYDO payments, the special rules would apply. If these rules were to
apply, we would not be allowed a deduction for the "disqualified portion" of the
original issue discount on the notes and would not be allowed a deduction with
respect to the remainder of such original issue discount until it was paid.
                                       116
The "disqualified portion" of the original issue discount on a note would
be calculated as the lesser of:

     - the amount of such original issue discount, or

     - the portion of the "total return" on the note which bears the same ratio
       to such total return as the "disqualified yield" on the note bears to the
       yield to maturity on the note.

For this purpose,

     - the term "total return" is the amount that would have been the original
       issue discount on the note if the stated interest on the note were
       included in its stated redemption price at maturity, and

     - the term "disqualified yield" means (i) the excess of the yield to
       maturity on the note over (ii) the sum of (A) the applicable Federal rate
       in effect under section 1274(d) of the Code for the calendar month in
       which the note is issued and (B) six percentage points.

                                       117
PLAN OF DISTRIBUTION

     Holdings will sell the notes directly to purchasers at the offering price
that appears on the cover page of this prospectus. Holdings may be deemed to be
an "underwriter" within the meaning of the Securities Act. To our knowledge,
there are currently no plans, arrangements or understandings between Holdings
and any underwriter, broker-dealer or agent regarding the sale of the notes by
Holdings.

     In order to comply with the securities laws of particular states, the notes
covered by this prospectus may be sold in certain states only through registered
or licensed brokers or dealers. In addition, in particular states, the notes may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

     Certain persons that participate in the distribution of the notes may
engage in transactions that stabilize, maintain or otherwise affect the price of
the notes, including over allotment, stabilizing and short-covering transactions
in such notes, and the imposition of penalty bids, in connection with an
offering. Any person participating in the distribution of the notes registered
under the registration statement that includes this prospectus will be subject
to applicable provisions of the Exchange Act and the applicable SEC rules and
regulations, including, among others, Regulation M, which may limit the timing
of purchases and sales of any of the notes by any such person. Furthermore,
Regulation M may restrict the ability of any person engaged in the distribution
of the notes to engage in market-making activities with respect to the notes.
These restrictions may affect the marketability of the notes and the ability of
any person or entity to engage in market-making activities with respect to the
notes.

     The notes are not listed and we do not intend to list the notes on any
securities exchange or to include the notes in any automated quotation system.
Currently, there is no public market for the notes.

     Holdings and Atlantic Equity Partners III have agreed that the aggregate
value of the shares of common stock to be issued by Holdings to Atlantic Equity
Partners III in the private transaction described in "Related Party
Transactions -- Issuances of Common Stock of Holdings" and "Selling Noteholder"
will be reduced by the amount of the expenses related to this offering. Subject
to the preceding sentence, Holdings has agreed to pay all of the expenses
incidental to the registration, offering and sale by Holdings of the notes to
the public, including any expenses relating to the filing of the registration
statement of which this prospectus is a part. We estimate these expenses to be
approximately $200,000.

                                       118
WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the Securities and Exchange Commission, which we refer
to as the SEC, a registration statement on Form S-1 under the Securities Act of
1933, which we refer to as the Securities Act, with respect to the offering of
the notes. This prospectus does not contain all the information included in the
registration statement and the exhibits and schedules thereto. You will find
additional information about us and the notes in the registration statement. We
also file annual, quarterly and special reports with the SEC. The registration
statement and the exhibits and schedules thereto and the other materials we file
with the SEC are available to the public over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities at 450 Fifth Street, N. W., Washington,
D. C. 20549, 233 Broadway, New York, New York 10279 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can also
obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D. C. 20549.
Please call the SEC at l-800-SEC-0330 for further information on the operation
of the public reference facilities. Statements made in this prospectus about
legal documents may not necessarily be complete and you should read the
documents which are filed as exhibits to the registration statement or otherwise
filed with the SEC.

     You may also request a copy of these filings at no cost, by writing or
calling us at the following address:

     Golfsmith International, Inc.
     11000 N. IH-35
     Austin, Texas 78753-3195
     (512) 837-8810
     Attention: Chief Executive Officer

     In addition, while any notes remain outstanding, we will make available,
upon request, to any holder and any prospective purchaser of notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act during
any period in which we are not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, which we refer to as the Exchange Act.

                                 LEGAL MATTERS

     Certain matters relating to the notes will be passed upon for us by King &
Spalding LLP, New York, New York.

                                    EXPERTS

     Ernst & Young LLP, independent auditors, have audited our consolidated
balance sheets as of January 3, 2004 and December 28, 2002, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 29, 2001, the period from December 30, 2001 through
October 15, 2002, the period from October 16, 2002 through December 28, 2002,
and the year ended January 3, 2004, as set forth in their report. We have
included our financial statements in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

                                       119
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
                                                              ----
Report of Independent Registered Public Accounting Firm.....   F-2
Consolidated Balance Sheets at January 3, 2004 and December
  28, 2002..................................................   F-3
Consolidated Statements of Operations for the fiscal year
  ended January 3, 2004 (Successor), for the period from
  October 16, 2002 through December 28, 2002 (Successor),
  for the period from December 30, 2001 through October 15,
  2002 (Predecessor), and for the fiscal year ended December
  29, 2001 (Predecessor)....................................   F-4
Consolidated Statements of Stockholders' Equity and
  Comprehensive Income for the fiscal year ended January 3,
  2004 (Successor), for the period from October 16, 2002
  through December 28, 2002 (Successor), for the period from
  December 30, 2001 through October 15, 2002 (Predecessor),
  and for the fiscal year ended December 29, 2001
  (Predecessor).............................................   F-5
Consolidated Statements of Cash Flows for the fiscal year
  ended January 3, 2004 (Successor), for the period from
  October 16, 2002 through December 28, 2002 (Successor),
  for the period from December 30, 2001 through October 15,
  2002 (Predecessor), and for the fiscal year ended December
  29, 2001 (Predecessor)....................................   F-6
Notes to Consolidated Financial Statements..................   F-7
Consolidated Balance Sheets at April 3, 2004 (unaudited) and
  January 3, 2004...........................................  F-31
Consolidated Statements of Operations for the three months
  ended April 3, 2004 and March 29, 2003 (unaudited)........  F-32
Consolidated Statements of Cash Flows for the three months
  ended April 3, 2004 and March 29, 2003 (unaudited)........  F-33
Notes to Consolidated Financial Statements (unaudited)......  F-34
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Golfsmith International Holdings, Inc.

     We have audited the accompanying consolidated balance sheets of Golfsmith
International Holdings, Inc. (Successor to Golfsmith International Inc.) as of
January 3, 2004 and December 28, 2002 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year ended January 3,
2004, the period from December 30, 2001 through October 15, 2002 (representing
Golfsmith International Inc., or the "Predecessor"), the period from October 16,
2002 through December 28, 2002 (representing Golfsmith International Holdings,
Inc., or the "Successor") and for the year ended December 29, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Golfsmith International Holdings, Inc. ("Successor") at January 3, 2004 and
December 28, 2002, and the consolidated results of their operations and their
cash flows for the year ended January 3, 2004, the period from December 30, 2001
through October 15, 2002 ("Predecessor"), the period from October 16, 2002
through December 28, 2002 ("Successor") and for the year ended December 29,
2001, in conformity with U.S. generally accepted accounting principles.

                                          /s/ ERNST & YOUNG LLP

Austin, Texas
February 21, 2004

                                       F-2
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS
JANUARY 3,    DECEMBER 28,
                                                                  2004           2002
                                                              ------------   ------------
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  2,928,109   $ 11,412,460
  Receivables, net of allowances of $176,667 at January 3,
    2004 and $242,643 at December 28, 2002..................     2,689,815      1,639,120
  Inventories, net of reserves of $821,618 at January 3,
    2004 and $818,816 at December 28, 2002..................    51,212,544     32,351,880
  Deferred tax assets.......................................     1,437,922         67,905
  Prepaid and other current assets..........................     1,845,546      2,119,390
                                                              ------------   ------------
Total current assets........................................    60,113,936     47,590,755
Property and equipment:
  Land and buildings........................................    21,040,387     21,017,551
  Equipment, furniture, fixtures and autos..................    12,234,869      9,270,340
  Leasehold improvements and construction in progress.......    10,907,168      7,015,985
                                                              ------------   ------------
                                                                44,182,424     37,303,876
  Less: accumulated depreciation and amortization...........    (6,100,047)    (1,258,676)
                                                              ------------   ------------
Net property and equipment..................................    38,082,377     36,045,200
Goodwill....................................................    42,035,545     34,948,016
Tradename...................................................    11,158,000     11,158,000
Trademarks..................................................    15,459,038     15,093,396
Customer database, net of accumulated amortization of
  $472,111 at January 3, 2004 and $94,422 at December 28,
  2002......................................................     2,927,094      3,304,783
Deferred tax assets.........................................     2,724,174      4,274,161
Debt issuance costs, net of accumulated amortization of
  $1,087,499 at January 3, 2004 and $178,744 at December 28,
  2002......................................................     6,770,216      7,596,561
Other long-term assets......................................        56,333             --
                                                              ------------   ------------
Total assets................................................  $179,326,713   $160,010,872
                                                              ============   ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 23,604,647   $ 17,822,015
  Accrued expenses and other current liabilities............    16,762,870     12,822,302
  Lines of credit...........................................     1,417,039             --
                                                              ------------   ------------
Total current liabilities...................................    41,784,556     30,644,317
Long-term debt, less current maturities.....................    77,482,469     75,380,045
Deferred rent...............................................     1,083,511        513,324
                                                              ------------   ------------
Total liabilities...........................................   120,350,536    106,537,686
Stockholders' Equity:
  Common stock -- $.001 par value; 40,000,000 shares
    authorized; 21,594,597 and 20,077,931 shares issued and
    outstanding at January 3, 2004 and December 28, 2002,
    respectively............................................        21,594         20,078
  Restricted common stock units -- $.001 par value; 755,935
    and 839,268 shares issued and outstanding at January 3,
    2004 and December 28, 2002, respectively................           756            839
  Additional capital........................................    60,288,607     55,990,042
  Other comprehensive income................................       186,877         48,148
  Accumulated deficit.......................................    (1,521,657)    (2,585,921)
                                                              ------------   ------------
Total stockholders' equity..................................    58,976,177     53,473,186
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $179,326,713   $160,010,872
                                                              ============   ============
See accompanying notes.
                                       F-3
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
SUCCESSOR                    PREDECESSOR
                                           ---------------------------   ---------------------------
                                                            FOR THE        FOR THE
                                                          PERIOD FROM    PERIOD FROM
                                                          OCTOBER 16,    DECEMBER 30,
                                           FISCAL YEAR        2002           2001       FISCAL YEAR
                                              ENDED         THROUGH        THROUGH         ENDED
                                            JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                               2004           2002           2002           2001
                                           ------------   ------------   ------------   ------------
Net revenues.............................  $257,744,780   $37,830,540    $180,315,163   $221,438,496
Cost of products sold....................   171,083,110    25,146,178     117,206,594    143,117,798
                                           ------------   -----------    ------------   ------------
Gross profit.............................    86,661,670    12,684,362      63,108,569     78,320,698
Selling, general and administrative......    73,400,271    13,580,912      48,308,301     64,081,753
Store pre-opening expenses...............       599,603        92,792         121,686             --
Amortization of deferred compensation....            --            --       6,033,273        457,722
                                           ------------   -----------    ------------   ------------
Total operating expenses.................    73,999,874    13,673,704      54,463,260     64,539,475
                                           ------------   -----------    ------------   ------------
Operating income.........................    12,661,796      (989,342)      8,645,309     13,781,223
Interest expense.........................   (11,156,792)   (2,210,304)     (5,205,859)    (6,825,356)
Interest income..........................        39,776         7,119         330,587        597,595
Other income.............................       210,707        13,725       2,365,551      1,181,538
Other expense............................       (46,270)         (133)                      (150,000)
Minority interest........................            --            --        (844,378)      (580,798)
Loss on debt extinguishment..............            --            --      (8,046,552)            --
                                           ------------   -----------    ------------   ------------
Income (loss) from continuing operations
  before income taxes....................     1,709,217    (3,178,935)     (2,755,342)     8,004,202
Income tax (expense) benefit.............      (644,953)      632,934        (708,374)      (251,147)
                                           ------------   -----------    ------------   ------------
Income (loss) from continuing
  operations.............................     1,064,264    (2,546,001)     (3,463,716)     7,753,055
Loss from discontinued operations,
  including loss on disposal of $285,886
  for the year ended December 28, 2002
  (see Note 6)...........................            --       (39,920)       (229,880)      (589,881)
                                           ------------   -----------    ------------   ------------
Income (loss) before extraordinary
  item...................................     1,064,264    (2,585,921)     (3,693,596)     7,163,174
Extraordinary gain -- negative goodwill
  arising from purchase of minority
  interest (see Note 4)..................            --            --       4,121,927             --
                                           ------------   -----------    ------------   ------------
Net income (loss)........................  $  1,064,264   $(2,585,921)   $    428,331   $  7,163,174
                                           ============   ===========    ============   ============
See accompanying notes.
                                       F-4
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
COMMON STOCK
                                                   ----------------------------------------------   RESTRICTED STOCK
                                                                                  GOLFSMITH         UNITS GOLFSMITH
                                                          GOLFSMITH             INTERNATIONAL        INTERNATIONAL
                                                     INTERNATIONAL, INC.        HOLDINGS, INC.       HOLDINGS, INC.
                                                   -----------------------   --------------------   ----------------    ADDITIONAL
                                                     SHARES       AMOUNT       SHARES     AMOUNT    SHARES    AMOUNT     CAPITAL
                                                   -----------   ---------   ----------   -------   -------   ------   ------------
Balance at December 30, 2000 (Predecessor).......   10,000,000   $ 100,000           --   $   --         --    $ --    $ 10,512,226
 Stock compensation -- variable employee
   options.......................................           --          --           --       --         --      --       2,374,254
 Amortization of deferred compensation...........           --          --           --       --         --      --              --
 Amortization of deferred interest...............           --          --           --       --         --      --              --
 Comprehensive income:
   Translation adjustments, cumulative
     translation loss of $(337,392) at December
     29, 2001....................................           --          --           --       --         --      --              --
   Net income....................................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
     Total comprehensive income..................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at December 29, 2001 (Predecessor).......   10,000,000     100,000           --       --         --      --      12,886,480
 Dividends paid..................................           --          --           --       --         --      --              --
 Stock compensation -- variable employee
   options.......................................           --          --           --       --         --      --       4,116,741
 Amortization of deferred compensation...........           --          --           --       --         --      --              --
 Amortization of deferred interest...............           --          --           --       --         --      --              --
 Pre merger net income...........................           --          --           --       --         --      --              --
 Merger of Golfsmith International, Inc. into
   Golfsmith International Holdings, Inc.........  (10,000,000)   (100,000)          --       --         --      --     (17,003,221)
 Issuance of Holdings common stock net of
   issuance costs of $6,740,637..................           --          --   20,077,931   20,078         --      --      53,473,079
 Issuance of Holdings restricted stock units.....           --          --           --       --    839,268     839       2,516,963
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance October 15, 2002 (Predecessor)...........           --   $      --   20,077,931   $20,078   839,268    $839    $ 55,990,042
                                                   ===========   =========   ==========   =======   =======    ====    ============
-----------------------------------------------------------------------------------------------------------------------------------
Balance October 16, 2002 (Successor).............           --   $      --   20,077,931   $20,078   839,268    $839    $ 55,990,042
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $48,148 at December 28,
     2002........................................           --          --           --       --         --      --              --
   Net loss of Holdings..........................           --          --           --       --         --      --              --
     Total comprehensive loss....................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at December 28, 2002 (Successor).........           --          --   20,077,931   20,078    839,268     839      55,990,042
 Issuance of common stock........................           --          --    1,433,333    1,433         --      --       4,298,565
 Conversion of restricted stock..................           --          --       83,333       83    (83,333)    (83)             --
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $186,877 at January 3,
     2004........................................           --          --           --       --         --      --              --
   Net income of Holdings........................           --          --           --       --         --      --              --
       Total comprehensive income................           --          --           --       --         --      --              --
                                                   -----------   ---------   ----------   -------   -------    ----    ------------
Balance at January 3, 2004 (Successor)...........           --   $      --   21,594,597   $21,594   755,935    $756    $ 60,288,607
                                                   ===========   =========   ==========   =======   =======    ====    ============
RETAINED
                                                                                  OTHER         EARNINGS
                                                   DEFERRED      DEFERRED     COMPREHENSIVE   (ACCUMULATED   STOCKHOLDERS'
                                                   INTEREST    COMPENSATION      INCOME         DEFICIT)        EQUITY
                                                   ---------   ------------   -------------   ------------   -------------
Balance at December 30, 2000 (Predecessor).......  $(175,548)  $        --      $(275,865)    $14,760,558    $ 24,921,371
 Stock compensation -- variable employee
   options.......................................         --    (2,374,254)            --              --              --
 Amortization of deferred compensation...........         --       457,722             --              --         457,722
 Amortization of deferred interest...............     38,358            --             --              --          38,358
 Comprehensive income:
   Translation adjustments, cumulative
     translation loss of $(337,392) at December
     29, 2001....................................         --            --        (61,527)             --         (61,527)
   Net income....................................         --            --             --       7,163,174       7,163,174
                                                   ---------   -----------      ---------     -----------    ------------
     Total comprehensive income..................         --            --             --              --       7,101,647
                                                   ---------   -----------      ---------     -----------    ------------
Balance at December 29, 2001 (Predecessor).......   (137,190)   (1,916,532)      (337,392)     21,923,732      32,519,098
 Dividends paid..................................         --            --             --      (3,237,500)     (3,237,500)
 Stock compensation -- variable employee
   options.......................................         --    (4,116,741)            --              --              --
 Amortization of deferred compensation...........         --     6,033,273             --              --       6,033,273
 Amortization of deferred interest...............    137,190            --             --              --         137,190
 Pre merger net income...........................         --            --             --         428,331         428,331
 Merger of Golfsmith International, Inc. into
   Golfsmith International Holdings, Inc.........         --            --        337,392     (19,114,563)    (35,880,392)
 Issuance of Holdings common stock net of
   issuance costs of $6,740,637..................         --            --             --              --      53,493,157
 Issuance of Holdings restricted stock units.....         --            --             --              --       2,517,802
                                                   ---------   -----------      ---------     -----------    ------------
Balance October 15, 2002 (Predecessor)...........  $      --   $        --      $      --     $        --    $ 56,010,959
                                                   =========   ===========      =========     ===========    ============
-----------------------------------------------------------------------------------------------------------------------------------
Balance October 16, 2002 (Successor).............  $      --   $        --      $      --     $        --    $ 56,010,959
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $48,148 at December 28,
     2002........................................         --            --         48,148              --          48,148
   Net loss of Holdings..........................         --            --             --      (2,585,921)     (2,585,921)
     Total comprehensive loss....................         --            --             --              --      (2,537,773)
                                                   ---------   -----------      ---------     -----------    ------------
Balance at December 28, 2002 (Successor).........         --            --         48,148      (2,585,921)     53,473,186
 Issuance of common stock........................         --            --             --              --       4,299,998
 Conversion of restricted stock..................         --            --             --              --              --
 Comprehensive loss:
   Translation adjustments, cumulative
     translation gain of $186,877 at January 3,
     2004........................................         --            --        138,729              --         138,729
   Net income of Holdings........................         --            --             --       1,064,264       1,064,264
       Total comprehensive income................         --            --             --              --       1,202,993
                                                   ---------   -----------      ---------     -----------    ------------
Balance at January 3, 2004 (Successor)...........  $      --   $        --      $ 186,877     $(1,521,657)   $ 58,976,177
                                                   =========   ===========      =========     ===========    ============
See accompanying notes.

                                       F-5
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
SUCCESSOR                    PREDECESSOR
                                                              ---------------------------   ---------------------------
                                                                               FOR THE        FOR THE
                                                                             PERIOD FROM    PERIOD FROM
                                                                             OCTOBER 16,    DECEMBER 30,
                                                              FISCAL YEAR        2002           2001       FISCAL YEAR
                                                                 ENDED         THROUGH        THROUGH         ENDED
                                                               JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                                                  2004           2002           2002           2001
                                                              ------------   ------------   ------------   ------------
OPERATING ACTIVITIES
Net income (loss)...........................................  $  1,064,264   $(2,585,921)   $   428,331    $  7,163,174
 Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Depreciation.............................................     4,850,711     1,255,251      4,776,431       6,455,080
   Amortization of intangible assets........................       377,689        94,422         31,959         261,835
   Amortization of debt issue costs and debt discount.......     3,011,179       558,788      1,821,074       2,000,700
   Interest paid with issuance of in-kind debt..............            --            --             --         954,810
   Minority interest........................................            --            --        844,378         580,798
   Stock compensation to non-employee.......................            --            --         30,284          38,358
   Stock compensation -- variable employee options..........            --            --      6,033,273         457,722
   Net loss (gain) on sale of real estate and other
     assets.................................................         3,069            --     (2,215,735)       (980,233)
   Loss on extinguishment of debt...........................            --            --      8,046,552              --
   Extraordinary gain -- negative goodwill arising from
     purchase of minority interest..........................            --            --     (4,121,927)             --
   Changes in operating assets and liabilities:
     Accounts receivable....................................    (1,109,008)      462,403        959,130       6,001,531
     Inventories............................................   (14,196,793)      799,837      1,512,546      10,621,937
     Prepaid and other assets...............................       323,305      (475,753)      (457,688)        992,458
     Deferred income taxes..................................       179,970      (439,814)            --              --
     Accounts payable.......................................     3,346,528     4,767,312     (5,884,333)      6,597,510
     Accrued expenses and other current liabilities.........     2,632,298     3,861,433         15,363          11,586
     Deferred rent..........................................       570,187       404,817       (304,597)        373,870
                                                              ------------   -----------    ------------   ------------
Net cash provided by operating activities...................     1,053,399     8,702,775     11,515,041      41,531,136
INVESTING ACTIVITIES
Purchase of property, plant and equipment...................    (5,759,429)   (1,126,683)    (2,086,323)     (1,344,843)
Proceeds from sale of real estate and other assets..........        18,046            --      3,313,022       1,395,736
Purchase of assets and other................................      (956,676)           --             --              --
Purchase of business, net of cash received..................    (8,585,560)           --             --              --
                                                              ------------   -----------    ------------   ------------
Net cash provided by (used in) investing activities.........   (15,283,619)   (1,126,683)     1,226,699          50,893
FINANCING ACTIVITIES
Principal payments on lines of credit.......................   (27,178,727)           --     (9,840,843)    (20,115,977)
Proceeds from lines of credit...............................    28,595,766            --      9,807,280      12,977,194
Principal payments on term note.............................            --            --    (41,698,481)     (5,999,996)
Proceeds from issuance of common stock......................     4,299,998            --     43,243,157              --
Payments to satisfy debt and minority interest
 obligations................................................            --            --    (10,634,165)             --
Distributions to shareholders...............................            --            --    (35,880,392)             --
Dividends paid..............................................            --            --     (3,237,500)             --
Dividends paid to minority interest owners..................            --            --       (262,500)             --
Debt issuance costs.........................................       (82,410)           --             --              --
Other.......................................................       (23,264)           --             --              --
                                                              ------------   -----------    ------------   ------------
Net cash provided by (used in) financing activities.........     5,611,363            --    (48,503,444)    (13,138,779)
Effect of exchange rate changes on cash.....................       134,506        48,148             --         (42,475)
                                                              ------------   -----------    ------------   ------------
Change in cash and cash equivalents.........................    (8,484,351)    7,624,240    (35,761,704)     28,400,775
Cash and cash equivalents, beginning of period..............    11,412,460     3,788,220     39,549,924      11,149,149
                                                              ------------   -----------    ------------   ------------
Cash and cash equivalents, end of period....................  $  2,928,109   $11,412,460    $ 3,788,220    $ 39,549,924
                                                              ============   ===========    ============   ============
Supplemental cash flow information:
 Interest payments..........................................  $  7,130,032   $     6,529    $ 4,078,658    $  4,322,284
 Tax payments...............................................       699,198        15,325        493,392         250,591
 Amortization of discount on senior subordinated notes......            --            --      1,369,447       1,620,349
 Amortization of discount on senior secured notes...........     2,102,424       380,045             --              --
 Issuance of common stock units in connection with business
   combination..............................................            --            --      2,517,802              --
 Management rollover of Golfsmith International, Inc. equity
   into Golfsmith International Holdings, Inc. equity.......            --            --     10,250,000              --
 Issuance of senior secured notes in business combination...            --            --     75,000,000              --
See accompanying notes.
                                       F-6
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 3, 2004

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF PRESENTATION AND CHANGE IN REPORTING ENTITY

     The accompanying consolidated financial statements include the accounts of
Golfsmith International Holdings, Inc. ("Holdings", the "Company", or
"Successor") and its wholly owned subsidiary Golfsmith International, Inc.
("Golfsmith" or "Predecessor"). Holdings was formed on September 4, 2002 as a
Delaware corporation to acquire all of the outstanding shares of common stock of
Golfsmith. Holdings acquired Golfsmith on October 15, 2002 (See Note 2).
Holdings has no assets or liabilities other than its investment in its wholly
owned subsidiary Golfsmith and did not have operations prior to the acquisition
of Golfsmith; accordingly these consolidated financial statements represent the
operations of Golfsmith and its subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.

     For purposes of presentation, the accompanying statements of operations and
cash flows for the period from December 30, 2001 through October 15, 2002 and
for the year ended December 29, 2001 reflect the operating results and cash
flows of Golfsmith prior to its acquisition by Holdings on October 15, 2002. The
accompanying statements of operations and cash flows for the year ended January
3, 2004 and for the period from October 16, 2002 through December 28, 2002
reflect the sum of the consolidated operating results and cash flows of
Golfsmith and Holdings.

  NATURE OF OPERATIONS

     The Company is a multi-channel, specialty retailer of golf equipment and
related accessories and is a designer and marketer of golf equipment. Golfsmith
offers equipment from leading manufacturers, including Callaway(R), Cobra(R),
FootJoy(R), Nike(R), Ping(R), Taylor Made(R) and Titleist(R). In addition, the
Company offers its own proprietary brands, including Golfsmith(R), Lynx(R),
Snake Eyes(R), Killer Bee(R) and Zevo(R). The Company markets its products
through 38 superstores as well as through its direct-to-consumer channel, which
includes its clubmaking and accessory catalogs and its Internet site. The
Company also operates the Harvey Penick Golf Academy, an instructional school
incorporating the techniques of the well-known golf instructor, Harvey Penick.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and use assumptions that affect certain reported amounts and
disclosures. Although management uses the best information available, it is
reasonably possible that the estimates used by the Company will be materially
different from the actual results. These differences could have a material
effect on the Company's future results of operations and financial position. The
Company uses estimates when accounting for depreciation and amortization,
allowance for doubtful accounts, income taxes, allowance for obsolete inventory
and allowance for sales returns.

  CASH EQUIVALENTS

     Cash equivalents consist of commercial paper and other investments that are
readily convertible into cash and have maturities when purchased of three months
or less.

  INVENTORIES

     Inventories consist primarily of finished goods (i.e., golf equipment and
accessories) and are stated at the lower of cost (weighted average) or market.
Inbound freight charges, import fees and vendor discount

                                       F-7
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

charges are capitalized into inventory upon receipt of the purchased goods.
These costs are included in cost of products sold upon the sale of the
respective inventory item.

  CONCENTRATION OF FOREIGN SUPPLIERS

     The Company derives a significant portion of its sales from products
supplied by manufacturers located outside the United States (primarily China).
While the Company is not dependent on any single manufacturer outside the U.S.,
the Company could be adversely affected by political or economic disruptions
affecting the business or operations of third-party manufacturers located
outside the U.S.

  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost net of accumulated depreciation
and amortization. Depreciation and amortization are computed primarily using the
straight-line method over the estimated useful lives of the related assets,
generally 5 to 10 years for equipment, furniture, and fixtures and 40 years for
buildings. Leasehold improvements are amortized on a straight-line basis over
the shorter of the term of the related lease or estimated life of the leasehold
improvement. The Company capitalizes eligible internal-use software development
costs incurred subsequent to the completion of the preliminary project stage.
Development costs are amortized over the expected useful life of the software.
Repair and maintenance costs are expensed as incurred.

  LONG-LIVED ASSETS

     The Company evaluates its long-lived assets in accordance with SFAS No.
144, Accounting for the Impairment of Long-Lived Assets. Long-lived assets held
and used by the Company are reviewed for impairment whenever events or changes
in circumstances indicate that their net book value may not be recoverable. When
such factors and circumstances exist, the Company compares the projected
undiscounted future cash flows associated with the related asset or group of
assets over their estimated useful lives against their respective carrying
amounts. Impairment, if any, is based on the excess of the carrying amount over
the fair value of those assets and is recorded in the period in which the
determination was made and is recorded in continuing operations.

     Long-lived assets to be disposed of by sale are classified as held-for-sale
in the period in which the established criteria of SFAS No. 144 are met.

     Long-lived asset to be disposed of other than by sale are classified as
held-and-used until the disposal occurs. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets and is
recorded in the period in which the determination was made and is recorded in
continuing operations until the related assets are disposed of. The Company
recorded a loss from discontinued operations of $0.2 million during the period
from December 30, 2001 through October 15, 2002 and $0.1 million during the
period from October 16, 2002 through December 28, 2002 related to the disposal
of assets.

  FOREIGN CURRENCY TRANSLATION

     In accordance with Financial Accounting Standards No. 52, Foreign Currency
Translation, the financial statements of the Company's international operations
are translated into U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities, the historical exchange rate for stockholders'
equity, and a weighted average exchange rate for each period for revenues,
expenses, and gains and losses. Foreign currency translation adjustments are
recorded as a separate component of stockholders' equity as the local currency
is the functional currency. Gains and losses from foreign

                                       F-8
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currency denominated transactions are included in "Other income" in the
consolidated statement of operations and were not significant for the years
presented.

  CONCENTRATIONS OF CREDIT RISK

     Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash, cash equivalents and accounts
receivable. Excess cash is invested in high-quality, short-term, liquid money
instruments issued by highly rated financial institutions. Concentration of
credit risk with respect to the Company's receivables is minimized due to the
large number of customers, individually small balances, and short payment terms.

     The Company maintains an allowance for estimated losses resulting from
non-collection of customer receivables based on: historical collection
experience, age of the receivable balance, both individually and in the
aggregate, and general economic conditions. The Company generally does not
require collateral.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Fair value and carrying amounts for financial instruments may differ due to
instruments that provide fixed interest rates or contain fixed interest rate
elements. Such instruments are subject to fluctuations in fair value due to
subsequent movements in interest rates. The carrying value of the Company's
financial instruments approximates fair value, except for differences with
respect to long-term, fixed rate debt, which are not significant. Fair value for
such instruments is based on estimates using present value or other valuation
techniques.

  REVENUE RECOGNITION

     The Company recognizes retail sales at the time the customer takes
possession of the merchandise and purchases are paid for, primarily with either
cash or credit card.

     Catalog and e-commerce sales are recorded upon shipment of merchandise.
This policy is based on: (1) the customer has already paid for the goods with a
credit card, thus minimal collectibility risk exists, (2) the equipment being
shipped is complete and ready for shipment at the time of shipment, (3) the date
of delivery is within a reasonable time of the order, generally within one week,
(4) the Company has no further obligations once the product is shipped, (5) the
Company's custodial risks are insured by a third party shipping company, and (6)
the Company records an allowance for estimated returns in the period of sale.

     The Company recognizes revenue from the Harvey Penick Golf Academy
instructional school at the time the services are performed.

     Revenues from the sale of gift certificates are recorded upon the
redemption of the gift certificate for the purchase of tangible products at the
time the customer takes possession of the merchandise. At the purchase of a gift
certificate, a liability is recorded until the redemption of the certificate for
merchandise occurs.

     For all merchandise sales, the Company reserves for sales returns in the
period of sale through estimates based on historical experience.

  SHIPPING AND HANDLING COSTS

     Amounts billed to customers in sales transactions related to shipping and
handling, if any, are included in revenues. Shipping and handling costs incurred
by the Company are included in cost of products sold.

                                       F-9
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  VENDOR REBATES AND PROMOTIONS

     The Company receives income from certain merchandise suppliers in the form
of rebates and promotions. Agreements are made with each individual supplier and
income is earned as buying levels are met and/or cooperative advertising is
placed. Rebate income is recorded as a reduction of cost of products sold and
cooperative promotional income is recorded as a reduction of selling, general
and administrative expenses. The uncollected amounts of vendor rebate and
promotional income remaining in receivables in the accompanying consolidated
balance sheets as of January 3, 2004, and December 28, 2002 were approximately
$0.7 million and $0.3 million, respectively. Cooperative promotional income
received and recorded as a reduction of selling, general and administrative
expenses was approximately $1.2 million for the fiscal year ended January 3,
2004, $0.2 million for the period from October 16, 2002 through December 28,
2002, $0.7 million for the period from December 30, 2001 through October 15,
2002, and $1.0 million for the fiscal year ended December 29, 2001. Vendor
rebate income received and recorded as a reduction of cost of products sold was
$0.8 million for the year ended January 3, 2004, $0.1 million for the period
from October 16, 2002 through December 28, 2002, $0.4 million for the period
from December 30, 2001 through October 15, 2002, and $0.5 million for the fiscal
year ended December 29, 2001.

  STORE PRE-OPENING AND CLOSING EXPENSES

     Costs associated with the opening of a new store, which include costs
associated with hiring and training personnel, supplies and certain occupancy
and miscellaneous costs related to new locations, are expensed as incurred. When
the Company decides to close a store, the Company recognizes an expense related
to the future net lease obligation, non-recoverable investments in related fixed
assets and other expenses directly related to the discontinuance of operations
in accordance with SFAS No. 146, Accounting For Costs Associated With Exit or
Disposal Activities. These charges require the Company to make judgments about
exit costs to be incurred for employee severance, lease terminations, inventory
to be disposed of, and other liabilities. The ability to obtain agreements with
lessors, to terminate leases or to assign leases to third parties can materially
affect the accuracy of these estimates.

  INCOME TAXES

     Prior to October 15, 2002, Golfsmith elected to be treated as a Subchapter
S Corporation under the Internal Revenue Code of 1986 as amended, whereby
federal income taxes are the responsibility of the individual stockholders.
Accordingly, Golfsmith did not provide for federal income taxes. Effective
October 15, 2002, Golfsmith merged with BGA Acquisition Corporation, a wholly
owned subsidiary of Holdings, with the surviving entity (Holdings' subsidiary)
being Golfsmith International, Inc. As part of the merger, Golfsmith's
Subchapter S status was terminated; thus, the Company became subject to
corporate income taxes beginning October 15, 2002.

     In accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, deferred income taxes were provided for all
temporary differences existing at the date of Golfsmith's termination of its
Subchapter S status. Deferred taxes are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to be recovered or settled.

  CATALOG COSTS AND ADVERTISING

     Catalog costs are amortized over the expected revenue stream, which
typically ranges between two and twelve months from the date the catalogs are
mailed. The Company capitalized approximately $0.7 million and $0.8 million in
catalog costs at January 3, 2004 and December 28, 2002, respectively.
Advertising costs are expensed as incurred. Advertising costs totaled
approximately $14.4 million for the
                                       F-10
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fiscal year ended January 3, 2004, $3.2 million for the period from October 16,
2002 through December 28, 2002, $10.0 million for the period from December 30,
2001 through October 15, 2002, and $12.8 million for the fiscal year ended
December 29, 2001. These amounts include amortization of catalog costs of
approximately $8.6 million for the fiscal year ended January 3, 2004, $2.0
million for the period from October 16, 2002 through December 28, 2002, $6.4
million for the period from December 30, 2001 to October 15, 2002, and $8.6
million for the fiscal year ended December 29, 2001.

  DEBT ISSUANCE COSTS

     Issuance costs are deferred and amortized to interest expense using the
interest method over the terms of the related debt. Amortization of such costs
for the fiscal year ended January 3, 2004, for the period from October 16, 2002
through December 28, 2002, the period from December 30, 2001 through October 15,
2002, and for the fiscal year ended 2001 totaled approximately $0.9 million,
$0.5 million, $0.2 million, and $0.4 million, respectively. Approximately $1.7
million of debt issuance costs were written off on October 15, 2002 (the merger
date) because the debt was paid off. Of this expense approximately $1.5 million
is included in the loss on debt extinguishment in the accompanying statement of
operations for the period from December 30, 2001 through October 15, 2002.

  GOODWILL AND INTANGIBLE ASSETS

     Goodwill represents the excess purchase price over the fair value of net
assets acquired, or net liabilities assumed, in a business combination.
Beginning in 2002, the Company adopted Statement of Financial Accounting
Standard 142, Goodwill and Other Intangible Assets ("Statement 142"). In
accordance with Statement 142, the Company periodically assesses its intangible
assets, including goodwill, for indications of impairment annually, or more
frequently if events or changes in circumstances indicate that the carrying
amount of goodwill may not be recoverable based on our projections of estimated
future discounted cash flows and other valuation methodologies. Factors that are
considered by management in performing this assessment include, but are not
limited to, our performance relative to our projected or historical results, our
intended use of the assets and our strategy for our overall business, as well as
industry and economic trends. In the event that the book value of intangibles
and goodwill is determined to be impaired, such impairments are measured using a
combination of a discounted cash flow valuation, with a discount rate determined
to be commensurate with the risk inherent in our current business model, and
other valuation methodologies. To the extent these future projections or our
strategies change, our estimates regarding impairment may differ from our
current estimates. The Company performs its annual test for goodwill impairment
on the first day of the fourth fiscal quarter of each year. Goodwill is
allocated to one enterprise-level reporting unit for impairment testing.

     Identifiable intangible assets consist of trademarks, the Golfsmith
tradename and customer databases acquired. The customer database intangible
asset is considered a definite lived intangible asset in accordance with
Statement 142 and is being amortized using the straight-line method over its
estimated useful life of 9 years. Both the trademark and tradename intangible
assets are considered indefinite lived intangible assets under Statement 142. As
such, amortization for these indefinite lived assets is replaced with periodic
impairment review.

     It is the Company's policy to value intangible assets at the lower of
unamortized cost or fair value. Management reviews the valuation and
amortization of intangible assets on a periodic basis, taking into consideration
any events or circumstances that might result in diminished fair value. The
Company periodically reviews the estimated useful lives of its identifiable
intangible assets, taking into consideration any events or circumstances which
might result in a diminished fair value or revised useful life.

                                       F-11
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  INSURANCE AND SELF-INSURANCE RESERVES

     The Company is primarily self-insured for employee health benefits. The
Company records its self-insurance liability based on claims filed and an
estimate of claims incurred but not yet reported. If more claims are made than
were estimated or if the costs of actual claims increases beyond what was
anticipated, reserves recorded may not be sufficient and additional accruals may
be required in future periods.

  STOCK-BASED COMPENSATION

     SFAS No. 123, Accounting for Stock-Based Compensation, prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by SFAS No. 123, the Company has
elected to continue to account for its employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB No. 25").

     In December 2002, the FASB issued SFAS No. 148, Accounting For Stock-Based
Compensation -- Transition and Disclosure, An Amendment of FASB Statement No.
123. This Statement amends SFAS No. 123, Accounting For Stock-Based
Compensation, to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of that
Statement to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation. Since the Company is continuing to account for
stock-based compensation according to APB 25, adoption of SFAS No. 148 requires
the Company to provide prominent disclosures about the affects of FASB No. 123
on reported net income (loss).

     In June 2003, the Company issued 1,840,500 options to purchase common stock
under the Golfsmith International Holdings, Inc. 2002 Incentive Stock Plan. The
options were issued with an exercise price of $3.00 per share and have a ten
year term.

     The following table illustrates the effect on net income (loss), if the
Company had applied the fair value recognition provisions of SFAS No. 123:
SUCCESSOR                    PREDECESSOR
                                            --------------------------   ---------------------------
                                                            FOR THE        FOR THE
                                                          PERIOD FROM    PERIOD FROM
                                                          OCTOBER 16,    DECEMBER 30,
                                            FISCAL YEAR       2002           2001       FISCAL YEAR
                                               ENDED        THROUGH        THROUGH         ENDED
                                            JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                               2004           2002           2002           2001
                                            -----------   ------------   ------------   ------------
Net Income (loss) as reported.............  $1,064,264    $(2,585,921)   $   428,331     $7,163,174
Total stock-based compensation cost, net
  of related tax effects included in the
  determination of net income (loss) as
  reported................................          --             --      6,063,557        496,080
The stock-based employee compensation
  cost, net of related tax effects, that
  would have been included in the
  determination of net income (loss) if
  the fair value based method had been
  applied to all awards...................     (97,585)            --     (6,078,057)            --
                                            ----------    -----------    -----------     ----------
Pro forma net income (loss)...............  $  966,679    $(2,585,921)   $   413,831     $7,659,254
                                            ==========    ===========    ===========     ==========
F-12
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  SEGMENTS

     The Company applies Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information, and
considers its business activities to constitute a single segment.

  FISCAL YEAR

     The Company's fiscal year ends on the Saturday closest to December 31.
Fiscal year 2003 consisted of 53 weeks. The combined predecessor and successor
fiscal year ended December 28, 2002 and the predecessor fiscal year ended
December 29, 2001 each consisted of 52 weeks.

  RECENTLY ISSUED ACCOUNTING STANDARDS

  Variable Interest Entities

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 requires that if an entity has a
controlling financial interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest entity should be
included in the consolidated financial statements of the entity. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after December 31, 2003. The adoption of FIN
46 is not expected to have a material impact on the Company's results of
operations or financial position.

  Financial Instruments with Characteristics of Both Liabilities and Equity

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS No. 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS No. 150 did not have a material impact on the Company's
results of operations or financial position.

2.  BUSINESS COMBINATIONS

  GOLFSMITH INTERNATIONAL, INC.

     On October 15, 2002, the Company acquired all of the issued and outstanding
shares of Golfsmith. The total purchase price was $121.0 million including
related acquisition costs of $6.7 million. Atlantic Equity Partners III, L.P.,
the Company's majority stockholder, acquires profitable companies that it
believes to be leaders in their respective markets and that it believes will
increase in value over time. The Company believed that Golfsmith satisfied these
criteria based on its profitable business, its investment in infrastructure to
support additional growth, and its private label brands. The Company believed
that these attributes would allow Golfsmith opportunities to increase in value,
and therefore justified the purchase price that exceeded the fair market value
of the assets.

     In conjunction with the acquisition of Golfsmith, the Company issued
20,077,931 shares of common stock and 839,268 restricted stock units to
investors for approximately $62.8 million, excluding related issuance costs.
Golfsmith International, Inc., being the surviving wholly owned subsidiary of
the Company, issued Senior Secured Notes at a 20% discount off of face value for
consideration of $75.0 million (see

                                       F-13
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Note 5). The proceeds from the issuance of common stock and restricted stock
units and the new Senior Secured Notes were utilized to fund the acquisition of
Golfsmith.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including identifiable intangible assets, based on
their respective fair values at the date of acquisition as determined by an
independent valuation obtained by the Company. Such allocation resulted in
goodwill of $34.9 million. Goodwill is assigned at the enterprise level and is
deductible for income tax purposes. Subsequent to the acquisition, the purchase
price, and related goodwill, was adjusted by $0.7 million for additional
transaction costs incurred.

     The consolidated financial statements have been prepared giving effect to
the recapitalization of the Company in accordance with EITF 88-16, Basis in
Leveraged Buyout Transactions, as a partial purchase. Under EITF 88-16, the
Company was revalued at the merger date to fair value to the extent of the
majority stockholder's 79.7% controlling interest in the Company. The remaining
20.3% is accounted for at the continuing stockholders' carryover basis in the
Company. The excess of the purchase price over the historical basis of the net
assets acquired has been applied to adjust net assets to their fair values to
the extent of the majority stockholder's 79.7% ownership.

     Contingent consideration of $6,250,000 was placed in an escrow account by
the selling stockholders to secure certain indemnification obligations of the
sellers. In accordance with the merger agreement, on May 20, 2003, the parties
determined that an adjustment in the merger consideration of $25,000 was payable
to the Company based on the post-merger review of Golfsmith's working capital.
This amount was paid out of the escrow account on June 20, 2003. The Company has
adjusted the purchase price allocation accordingly. On July 24, 2003, $1,107,579
was paid to the Company from the selling stockholders escrow account for the
repayment of certain obligations owed by the selling stockholders that were paid
by the Company. On April 15, 2004, any remaining escrow funds will be dispersed.
Concurrent with the acquisition, Golfsmith changed status from a Subchapter S
Corporation to a C Corporation that is subject to federal income taxes.

  DON SHERWOOD GOLF SHOP

     On July 24, 2003, the Company acquired all issued and outstanding shares of
Don Sherwood Golf Shop ("Sherwood") for a total purchase price of $9.2 million,
including related acquisition costs of $0.4 million. The Company believes that
the Sherwood acquisition supports the Company's goals of expanding its national
presence while gaining exposure to one of the country's top golf markets in San
Francisco, California. The Company acquired all six Sherwood retail stores as
part of the acquisition. The operations of Sherwood stores are included in the
Company's consolidated statement of operations and cash flows as of July 25,
2003.

     In conjunction with the acquisition of Sherwood, the Company issued
1,433,333 shares of common stock to existing stockholders, including its
majority stockholder, for consideration of $4.3 million. The proceeds from the
issuance of common stock were used to fund a portion of the acquisition of
Sherwood. The issuance of these additional shares increased the majority
stockholder's 79.7% controlling interest in the Company to an 80.9% controlling
interest, including issued restricted common stock units, which entitle the
holders to shares of the Company's common stock, and excluding outstanding stock
options.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. Such allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

     Contingent consideration of $1.3 million has been placed in an escrow
account by the Company to secure certain indemnification obligations of the
selling shareholder. The escrow funds will be released on
                                       F-14
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the earlier of one year from the acquisition date or 90 days after the Company's
audited financial statements for fiscal 2003 are completed.

3.  ASSET ACQUISITION

     On May 22, 2003, the Company acquired the assets and technology of Zevo
Golf Co., Inc. ("Zevo"). The total purchase consideration has been allocated to
the assets acquired, including identifiable intangible assets, based on their
respective fair values at the date of acquisition. As a result of the
acquisition, Golfsmith has obtained additional technology through the patented
"PreLoaded" technology for drivers and "Flying Buttress" design for irons as
well as an additional proprietary label.

4.  INTANGIBLE ASSETS

     In July 2001, Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("SFAS No. 142") was issued. SFAS No. 142 requires
that ratable amortization of intangible assets with indefinite lives, including
goodwill, be replaced with periodic review and analysis for possible impairment.
Intangible assets with definite lives must be amortized over their estimated
useful lives. On January 1, 2002, the Company adopted SFAS No. 142. As a result,
the Company no longer amortizes its acquired trademarks, thereby eliminating
estimated amortization of approximately $144,000, for the combined fiscal year
ended December 28, 2002.

     As required by Statement 142, prior period results are not restated;
however, the following presents the Company's reported net income (loss) and
income (loss) as adjusted for the exclusion of trademark amortization:
SUCCESSOR                    PREDECESSOR
                                     --------------------------   ---------------------------
                                                     FOR THE        FOR THE
                                                   PERIOD FROM    PERIOD FROM
                                                   OCTOBER 16,    DECEMBER 30,
                                     FISCAL YEAR       2002           2001       FISCAL YEAR
                                        ENDED        THROUGH        THROUGH         ENDED
                                     JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                        2004           2002           2002           2001
                                     -----------   ------------   ------------   ------------
Net income (loss):
  As Reported......................  $1,064,264    $(2,585,921)     $428,331      $7,163,174
     Add: trademark amortization
       expense.....................          --             --            --         261,835
                                     ----------    -----------      --------      ----------
     Adjusted net income (loss)....  $1,064,264    $(2,585,921)     $428,331      $7,425,009
                                     ==========    ===========      ========      ==========
INTANGIBLE ASSETS WITH DEFINITE LIVES

     Following is a summary of the Company's intangible assets that are subject
to amortization:
GROSS CARRYING   ACCUMULATED    NET CARRYING
                                                     AMOUNT       AMORTIZATION      AMOUNT
                                                 --------------   ------------   ------------
Customer databases.............................    $3,399,205      $(472,111)     $2,927,094
The net carrying amount of customer databases intangible assets relates
solely to the merger transaction between Golfsmith and Holdings discussed in
Note 2. Total amortization expense was $377,689 for the fiscal year ended
January 3, 2004, $94,422 for the period from October 16, 2002 through December
28, 2002, and $0 for the period from December 30, 2001 through October 15, 2002,
and is recorded in selling, general, and administration costs on the
consolidated statement of operations.

                                       F-15
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Estimated future annual amortization expense is as follows:
2004........................................................  $  377,689
2005........................................................     377,689
2006........................................................     377,689
2007........................................................     377,689
2008........................................................     377,689
Thereafter..................................................   1,038,649
                                                              ----------
                                                              $2,927,094
                                                              ==========
5.  DEBT

     Long-term debt at January 3, 2004 and December 28, 2002 consisted of the
following:
JANUARY 3,    DECEMBER 28,
                                                               2004           2002
                                                           ------------   ------------
Senior secured notes due October 15, 2009 (see discussion
  below).................................................  $ 93,750,000   $ 93,750,000
                                                           ------------   ------------
Total long-term debt.....................................    93,750,000     93,750,000
Less current maturities..................................            --             --
Long-term portion........................................    93,750,000     93,750,000
Unamortized discount on senior secured notes.............   (16,267,531)   (18,369,955)
                                                           ------------   ------------
Long-term debt, net of discount..........................  $ 77,482,469   $ 75,380,045
                                                           ============   ============
As of January 3, 2004, the annual maturities of long-term debt were as
follows:
2004........................................................  $        --
2005........................................................           --
2006........................................................           --
2007........................................................   18,750,000
2008........................................................    9,375,000
Thereafter..................................................   65,625,000
                                                              -----------
                                                              $93,750,000
                                                              ===========
SENIOR SECURED NOTES

     On October 15, 2002, concurrent with the acquisition of Golfsmith by
Holdings, Golfsmith completed an offering of $93.75 million aggregate principal
amount at maturity of 8.375% senior secured notes (the "notes") due in 2009 at a
discount of 20%, or $18.75 million. Interest payments are required semi-
annually on March 1 and September 1, beginning on March 1, 2003. The notes rank
equal in right with any other senior indebtedness, including indebtedness under
Golfsmith's senior credit facility. The notes are fully and unconditionally
guaranteed by both Holdings and all existing and future Golfsmith domestic
subsidiaries. As of January 3, 2004 and December 28, 2002, the notes were
guaranteed by all Golfsmith subsidiaries.

     The notes and each guarantee is secured by all of Golfsmith's real
property, equipment and proceeds thereof as well as by substantially all of
Golfsmith's other assets.

                                       F-16
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Golfsmith has the option to redeem some or all of the notes at any time
prior to October 15, 2006 at a make-whole redemption price. On or after October
15, 2006, Golfsmith has the option to redeem some or all of the notes at a
redemption price that will decrease ratably from 106.5% of accreted value to
100.0% of accreted value on October 15, 2008, in all cases plus accrued but
unpaid interest. Prior to October 15, 2005, Golfsmith also has the option, under
certain circumstances, to redeem up to 35% of the aggregate principal amount of
the notes at a redemption price equal to 113% of accreted value plus accrued but
unpaid interest.

     The terms of the notes require Golfsmith to make partial pro rata
redemptions of the principal amount at maturity of each note, plus accrued but
unpaid interest to the redemption date as follows:
PERCENTAGES OF
                                                              NOTES REQUIRED
MANDATORY REDEMPTION DATE                                     TO BE REDEEMED
-------------------------                                     --------------
October 15, 2007............................................       20%
October 15, 2008............................................       10%
The redemption requirements may be reduced by the aggregate principal
amount at maturity of any notes Golfsmith has previously repurchased.

     Additionally, subsequent to fiscal 2003, Golfsmith is required under the
notes to (i) offer to repurchase a portion of the notes at 100% of their
accreted value within 120 days after the end of each fiscal year with 50% of
Golfsmith's excess cash flow, as defined in the agreement; (ii) under certain
circumstances, Golfsmith is required to repurchase the notes at specified
redemption prices in the event of a change in control.

     Additionally, the terms of the notes limit the ability of Golfsmith to,
among other things, incur additional indebtedness, dispose of assets, make
acquisitions, make other investments, pay dividends and make various other
payments. The terms of the notes also contain certain other restrictive
covenants. As of January 3, 2004 and December 28, 2002, Golfsmith was in
compliance with the covenants imposed by the notes.

     In July 2003, Golfsmith conducted an exchange offer in which it offered to
exchange new senior secured notes registered under the Securities Act of 1933
for all of its eligible existing senior secured notes. The terms of the new
notes are substantially identical as those issued in the private placement,
except the new notes are freely tradable. The notes are recorded on the January
3, 2004 and December 28, 2002 balance sheets net of an original issuance
discount of $18.75 million that is being amortized to interest expense over the
term of the notes using the interest method.

  SENIOR CREDIT FACILITY

     On October 15, 2002, concurrent with the acquisition of Golfsmith by
Holdings, the Company entered into a new senior credit facility with a third
party for up to $10.0 million in available revolver funds. Additionally, the
senior credit facility allows for up to $1.0 million in authorized letters of
credit. Borrowings under the senior credit facility are secured by substantially
all of Golfsmith's current and future assets, excluding real property, equipment
and proceeds thereof owned by Golfsmith, Holdings, or Golfsmith's subsidiaries,
and all of Golfsmith's stock and equivalent equity interest in any subsidiaries.
The senior credit facility is fully guaranteed by Holdings.

     The senior credit facility has a term of 4.5 years and available amounts
under the facility are based on a borrowing base. The borrowing base is limited
to 85% of the net amount of eligible receivables, as defined in the agreement,
plus the lesser of (i) 65% of the value of eligible inventory and (ii) 60% of
the net orderly liquidation value of eligible inventory.

                                       F-17
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The senior credit facility contains covenants which, among other things,
limit: (i) additional indebtedness; (ii) dividends; (iii) capital expenditures;
and (iv) acquisitions, mergers, and consolidations. The facility also contains
certain additional covenants, including financial covenants. As of January 3,
2004 and December 28, 2002, the Company was in compliance with these covenants.

     Borrowings under the credit facility may be made, at the Company's option,
as either an index rate loan or a LIBOR rate loan. Index rate loans bear
interest at the higher of (1) the Wall Street Journal posted base rate on
corporate loans or (2) the federal funds rate, in each case plus 1%. LIBOR rate
loans bear interest at a rate based on LIBOR plus 2.5%. A fee of 2.5% per annum
of the amount available under outstanding letters of credit is due and payable
monthly. The weighted-average interest rate on borrowings under the senior
credit facility during fiscal 2003 was 5.1%. The Company is required to pay
commitment fees of 0.50% of the undrawn availability as calculated under the
agreement. These fees were not significant for all years presented for which the
senior credit facility as effective. At January 3, 2004, the Company had $1.4
million outstanding under the senior credit facility. There were no outstanding
amounts under the senior credit facility at December 28, 2002.

     In January 2003, the senior credit facility was amended to extend the
period of time permitted to obtain certain waivers from landlords of leased
premises in connection with collateral under the senior credit facility. In
September 2003, the senior credit facility was amended to clarify certain
definitions contained in the agreement relating to minimum levels of EBITDA (as
defined in the senior credit facility) for each of the three fiscal quarters
ending on or about December 31, 2002, March 31, 2003,and June 30, 2003.

     In February 2004, the senior credit facility was amended in order to
increase the borrowing availability from $10 million to $12.5 million. In March
2004, the senior credit facility was amended to decrease the minimum levels of
EBITDA (as defined in the senior credit facility) for the fiscal quarters ending
on or about March 31, 2004 and June 30, 2004 and to decrease the minimum
interest coverage ratios for the three fiscal quarters of 2004. Due to a higher
retail store base than was in existence at the origination of the facility as
well as accelerated growth plans, the Company believes the increased
availability and the modification of certain short-term financial covenants
better matches its currently projected cash needs.

  SENIOR SUBORDINATED NOTES

     On August 17, 1998, Golfsmith issued in a private placement $30.0 million
senior subordinated pay-in-kind notes (the "Subordinated Notes") and partnership
interests that may be converted into warrants to purchase 810,811 shares of
Golfsmith's common stock for $.01 per share, under certain circumstances. In
1998, the partnership interests for 7.5% of Golfsmith Holdings (a wholly-owned
subsidiary of Golfsmith International, Inc.) were valued at $12.0 million. Since
the interests are related to a Golfsmith subsidiary that is consolidated, the
value of the interests were recorded as minority interest on the consolidated
balance sheet. The value of the minority interest was offset as a discount to
the Subordinated Notes. Immediately prior to the merger, Golfsmith repurchased
the minority interest which had a carrying value of $13.1 million for cash
consideration of $9.0 million resulting in negative goodwill of $4.1 million. In
accordance with FAS 141, this is recorded in the period from December 30, 2001
through October 15, 2002, as an extraordinary item in the consolidated statement
of operations.

     Holders of the Subordinated Notes were entitled to receive interest,
payable quarterly, at Golfsmith's option in cash, or in-kind, through the
issuance of additional Subordinated Notes, both at 12% per annum. The
Subordinated Notes were to mature on August 1, 2005, representing a yield to
maturity of 22.6%. During the period from December 30, 2001 through October 15,
2002, the period from October 16, 2002 through December 28, 2002 and fiscal year
2001, Golfsmith issued $0, $0 and $1.0 million, respectively, in additional
Subordinated Notes for the payment of interest.
                                       F-18
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On October 15, 2002, immediately prior to the merger of Golfsmith with
Holdings, the Subordinated Notes were repaid in full. During the period from
December 30, 2001 through October 15, 2002, Golfsmith recorded a loss on this
extinguishment of senior subordinated debt of $8.0 million.

  OLD BANK DEBT

     In 2000, Golfsmith entered into a loan agreement (the "Loan Agreement")
providing for term loan ("Term Loan") borrowings of $15.0 million and revolver
borrowings up to $40.0 million ("Revolver"), subject to certain limitations.
This Loan Agreement replaced a 1997 credit agreement that provided for
borrowings up to $46.0 million that expired in 2000 and certain mortgage notes
totaling $2.8 million as of November 13, 2000. The Term Loan was secured by a
pledge of Golfsmith's land and buildings. The Revolver was secured by a pledge
of Golfsmith's inventory, receivables, and certain other assets and contained
significant covenants and restrictions. On October 15, 2002 Golfsmith's existing
line of credit was terminated.

6.  STORE CLOSURE AND ASSET IMPAIRMENTS

     A summary of the Company's store closures and asset impairments is as
follows:
REVENUES         CASH FLOWS
                                                       GENERATED BY      GENERATED BY
                                          NUMBER OF     THE CLOSED        THE CLOSED      TOTAL STORE
                                           STORES      STORES IN THE     STORES IN THE      CLOSURE
PERIOD                                     CLOSED     YEAR OF CLOSURE   YEAR OF CLOSURE      COSTS
------                                    ---------   ---------------   ---------------   -----------
Fiscal 2003.............................       0        $       --         $      --       $     --
October 16, 2002 through December 28,
  2002 (Successor)......................       0                --           (39,920)        39,920
December 30, 2001 through October 15,
  2002 (Predecessor)....................       2         1,987,226          (208,396)       229,880
Fiscal 2001 (Predecessor)...............       1         3,350,000          (419,672)       655,130
The Company has closed five retail locations since its inception due to
poor operating performance and the lack of market penetration being derived from
these single-market stores. Store closure costs include writedowns of leasehold
improvements and store equipment to estimated fair values and lease termination
costs. These store-closing expenses in the period from December 30, 2001 through
October 15, 2002 and in the period from October 16, 2002 through December 28,
2002 are reported in discontinued operations under the accounting guidance of
SFAS No. 144, Impairment of Long-Lived Assets. All related assets and
liabilities for these closed locations have been eliminated from the
consolidated balance sheet as the net assets were disposed of prior to December
28, 2002. There were no store closures in fiscal 2003.

7.  COMMITMENTS

  LEASE COMMITMENTS

     The Company leases certain store locations under operating leases that
provide for annual payments that, in some cases, increase over the life of the
lease. The aggregate of the minimum annual payments is expensed on a
straight-line basis over the term of the related lease without consideration of
renewal option periods. The lease agreements contain provisions that require the
Company to pay for normal repairs and maintenance, property taxes, and
insurance. Rent expense was $9.5 million for the fiscal year ended January 3,
2004, $1.5 million for the period from October 16, 2002 through December 28,
2002, $5.9 million for the period from December 30, 2001 through October 15,
2002, and $8.1 million for the fiscal year ended December 29, 2001.

                                       F-19
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At January 3, 2004, future minimum payments due and sublease income to be
received, under non-cancelable operating leases with initial terms of one year
or more are as follows for each of the fiscal years presented below:
OPERATING
                                                                 LEASE       SUBLEASE
                                                              OBLIGATIONS     INCOME
                                                              -----------   ----------
2004........................................................  $11,970,283   $  537,265
2005........................................................   11,782,791      518,550
2006........................................................   11,384,045      532,575
2007........................................................   10,931,243      537,250
2008........................................................    9,966,439      362,250
Thereafter..................................................   40,397,611    1,446,913
                                                              -----------   ----------
  Total minimum lease payments..............................  $96,432,412
                                                              ===========
  Total minimum sublease rentals............................                $3,934,803
                                                                            ==========
Deferred rent consists of the step-rent accrual related to the Company's
store leases. In accordance with FASB Statement No. 13, Accounting for Leases,
rental expense for the Company's store leases is recognized on a straight-line
basis even though a majority of the store leases contain escalation clauses.

     Golfsmith has entered into certain sublease agreements with third parties
to sublease retail space previously occupied by Golfsmith. The sublease terms
ending dates range from 2004 to 2013. Sublease income recorded as a reduction of
rent expense was $0.3 million in fiscal 2003, $0.1 million for the period from
October 16, 2002 through December 28, 2002, $0.2 million for the period from
December 30, 2001 through October 15, 2002 and $0 in fiscal 2001. Future minimum
sublease payments to be received by Golfsmith over the terms of the leases are
noted in the table above.

  EMPLOYMENT AGREEMENTS

     The Company has entered into employment agreements with James D. Thompson,
the Company's president and chief executive officer, and with Virginia Bunte,
the Company's chief financial officer. The Company also entered into employment
agreements with Carl Paul and Franklin Paul to provide advising services. You
should read the information set forth in "Management -- Employment Agreements"
in this prospectus for a description of these agreements.

8.  GUARANTEES

     Holdings fully and unconditionally guarantees both the senior secured notes
issued by Golfsmith in October 2002 and the senior credit facility. The senior
secured notes mature in October 2009 with certain mandatory redemption features.
Interest payments are required on a semi-annual basis on the senior secured
notes at an annual interest rate of 8.375%. At January 3, 2004 there was $1.4
million outstanding under the senior credit facility and $77.5 million
outstanding on the senior secured notes. Holdings' guarantee of Golfsmith's
senior secured notes and senior credit facility is explicitly excluded from the
initial recognition and initial measurement requirements of FASB Interpretation
No. 45 as it meets the definition of an intercompany guarantee.

                                       F-20
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following represents certain stand-alone information for the fiscal
years ended January 3, 2004 and December 28, 2002 for the issuer and certain
guarantors of the senior secured notes and the senior credit facility:

  FISCAL YEAR ENDED JANUARY 3, 2004
GOLFSMITH    GOLFSMITH
                       HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
                       --------   ------------   ----------   ----------   ------------   ------------
Assets...............   $  --     $176,974,627   $1,615,054   $2,303,100   $(1,566,068)   $179,326,713
Debt.................      --      (78,899,508)          --           --            --     (78,899,508)
Net revenues.........      --      248,997,549    3,129,311    5,617,920            --     257,744,780
Net income...........      --           22,649      527,162      514,453            --       1,064,264
FISCAL YEAR ENDED DECEMBER 28, 2002
GOLFSMITH    GOLFSMITH
                       HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
                       --------   ------------   ----------   ----------   ------------   ------------
Assets...............   $  --     $158,115,783   $1,118,250   $1,555,754    $(778,915)    $160,010,872
Debt.................      --      (75,380,045)          --     (149,832)     149,832      (75,380,045)
Net revenues
  (Predecessor)......      --      173,118,838    2,546,407    4,649,918           --      180,315,163
Net revenues
  (Successor)........      --       36,936,204      273,602      620,734           --       37,830,540
Net income (loss)
  (Predecessor)......      --         (590,619)     372,050      646,900           --          428,331
Net income (loss)
  (Successor)........      --       (3,080,176)     530,048      (35,793)          --       (2,585,921)
The Company offers warranties to its customers depending on the specific
product and terms of the goods purchased. A typical warranty program requires
that the Company replace defective products within a specified time period from
the date of sale. The Company records warranty costs as they are incurred and
historically such costs have not been material. Golfsmith accrued and settled
approximately $0.3 million for product warranties during the period from
December 30, 2001 through October 15, 2002. For all other periods presented,
warranty costs were immaterial.

9.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     The Company's accrued expenses and other current liabilities are comprised
of the following at January 3, 2004 and December 28, 2002, respectively:
JANUARY 3,    DECEMBER 28,
                                                                2004           2002
                                                             -----------   ------------
Salaries and benefits......................................  $ 1,998,142   $ 2,206,568
Interest...................................................    2,675,824     1,660,246
Allowance for returns reserve..............................    1,357,173     1,098,029
Gift certificates..........................................    5,990,485     3,785,669
Taxes......................................................    3,102,040     2,456,960
Other......................................................    1,639,206     1,614,830
                                                             -----------   -----------
  Total....................................................  $16,762,870   $12,822,302
                                                             ===========   ===========
F-21
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  OTHER INCOME AND EXPENSE

     Other income was $211,000 in fiscal 2003, $14,000 for the period from
October 16, 2002 through December 28, 2002, $2.4 million for the period from
December 30, 2001 through October 15, 2002, and $1.2 million in fiscal 2001.
During the period from December 30, 2001 through October 15, 2002, Golfsmith
recorded a gain of $2.2 million on the sale of trademark rights to a third
party. The trademark rights were sold for $3.3 million and had a book value of
$1.1 million. During 2001, Golfsmith recorded a gain of $1.0 million on the sale
of property owned in Austin, Texas. The property was sold for gross proceeds of
$1.4 million and had a book value of $0.4 million.

     Other expense was not significant during any of the years presented.

11.  RETIREMENT AND PROFIT SHARING PLANS

     During 1998, the Board of Directors approved a Retirement Savings Plan (the
"Plan"), which permits eligible employees to make contributions to the Plan on a
pretax basis in accordance with the provisions of Section 401(k) of the Internal
Revenue Code. The Company makes a matching contribution of 50% of the employee's
pretax contribution, up to 6% of the employee's compensation, in any calendar
year. The Company contributed approximately $259,000 during the fiscal year
ended January 3, 2004, $35,000 for the period from October 16, 2002 through
December 28, 2002, $243,000 for the period from December 30, 2001 through
October 15, 2002, and $292,000 to the Plan during the fiscal year ended December
29, 2001.

     In 2002, the Company established the 2002 Incentive Plan under which the
Company agreed to pay specified bonuses to eligible management employees based
upon their individual and company-wide performance. The bonuses are payable
within 90 days of the end of the Company's fiscal year.

12.  COMMON STOCK

  GOLFSMITH INTERNATIONAL HOLDINGS, INC.

     Holdings has authorized 40.0 million shares of common stock, par value
$.001 per share, of which 21,594,597 and 20,077,931 shares were issued and
outstanding at January 3, 2004 and December 28, 2002, respectively.

  GOLFSMITH INTERNATIONAL, INC.

     Prior to the merger on October 15, 2002, Golfsmith International, Inc. had
authorized 20.0 million shares of common stock, par value $.01 per share, of
which 10.0 million shares were outstanding at December 29, 2001.

     Subsequent to the merger on October 15, 2002, the surviving operating
entity Golfsmith is authorized to issue 100 shares of its $.01 par value common
stock. All 100 shares were issued and outstanding as of January 3, 2004 and
December 28, 2002. Holdings, the parent of Golfsmith, holds all of Golfsmith's
outstanding common stock.

  DIVIDENDS

     Golfsmith declared and paid cash dividends of $3.5 million and $0 in the
period from December 30, 2001 through October 15, 2002 and fiscal 2001,
respectively, to all common shareholders on the date of record. Holdings has not
declared or paid any dividends.

                                       F-22
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CAPITAL SHARES RESERVED FOR ISSUANCE

     At January 3, 2004, the Company has reserved the following shares of common
stock for issuance:
Stock options...............................................   2,850,000
Restricted stock units......................................     755,935
Additional authorized common shares.........................  14,799,468
                                                              ----------
  Total unissued authorized common shares...................  18,405,403
                                                              ==========
13.  RESTRICTED STOCK UNITS

     In October 2002, concurrent with the merger transaction between Holdings
and Golfsmith, Holdings awarded restricted stock units of Holdings' common stock
to eligible employees of Golfsmith and its subsidiaries. The stock units are
granted with certain restrictions as defined in the agreement. There were
755,935 and 839,268 outstanding shares of restricted stock units at January 3,
2004 and December 28, 2002, respectively, with a value of $2.3 million and $2.5
million, respectively.

     The restricted stock units are fully vested at the grant date and are held
in an escrow account. The stock units become available to the employees as the
restrictions lapse. In general, the restrictions lapse after ten years unless
the occurrence of certain specified events, upon which the restrictions will
lapse earlier.

14.  STOCK OPTION PLAN

  GOLFSMITH INTERNATIONAL, INC. 1997 INCENTIVE PLAN

     For all periods prior to the merger date of October 15, 2002, Golfsmith had
a stock incentive plan (the "1997 Incentive Plan") covering 2.8 million shares
of Golfsmith common stock. Options to acquire 0.22 million and 0.24 million
shares of stock were granted in during the period from December 30, 2001 through
October 15, 2002 and during the fiscal year ended December 29, 2001,
respectively. The exercise price of the options granted was at or above the
value of Golfsmith's common stock on the grant date. All outstanding options
vested on the merger date, and were either canceled in exchange for the right to
receive cash or surrendered in exchange for stock units as part of the merger
transaction discussed in Note 2. The plan was then terminated.

     A summary of the Company's stock option activity and related information
for the 1997 Incentive Plan through the Plan's termination date of October 15,
2002 follows:
WEIGHTED AVERAGE
                                                            OPTIONS      EXERCISE PRICE
                                                           ----------   ----------------
Outstanding at December 30, 2000 (Predecessor)...........   2,176,205        $4.22
  Granted................................................     241,500         5.50
  Exercised..............................................          --           --
  Forfeited..............................................    (583,698)        4.01
                                                           ----------        -----
Outstanding at December 29, 2001 (Predecessor)...........   1,834,007        $4.45
  Granted................................................     230,120         6.55
  Repurchased in connection with merger..................  (1,673,838)        4.43
  Forfeited..............................................    (390,289)        4.54
                                                           ----------        -----
Outstanding at October 15, 2002 (Predecessor)............          --        $  --
                                                           ==========        =====
F-23
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Of the 1.7 million options that vested on the merger date, 612,201 options
with a value of $2.5 million were surrendered in exchange for stock units
entitling the holder thereof to 839,268 shares of common stock of Holdings as
part of the merger transaction discussed in Note 2.

     Cash consideration of $7.4 million was paid to option holders in exchange
for the cancellation of fully vested outstanding options concurrent with the
merger on October 15, 2002 discussed in Note 2.

  GOLFSMITH INTERNATIONAL HOLDINGS, INC. 2002 INCENTIVE STOCK PLAN

     In October 2002, Holdings adopted the 2002 Incentive Stock Plan (the "2002
Plan"). Under the 2002 Plan, certain employees, members of the Board of
Directors and third party consultants may be granted options to purchase shares
of Holdings common stock, stock appreciation rights and restricted stock grants
(collectively referred to as "options"). Options are exercisable and vest in
accordance with each option agreement. The term of each option is no more than
ten years from the date of the grant. There were 2,850,000 shares authorized
under the 2002 Plan at January 3, 2004, of which 1,122,500 are available for
future grant.

     A summary of the Company's stock option activity and related information
for the 2002 Plan through January 3, 2004 follows:
WEIGHTED AVERAGE
                                                             OPTIONS     EXERCISE PRICE
                                                            ---------   ----------------
Outstanding at October 16, 2002 (Successor)...............         --        $  --
  Granted.................................................         --           --
  Exercised...............................................         --           --
  Forfeited...............................................         --           --
                                                            ---------        -----
Outstanding at December 28, 2002..........................         --        $  --
  Granted.................................................  1,840,500         3.00
  Exercised...............................................         --           --
  Forfeited...............................................   (113,000)        3.00
                                                            ---------        -----
Outstanding at January 3, 2004............................  1,727,500        $3.00
                                                            =========        =====
Options become exercisable as they vest. At January 3, 2004, no options
were vested or exercisable. The weighted-average remaining contractual life for
all outstanding options at January 3, 2004 was 9.5 years.

                                       F-24
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  FAIR VALUE DISCLOSURES

     Pro forma information regarding net income (loss) per share is required by
SFAS No. 123 and has been determined as if the Company had accounted for its
employee stock plans under the fair value method of that Statement. Fair value
was determined using the minimum value option-pricing model with a volatility
factor near zero as the Company's shares are not publicly traded, with the
following assumptions:
PREDECESSOR
                                                                 ---------------------------
                                                    SUCCESSOR    PERIOD FROM
                                                   -----------   DECEMBER 30,
                                                   FISCAL YEAR       2001       FISCAL YEAR
                                                      ENDED        THROUGH         ENDED
                                                   JANUARY 3,    OCTOBER 15,    DECEMBER 29,
                                                      2004           2002           2001
                                                   -----------   ------------   ------------
Risk-free interest rate..........................       4.0%          2.0%           4.8%
Weighted-average expected life of the options
  (years)........................................      7.00          5.77           5.77
Dividend rate....................................       0.0%          0.0%           0.0%
Weighted-average fair value of options granted
Exercise price equal to fair value of stock on
  date of grant..................................     $0.73         $0.71          $1.39
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is disclosed in Note 1. There were no outstanding stock
options during the period from October 15, 2002 through December 28, 2002.

     Option valuation models incorporate highly subjective assumptions. Because
changes in the subjective assumptions can materially affect the fair value
estimate, the existing models do not necessarily provide a reliable single
measure of the fair value of Golfsmith's employee stock options. Because, for
pro forma disclosure purposes, the estimated fair value of Golfsmith's employee
stock options is treated as if amortized to expense over the options' vesting
period, the effects of applying SFAS No. 123 for pro forma disclosures are not
necessarily indicative of future amounts.

  WARRANTS

     In 1997, Golfsmith granted one warrant to purchase 60,000 options to a
third party at an exercise price of $15 per share. The warrant holder's right to
exercise such warrant was dependent upon the occurrence of a certain event. In
October 2002, immediately prior to the merger transaction discussed in Note 2,
the warrant was repurchased by Golfsmith for $0.5 million.

  DEFERRED STOCK COMPENSATION

     Golfsmith recorded deferred interest expense of $194,622 for options issued
to a non-employee creditor during fiscal year 2000. The deferred charge was
being amortized to interest expense over the remaining five-year term of the
related senior subordinated note. For the period from December 30, 2001 through
October 15, 2002 and fiscal 2001, $30,284 and $38,358, respectively, was charged
to interest expense relating to this option grant. On October 15, 2002,
immediately prior to the merger transaction discussed in Note 2, the remaining
unamortized deferred charge of $106,906 was recorded as a loss on the
extinguishment of the senior subordinated note discussed in Note 5.

     Due to the decline in the fair market value of Golfsmith's common stock,
the Board of Directors authorized Golfsmith to reprice stock options granted to
employees and officers with exercise prices in excess of the fair market value
on July 11, 2000. Stock options held by optionees other than non-employees,
which were granted under the incentive stock plans and which had an exercise
price greater

                                       F-25
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

than $4.00 per share, were amended to reduce their exercise price to $4.00 per
share, which was the fair market value of Golfsmith's common stock on July 11,
2000. No other terms were changed. Options to purchase a total of 1,716,780
shares of common stock with a weighted average exercise price of $13.94 were
repriced.

     Under FASB Interpretation No. 44, these repriced options require variable
accounting treatment until exercised or expired. Golfsmith recorded deferred
compensation of $4,116,741 and $2,374,254 related to the repriced options during
the period from December 30, 2001 through October 15, 2002 and fiscal 2001,
respectively. The deferred charge was being amortized over the average remaining
life of the repriced options. For the period from December 30, 2001 through
October 15, 2002 and fiscal 2001, Golfsmith amortized $6,033,273 (including all
remaining amounts as of the merger date) and $457,722 to compensation expense
related to these repriced options. There was no remaining deferred compensation
relating to these repriced options subsequent to October 15, 2002 as all
remaining historical Golfsmith options vested and were either canceled in
exchange for the right to receive cash or surrendered in exchange for stock
units as part of the merger transaction discussed in Note 2.

15.  INCOME TAXES

     From commencement through October 15, 2002, Golfsmith and its subsidiaries
had elected to be treated as a S Corporation under Subchapter S of the Internal
Revenue Code of 1986, as amended. As such, federal income taxes were the
responsibility of the individual stockholders. Accordingly, no provision for
U.S. federal income taxes was included in the financial statements. However,
certain foreign and state taxes were incurred and were recorded as income tax
expense for these periods. Concurrent with the merger transaction with Holdings
(see Note 2) on October 15, 2002, Golfsmith's Subchapter S status was terminated
and the Company became subject to corporate income taxes.

     Significant components of the income tax provision (benefit) attributable
to continuing operations are as follows:
SUCCESSOR                    PREDECESSOR
                                       --------------------------   ---------------------------
                                                       FOR THE        FOR THE
                                                     PERIOD FROM    PERIOD FROM
                                                     OCTOBER 16,    DECEMBER 30,
                                       FISCAL YEAR       2002           2001       FISCAL YEAR
                                          ENDED        THROUGH        THROUGH         ENDED
                                       JANUARY 3,    DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                          2004           2002           2002           2001
                                       -----------   ------------   ------------   ------------
Current:
  Federal............................   $     --      $      --       $     --       $     --
  State..............................     60,000             --        392,019        128,119
  Foreign............................    404,983             --        316,355        123,028
                                        --------      ---------       --------       --------
Total Current........................    464,983             --        708,374        251,147
Deferred:
  Federal............................    165,378       (581,615)            --             --
  State..............................     14,592        (51,319)            --             --
  Foreign............................         --             --             --             --
                                        --------      ---------       --------       --------
Total deferred.......................    179,970       (632,934)            --             --
Income tax provision (benefit).......   $644,953      $(632,934)      $708,374       $251,147
                                        ========      =========       ========       ========
F-26
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's provision (benefit) for income taxes differs from the amount
computed by applying the statutory rate to income from continuing operations
before taxes as follows:
SUCCESSOR                   PREDECESSOR
                                        -------------------------   ---------------------------
                                                       FOR THE        FOR THE
                                                     PERIOD FROM    PERIOD FROM
                                          FISCAL     OCTOBER 16,    DECEMBER 30,
                                           YEAR          2002           2001       FISCAL YEAR
                                          ENDED        THROUGH        THROUGH         ENDED
                                        JANUARY 3,   DECEMBER 28,   OCTOBER 15,    DECEMBER 29,
                                           2004          2002           2002           2001
                                        ----------   ------------   ------------   ------------
Income Tax at U.S. statutory rate.....     34.0%        (34.0)%        (34.0)%         34.0%
State taxes, net of federal income
  tax.................................      3.3%         (3.0)%         14.2%           1.6%
Foreign income taxes..................      0.0%          0.0%          11.5%           1.5%
Permanent differences and other.......      0.4%          0.1%           0.1%           0.0%
Unbenefitted amounts..................      0.0%         17.0%           0.0%           0.0%
S Corporation income not subject to
  tax.................................      0.0%          0.0%          34.0%         (34.0)%
                                           ----         -----          -----          -----
Income tax provision (benefit)........     37.7%        (19.9)%         25.8%           3.1%
                                           ====         =====          =====          =====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred taxes as of January 3, 2004 and December 28, 2002 are as
follows:
SUCCESSOR
                                                            -------------------------------
                                                            AT JANUARY 3,   AT DECEMBER 28,
                                                                2004             2002
                                                            -------------   ---------------
Deferred tax assets:
  Accrued expenses and other..............................   $   76,306       $   45,068
  Inventory basis.........................................      931,272           67,905
  Depreciable/amortizable assets..........................    1,115,712        2,920,142
  Federal tax carryforwards...............................    1,608,462        1,308,951
  Reserves and allowances.................................      430,344               --
                                                             ----------       ----------
Total deferred tax assets.................................   $4,162,096       $4,342,066
                                                             ==========       ==========
Upon the acquisition of Golfsmith by Holdings on October 15, 2002, the
Company recorded a net deferred tax asset of approximately $3.9 million due to
differences between book and tax basis of acquired assets and assumed
liabilities.

     As of January 3, 2004, the Company had federal net operating loss
carryforwards of approximately $3.3 million. The net operating loss
carryforwards will expire in 2023 if not utilized. In addition, the Company has
foreign tax credits of approximately $0.4 million that will expire in 2008 if
not utilized.

                                       F-27
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  FOREIGN AND DOMESTIC OPERATIONS

     The Company has operated in foreign and domestic regions. Information about
these operations is presented below:
SUCCESSOR                    PREDECESSOR
                                ---------------------------   ---------------------------
                                                 FOR THE        FOR THE
                                               PERIOD FROM    PERIOD FROM
                                               OCTOBER 16,    DECEMBER 30,
                                FISCAL YEAR        2002           2001       FISCAL YEAR
                                   ENDED         THROUGH        THROUGH         ENDED
                                 JANUARY 3,    DECEMBER 28,   OCTOBER 16,    DECEMBER 29,
                                    2004           2002           2002           2001
                                ------------   ------------   ------------   ------------
Net revenues:
  North America...............  $251,910,857   $37,147,135    $175,392,971   $216,333,270
  International...............     5,833,923       683,405       4,922,192      5,105,226
Operating profit (loss):
  North America...............    11,231,351    (1,326,480)      8,077,197     12,550,336
  International...............     1,430,445       337,138         568,112      1,230,887
Identifiable assets:
  North America...............   177,023,613   158,455,118     151,030,755    109,803,125
  International...............     2,303,100     1,555,754       2,104,283      1,697,238
17.  VALUATION AND QUALIFYING ACCOUNTS
AMOUNTS
                                                              CHARGED TO
                                               BALANCE AT     NET INCOME     WRITE-OFFS    BALANCE AT
                                              BEGINNING OF    (LOSS), NET      AGAINST       END OF
                                                 PERIOD      OF RECOVERIES    RESERVES       PERIOD
                                              ------------   -------------   -----------   ----------
INVENTORY RESERVE:
  Fiscal year ended January 3, 2004.........   $  818,816     $1,688,193     $(1,685,391)  $  821,618
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........    1,219,373        (58,852)       (341,705)     818,816
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,555,107      1,253,856      (1,589,590)   1,219,373
  Fiscal year ended December 29, 2001
     (Predecessor)..........................      867,510      1,745,956      (1,058,359)   1,555,107
ALLOWANCE FOR SALES RETURNS:
  Fiscal year ended January 3, 2004.........    1,098,029      8,111,425      (7,852,281)   1,357,173
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........    1,116,480        640,592        (659,043)   1,098,029
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,220,584      4,240,901      (4,345,005)   1,116,480
  Fiscal year ended December 29, 2001
     (Predecessor)..........................    1,402,614      5,768,877      (5,950,907)   1,220,584
F-28
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AMOUNTS
                                                              CHARGED TO
                                               BALANCE AT     NET INCOME     WRITE-OFFS    BALANCE AT
                                              BEGINNING OF    (LOSS), NET      AGAINST       END OF
                                                 PERIOD      OF RECOVERIES    RESERVES       PERIOD
                                              ------------   -------------   -----------   ----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
  Fiscal year ended January 3, 2004.........      242,643        157,717        (223,693)     176,667
  Period from October 16, 2002 through
     December 28, 2002 (Successor)..........      403,088        (94,905)        (65,540)     242,643
  Period from December 30, 2001 through
     October 15, 2002 (Predecessor).........    1,107,321         27,057        (731,290)     403,088
  Fiscal year ended December 29, 2001
     (Predecessor)..........................    1,564,785      2,129,334      (2,586,798)   1,107,321
18.  CONSOLIDATED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
SUCCESSOR
                               --------------------------------------------------------------------
                                  FIRST        SECOND         THIRD        FOURTH          FULL
FISCAL 2003(1)                   QUARTER       QUARTER       QUARTER       QUARTER         YEAR
--------------                 -----------   -----------   -----------   -----------   ------------
Net revenues.................  $45,830,119   $79,256,107   $71,140,692   $61,517,862   $257,744,780
Gross profit.................   14,857,776    25,803,489    23,360,471    22,639,934     86,661,670
Income (loss) from continuing
  operations.................   (1,217,403)    2,221,214     1,011,809      (951,356)     1,064,264
Income (loss) from
  discontinued operations....           --            --            --            --             --
Income from extraordinary
  items......................           --            --            --            --             --
Net income (loss)............   (1,217,403)    2,221,214     1,011,809      (951,356)     1,064,264
PREDECESSOR                          SUCCESSOR
                               -------------------------------------------------------   ------------
                                                                          PERIOD FROM    PERIOD FROM
                                                                         SEPTEMBER 29,   OCTOBER 16,
                                                                             2002            2002
                                                                            THROUGH        THROUGH
                                  FIRST        SECOND         THIRD       OCTOBER 15,    DECEMBER 28,
FISCAL 2002(1)                   QUARTER       QUARTER       QUARTER         2002            2002
--------------                 -----------   -----------   -----------   -------------   ------------
Net revenues.................  $47,460,173   $70,155,932   $55,962,187   $  6,736,871    $37,830,540
Gross profit.................   16,752,162    24,991,205    19,346,101      2,019,101     12,684,362
Income (loss) from continuing
  operations.................    2,583,312     4,253,355     3,432,646    (13,733,029)    (2,546,001)
Income (loss) from
  discontinued
  operations(2)..............       26,208      (270,798)       14,710             --        (39,920)
Income from extraordinary
  items(3)...................           --            --            --      4,121,927             --
Net income (loss)............    2,609,520     3,982,557     3,447,356     (9,611,102)    (2,585,921)
---------------

(1) Fiscal 2003 consists of a 53-week period. Week 53 occurred in the fourth
    quarter of fiscal 2003. Fiscal 2002 consists of a 52-week period.

(2) Store-closing expenses in fiscal 2002 are reported in discontinued
    operations under the accounting guidance of SFAS No. 144, Impairment of
    Long-Lived Assets. All comparative periods presented in the above quarterly
    table have been reclassified to reflect the closed stores.

                                       F-29
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) During the period from December 30, 2001 through October 15, 2002, the
    Company recorded an extraordinary gain on the repurchase of minority
    interest obligations immediately prior to the merger transaction discussed
    in Note 2.

19.  RELATED PARTY TRANSACTIONS

     In October 2002, the Company entered into an agreement with its majority
stockholder whereby the Company pays a management fee expense of $600,000 per
year, plus out of pocket expenses, to this majority stockholder of the Company.
During the fiscal year ended January 3, 2004 and during the period from October
16, 2002 through December 28, 2002, the Company paid approximately $812,000 and
$150,000 to this majority stockholder under this agreement. These amounts are
recognized in the consolidated statement of operations in the selling, general
and administrative expense line item. As of January 3, 2004 and December 28,
2002, the Company did not have any material amounts payable to this majority
stockholder.

     On May 28, 2003, the Company issued 83,333 shares of its common stock to
one of the Company's directors, for an aggregate purchase price of $249,999, or
$3.00 per share.

     On July 24, 2003, in conjunction with the Company's acquisition of Don
Sherwood Golf Shop, the Company's majority stockholder, purchased 1,427,623
shares of the Company's common stock for an aggregate purchase price of $4.3
million. Also on July 24, 2003, in conjunction with the Company's acquisition of
Don Sherwood Golf Shop, a director of the Company purchased 5,710 shares of the
Company's common stock for an aggregate purchase price of approximately $17,000.

20.  SUBSEQUENT EVENTS

     In February 2004, the senior credit facility was amended in order to
increase the borrowing availability from $10 million to $12.5 million. In March
2004, the senior credit facility was amended to decrease the minimum levels of
EBITDA (as defined in the senior credit facility) for the fiscal quarters ending
on or about March 31, 2004 and June 30, 2004 and to decrease the minimum
interest coverage ratios for the three fiscal quarters of 2004. Due to a higher
retail store base than was in existence at the origination of the facility as
well as accelerated growth plans, the Company believes the increased
availability and the modification of certain short-term financial covenants
better matches its currently projected cash needs.

                                       F-30
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                          CONSOLIDATED BALANCE SHEETS
APRIL 3,      JANUARY 3,
                                                                  2004           2004
                                                              ------------   ------------
                                                              (UNAUDITED)
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  4,176,536   $  2,928,109
  Receivables, net of allowances of $212,389 at April 3,
     2004 and $176,667 at January 3, 2004...................     2,752,964      2,689,815
  Inventories, net of reserves of $1,276,311 at April 3,
     2004 and $821,618 at January 3, 2004...................    65,878,427     51,212,544
  Deferred tax assets.......................................     1,437,922      1,437,922
  Prepaid and other current assets..........................     2,748,243      1,845,546
                                                              ------------   ------------
Total current assets........................................    76,994,092     60,113,936
Property and equipment:
  Land and buildings........................................    21,040,387     21,040,387
  Equipment, furniture, fixtures and autos..................    13,670,395     12,234,869
  Leasehold improvements and construction in progress.......    11,282,679     10,907,168
                                                              ------------   ------------
                                                                45,993,461     44,182,424
  Less: accumulated depreciation............................    (7,342,088)    (6,100,047)
                                                              ------------   ------------
Net property and equipment..................................    38,651,373     38,082,377
Goodwill....................................................    42,021,324     42,035,545
Tradename...................................................    11,158,000     11,158,000
Trademarks..................................................    15,459,038     15,459,038
Customer database, net of accumulated amortization of
  $566,533 at April 3, 2004 and $472,111 at January 3,
  2004......................................................     2,832,672      2,927,094
Deferred tax assets.........................................     2,724,174      2,724,174
Debt issuance costs, net of accumulated amortization of
  $1,323,264 at April 3, 2004 and $1,087,499 at January 3,
  2004......................................................     6,534,451      6,770,216
Other long-term assets......................................        56,333         56,333
                                                              ------------   ------------
Total assets................................................  $196,431,457   $179,326,713
                                                              ============   ============
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 44,397,100   $ 23,604,647
  Accrued expenses and other current liabilities............    12,957,821     16,762,870
  Line of credit............................................     1,075,000      1,417,039
                                                              ------------   ------------
Total current liabilities...................................    58,429,921     41,784,556
Long-term debt..............................................    78,029,386     77,482,469
Deferred rent...............................................     1,161,094      1,083,511
                                                              ------------   ------------
Total liabilities...........................................   137,620,401    120,350,536
Stockholders' equity:
  Common stock -- $.001 par value; 40,000,000 shares
     authorized; 21,594,597 shares issued and outstanding at
     April 3, 2004 and January 3, 2004, respectively........        21,594         21,594
  Restricted common stock units -- $.001 par value; 755,935
     shares issued and outstanding at April 3, 2004 and
     January 3, 2004, respectively..........................           756            756
  Additional capital........................................    60,288,607     60,288,607
  Other comprehensive income................................       224,717        186,877
  Accumulated deficit.......................................    (1,724,618)    (1,521,657)
                                                              ------------   ------------
Total stockholders' equity..................................    58,811,056     58,976,177
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $196,431,457   $179,326,713
                                                              ============   ============
See accompanying notes.
                                       F-31
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
                                                              -------------------------
                                                               APRIL 3,      MARCH 29,
                                                                 2004          2003
                                                              -----------   -----------
                                                                     (UNAUDITED)
Net revenues................................................  $65,782,039   $45,830,119
Cost of products sold.......................................   42,806,857    30,972,343
                                                              -----------   -----------
Gross profit................................................   22,975,182    14,857,776
Selling, general and administrative.........................   20,167,893    14,258,838
Store pre-opening expenses..................................      329,238            --
                                                              -----------   -----------
Total operating expenses....................................   20,497,131    14,258,838
                                                              -----------   -----------
Operating income............................................    2,478,051       598,938
Interest expense............................................   (2,795,405)   (2,638,496)
Interest income.............................................          731         7,477
Other income................................................        2,434         5,693
Other expense...............................................      (13,167)       (2,334)
                                                              -----------   -----------
Loss before income taxes....................................     (327,356)   (2,028,722)
Income tax benefit..........................................      124,395       811,319
                                                              -----------   -----------
Net loss....................................................  $  (202,961)  $(1,217,403)
                                                              ===========   ===========
See accompanying notes.
                                       F-32
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
                                                              ---------------------------
                                                                APRIL 3,      MARCH 29,
                                                                  2004           2003
                                                              ------------   ------------
                                                                      (UNAUDITED)
OPERATING ACTIVITIES
Net loss....................................................  $   (202,961)  $ (1,217,403)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
     Depreciation...........................................     1,240,318      1,216,435
     Amortization of intangible assets......................        94,422         94,422
  Amortization of debt issue costs and debt discount........       782,682        713,393
  Loss on sale of auto......................................         2,257             --
  Changes in operating assets and liabilities:
       Accounts receivable..................................       (63,149)      (990,886)
       Inventories..........................................   (14,665,883)   (11,330,465)
       Prepaid and other assets.............................      (902,697)      (111,740)
       Accounts payable.....................................    20,792,453      6,115,875
       Accrued expenses and other current liabilities.......    (3,789,761)    (4,968,454)
       Deferred rent........................................        77,583        196,744
                                                              ------------   ------------
Net cash provided by (used in) operating activities.........     3,365,264    (10,282,079)

INVESTING ACTIVITIES
Capital expenditures........................................    (1,815,623)      (408,885)
Proceeds from sale of auto..................................         5,000             --
Other.......................................................            --         (1,325)
                                                              ------------   ------------
Net cash used in investing activities.......................    (1,810,623)      (410,210)

FINANCING ACTIVITIES
Principal payments on lines of credit.......................   (19,920,336)    (5,476,478)
Proceeds from lines of credit...............................    19,578,297      7,551,478
Debt issuance costs.........................................            --        (10,530)
Other.......................................................        (1,067)            --
                                                              ------------   ------------
Net cash provided by (used in) financing activities.........      (343,106)     2,064,470
Effect of exchange rate changes on cash.....................        36,892         (9,687)
                                                              ------------   ------------
Change in cash and cash equivalents.........................     1,248,427     (8,637,506)
Cash and cash equivalents, beginning of period..............     2,928,109     11,412,460
                                                              ------------   ------------
Cash and cash equivalents, end of period....................  $  4,176,536   $  2,774,954
                                                              ============   ============
Supplemental cash flow information:
  Interest payments.........................................  $  3,985,290   $  2,979,025
  Tax payments..............................................  $     27,494   $     56,936
  Amortization of discount on senior secured notes..........  $    546,917   $    499,123
See accompanying notes.
                                       F-33
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 APRIL 3, 2004

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  DESCRIPTION OF BUSINESS

     Golfsmith International Holdings, Inc., is a multi-channel retailer of golf
equipment, merchandise and training curriculum for consumers and golf clubmaking
businesses. Golfsmith offers equipment from leading manufacturers, including
Callaway(R), Cobra(R), FootJoy(R), Nike(R), Ping(R), Taylor Made(R) and
Titleist(R). In addition, Golfsmith offers its own proprietary brands, including
Golfsmith(R), Lynx(R), Snake Eyes(R), Killer Bee(R) and Zevo(R). The Company
markets its products through 42 superstores as well as through its
direct-to-consumer channel, which includes its clubmaking and accessory catalogs
and its Internet site. The Company also operates the Harvey Penick Golf Academy,
an instructional school incorporating the techniques of the well-known golf
instructor, Harvey Penick.

  BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
Golfsmith International Holdings, Inc. ("Holdings" or the "Company") and its
wholly owned subsidiary Golfsmith International, Inc. ("Golfsmith"). Holdings
was formed on September 4, 2002 as a Delaware corporation to acquire all of the
outstanding shares of common stock of Golfsmith. Holdings acquired Golfsmith on
October 15, 2002. Holdings has no assets or liabilities other than its
investment in its wholly owned subsidiary. Holdings did not have operations
prior to the acquisition of Golfsmith; accordingly these consolidated financial
statements represent the operations of Golfsmith and its subsidiaries. All
significant inter-company accounts and transactions have been eliminated in
consolidation.

     The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States. As information in this report relates to interim financial
information, certain footnote disclosures have been condensed or omitted. In the
Company's opinion, the unaudited interim consolidated financial statements
reflect all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows for the periods presented. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto for the year ended January 3, 2004
included elsewhere in this prospectus. The results of operations for the three
month period ended April 3, 2004 are not necessarily indicative of results that
may be expected for any other interim period or for the full fiscal year.

     The balance sheet at January 3, 2004 has been derived from audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. For further information,
refer to the audited consolidated financial statements and notes thereto for the
year ended January 3, 2004, included elsewhere in this prospectus.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and use assumptions that affect certain reported amounts and
disclosures. Although management uses the best information available, it is
reasonably possible that the estimates used by the Company will be materially
different from the actual results. These differences could have a material
effect on the Company's future results of operations and financial position. The
Company uses estimates when accounting for depreciation and amortization,
allowance for doubtful accounts, income taxes, allowance for obsolete inventory
and allowance for sales returns.

                                       F-34
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  REVENUE SUBJECT TO SEASONAL VARIATIONS

     The Company's business is seasonal, reflecting peak sales and earnings
during the Father's Day and Christmas holiday selling seasons. A substantial
portion of the Company's total revenues and an even larger portion of the
Company's operating income occur in its second fiscal quarter. The results of
these interim quarters may not be representative of the results for the full
fiscal year.

  FISCAL YEAR

     The Company's fiscal year ends on the Saturday closest to December 31. The
three-month periods ended April 3, 2004 and March 29, 2003 both consist of
thirteen weeks.

  STORE PRE-OPENING AND CLOSING EXPENSES

     Costs associated with the opening of a new store, which include costs
associated with hiring and training personnel, supplies and certain occupancy
and miscellaneous costs related to new locations, are expensed as incurred. When
the Company decides to close a store and meets the applicable accounting
guidance criteria, the Company recognizes an expense related to the future net
lease obligation, non-recoverable investments in related fixed assets and other
expenses directly related to the discontinuance of operations in accordance with
SFAS No. 146, Accounting For Costs Associated With Exit or Disposal Activities.
These charges require the Company to make judgments about exit costs to be
incurred for employee severance, lease terminations, inventory to be disposed
of, and other liabilities. The ability to obtain agreements with lessors, to
terminate leases or to assign leases to third parties can materially affect the
accuracy of these estimates.

  STOCK-BASED COMPENSATION

     The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The following table illustrates the
effect on net loss, if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standard (SFAS) No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting
for Stock-Based Compensation -- Transition and Disclosure, An Amendment of FASB
Statement No. 123:
THREE MONTHS ENDED
                                                              -----------------------
                                                              APRIL 3,     MARCH 29,
                                                                2004         2003
                                                              ---------   -----------
Net loss -- as reported.....................................  $(202,961)  $(1,217,403)
Total stock-based compensation cost, net of related tax
  effects included in the determination of net loss as
  reported..................................................         --            --
The stock-based employee compensation cost, net of related
  tax effects, that would have been included in the
  determination of net loss if the fair value based method
  had been applied to all awards............................    (44,583)           --
                                                              ---------   -----------
Pro forma net loss..........................................  $(247,544)  $(1,217,403)
                                                              =========   ===========
2.  BUSINESS COMBINATIONS

     On July 24, 2003, the Company acquired all issued and outstanding shares of
Don Sherwood Golf Shop ("Sherwood") for a total purchase price of $9.2 million,
including related acquisition costs of $0.4 million. The Company believes that
the Sherwood acquisition supports the Company's goals of expanding its national
presence while gaining exposure to one of the country's top golf markets in
                                       F-35
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

San Francisco, California. The Company acquired all six Sherwood retail stores
as part of the acquisition. The operations of Sherwood stores are included in
the Company's consolidated statements of operations and cash flows as of July
25, 2003.

     In conjunction with the acquisition of Sherwood, the Company issued
1,433,333 shares of common stock to existing stockholders, including its
majority stockholder, for consideration of $4.3 million. The proceeds from the
issuance of common stock were used to fund a portion of the acquisition of
Sherwood. The issuance of these additional shares increased the majority
stockholder's 79.7% controlling interest in the Company to an 80.9% controlling
interest, including issued restricted common stock units, which entitle the
holders to shares of the Company's common stock, and excluding outstanding stock
options. At April 3, 2004, the Company's majority stockholder held a majority
interest of 75.1% of our common stock on a fully diluted basis, including
outstanding stock options.

     The total purchase consideration has been allocated to the assets acquired
and liabilities assumed, including property and equipment, inventory and
identifiable intangible assets, based on their respective fair values at the
date of acquisition. Such allocation resulted in goodwill of $6.4 million.
Goodwill is assigned at the reporting unit level and is not deductible for
income tax purposes.

     Contingent consideration of $1.3 million has been placed in an escrow
account by the Company to secure certain indemnification obligations of the
selling shareholder. Subject to the terms and conditions of the escrow
agreement, any remaining balance of the funds placed in escrow (less any amount
of unresolved claims) will be disbursed to the selling shareholder on June 28,
2004.

3.  INTANGIBLE ASSETS

     In accordance with the adoption provisions of SFAS No. 142, Goodwill and
Other Intangible Assets, the Company is required to perform periodic review and
analysis for possible impairment of intangible assets with indefinite lives,
including goodwill. The Company evaluates its indefinite lived intangible assets
for impairment annually, as well as whenever events or changes in circumstances
indicate that the carrying amounts of these assets may not be recoverable based
on a combination of the Company's projection of estimated future discounted cash
flows and other valuation methodologies. In the event that the book value of
intangibles and goodwill is determined to be impaired, such impairments are
measured using a combination of discounted cash flow valuation, with a discount
rate determined to be commensurate with the risk inherent in the Company's
current business model, and other valuation methodologies. To the extent these
future projections or strategies change, the Company's estimates regarding
impairment may differ from the Company's current estimates. In accordance with
SFAS No. 142, the Company determined that its recorded tradename and trademarks
have indefinite useful lives and therefore are not amortized.

     Intangible assets with definite lives must be amortized over their
estimated useful lives. Following is a summary of the Company's intangible
assets that are subject to amortization as of April 3, 2004:
GROSS CARRYING   ACCUMULATED    NET CARRYING
                                                     AMOUNT       AMORTIZATION      AMOUNT
                                                 --------------   ------------   ------------
Customer databases.............................    $3,399,205      $(566,533)     $2,832,672
The net carrying amount of customer databases intangible assets relates
solely to the merger transaction in October 2002 between Golfsmith and Holdings.
Total amortization expense was $94,222 for each of the three months ended April
3, 2004 and March 29, 2003, and is recorded in selling, general, and
administration costs on the consolidated statements of operations.

                                       F-36
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  GUARANTEES

     Holdings fully and unconditionally guarantees both the senior secured notes
issued by Golfsmith in October 2002 and the senior credit facility. The senior
secured notes mature in October 2009 with certain mandatory redemption features.
Interest payments on the senior secured notes are required on a semi-annual
basis at an annual interest rate of 8.375%. At April 3, 2004 there was $1.1
million of borrowings outstanding under the senior credit facility and $78.0
million aggregate principal amount of the senior secured notes outstanding.
Holdings' guarantee of Golfsmith's senior secured notes and the senior credit
facility is explicitly excluded from the initial recognition and initial
measurement requirements of FASB Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, as it meets the definition of an intercompany guarantee.

     The following represents certain stand-alone information for the three
months ended April 3, 2004 and the fiscal year ended January 3, 2004 for the
issuer and certain guarantors of the senior secured notes and the senior credit
facility:
THREE MONTHS ENDED                              GOLFSMITH    GOLFSMITH
    APRIL 3, 2004      HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
---------------------  --------   ------------   ----------   ----------   ------------   ------------
Assets...............   $   --    $193,606,036   $1,716,919   $3,796,186   $(2,687,684)   $196,431,457
Debt.................       --     (79,104,386)          --           --            --     (79,104,386)
Net revenues.........       --      63,626,844      683,393    1,471,802            --      65,782,039
Net income (loss)....       --        (328,684)     102,920       22,803            --        (202,961)
FISCAL YEAR ENDED                              GOLFSMITH    GOLFSMITH
   JANUARY 3, 2004     HOLDINGS    GOLFSMITH       CANADA       EUROPE     ELIMINATIONS      TOTAL
---------------------  --------   ------------   ----------   ----------   ------------   ------------
Assets...............   $   --    $176,974,627   $1,615,054   $2,303,100   $(1,566,068)   $179,326,713
Debt.................       --     (78,899,508)          --           --            --     (78,899,508)
Net revenues.........       --     248,997,549    3,129,311    5,617,920            --     257,744,780
Net income...........       --          22,649      527,162      514,453            --       1,064,264
The Company offers warranties to its customers depending on the specific
product and terms of the goods purchased. A typical warranty program requires
that the Company replace defective products within a specified time period from
the date of sale. The Company records warranty costs as they are incurred and
historically such costs have not been material. During the three months ended
April 3, 2004 and March 29, 2003, respectively, no amounts have been accrued or
paid relating to product warranties.

5.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     The Company's accrued expenses and other current liabilities are comprised
of the following at April 3, 2004 and January 3, 2004, respectively:
APRIL 3,     JANUARY 3,
                                                                2004          2004
                                                             -----------   -----------
Salaries and benefits......................................  $ 2,531,203   $ 1,998,142
Interest...................................................      703,256     2,675,824
Allowance for returns reserve..............................    1,161,253     1,357,173
Gift certificates..........................................    5,158,659     5,990,485
Taxes......................................................    1,831,716     3,102,040
Other......................................................    1,571,734     1,639,206
                                                             -----------   -----------
  Total....................................................  $12,957,821   $16,762,870
                                                             ===========   ===========
F-37
GOLFSMITH INTERNATIONAL HOLDINGS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  COMPREHENSIVE INCOME (LOSS)

     The Company's comprehensive income (loss) is composed of net income (loss)
and translation adjustments. The following table presents the calculation of
comprehensive income (loss):
THREE MONTHS ENDED
                                                              -----------------------
                                                              APRIL 3,     MARCH 29,
                                                                2004         2003
                                                              ---------   -----------
Net loss....................................................  $(202,961)  $(1,217,403)
Translation adjustments.....................................     37,840       (10,273)
                                                              ---------   -----------
  Total comprehensive loss..................................  $(165,121)  $(1,227,676)
                                                              =========   ===========
7.  RECENTLY ISSUED ACCOUNTING STANDARDS

  VARIABLE INTEREST ENTITIES

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), which was revised in December 2003 ("FIN
46(R)"). FIN 46(R) requires that companies consolidate a variable interest
entity if they are subject to a majority of the risk of loss from the variable
interest entity's activities or are entitled to receive a majority of the
entity's residual returns, or both. The provisions of FIN 46(R) currently are
required to be applied no later than the first reporting period ending after
March 15, 2004 for variable interest entities. The Company has no special
purpose entities, nor has it acquired a variable interest in an entity where the
Company is the primary beneficiary. The adoption of FIN 46(R) did not have a
material impact on the Company's financial condition, results of operations or
cash flows.

8.  SUBSEQUENT EVENTS

     On April 15, 2004, all remaining escrow funds of $5,117,421 related to the
October 15, 2002 merger transaction between Golfsmith and Holdings were paid to
the selling stockholders in accordance with the merger agreement.

                                       F-38
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF GOLFSMITH SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

                         GOLFSMITH INTERNATIONAL, INC.

                      8.375% Senior Secured Notes Due 2009

                           -------------------------

                                   PROSPECTUS
                           -------------------------

                                           , 2004
PART II

                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC registration fee........................................  $    919
Blue Sky fees and expenses..................................     5,000
Legal fees and expenses.....................................   100,000
Accounting fees and expenses................................    45,000
Printing expenses...........................................    15,000
Miscellaneous...............................................    34,081
                                                              --------
  Total.....................................................  $200,000
                                                              ========
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Golfsmith International, Inc. and Golfsmith International Holdings,
Inc.  Each of Golfsmith International, Inc. ("Golfsmith") and Golfsmith
International Holdings, Inc. ("Holdings") are incorporated under the laws of the
State of Delaware. The Certificate of Incorporation of each of Golfsmith and
Holdings provides that each corporation shall indemnify its officers and
directors to the fullest extent permitted by the General Corporation Law of
Delaware.

     Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify a director, officer, employee, or agent of the corporation (or
other entity if such person is serving in such capacity at the corporation's
request) against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify a director, officer, employee, or agent of the
corporation (or other entity if such person is serving in such capacity at the
corporation's request) against expenses (including attorneys' fees) actually and
reasonably incurred by him if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses as
the court shall deem proper. Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation.

     Consistent with Section 145 of the Delaware General Corporation Law,
Article Eleventh of the Certificate of Incorporation of Golfsmith and Article
Twelfth of the Amended and Restated Certificate of Incorporation of Holdings
provide that each corporation will indemnify its directors, officers, employees
and agents of the corporation against all expenses, liabilities and losses
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection with any action, suit or proceeding and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent.

     In accordance with Section 102(b)(7) of the Delaware General Corporation
Law, Article Eleventh of the Certificate of Incorporation of Golfsmith and
Article Twelfth of the Amended and Restated Certificate of Incorporation of
Holdings provide that directors shall not be personally liable for monetary
damages for breaches of their fiduciary duty as directors except for liability
(i) for any breach of their duty of loyalty to

                                       II-1
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violations of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
transactions from which a director derives an improper personal benefit.

     Under Article Eleventh of the Certificate of Incorporation of Golfsmith and
Article Twelfth of the Amended and Restated Certificate of Incorporation of
Holdings, each of Golfsmith and Holdings may maintain insurance, at its expense,
to protect itself and any director, officer, employee, or agent of the
corporation or any other corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law. Golfsmith carries
standard directors and officers liability coverage for its directors and
officers and the directors and officers of its subsidiaries. Subject to certain
limitations and exclusions, the policies reimburse the corporation for
liabilities indemnified under the Certificate of Incorporation and indemnify
directors and officers against additional liabilities not indemnified under the
Certificate of Incorporation.

     Golfsmith entered into indemnification agreements with those individuals
who were directors prior to the merger of BGA Acquisition Corp. with and into
Golfsmith which was completed on October 15, 2002. These agreements provide for
the indemnification, to the full extent permitted by law, of expenses,
judgments, fines, penalties, and amounts paid in settlement incurred by the
director in connection with any threatened, pending or completed action, suit or
proceeding on account of service as a director, officer, employee or agent of
Golfsmith. Golfsmith has not entered into any indemnification agreements with
its current directors or officers. Holdings has not entered into indemnification
agreements with its officers or directors.

     Golfsmith GP Holdings, Inc.  Golfsmith GP Holdings, Inc. ("GP Holdings") is
incorporated under the laws of the State of Delaware. Consistent with Section
145 of the Delaware General Corporation Law, Article VII, Section 7.1 of the
Bylaws of GP Holdings provides that the corporation will indemnify the
directors, advisory directors, officers, employees or agents of the corporation,
or of any entity a majority of the voting stock of which is owned by the
corporation, or any person who is or was serving at the request of the
corporation as a director, advisory director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any action, suit, or proceeding if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation. With respect to a
criminal action or proceeding, such person must also have had no reasonable
cause to believe his conduct was unlawful.

     In accordance with Section 102(b)(7) of the Delaware General Corporation
Law, Article Ten of the Certificate of Incorporation of GP Holdings provides
that a director of GP Holding shall not be liable to the corporation or the
stockholders for monetary damages for any breach of his fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or the stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.

     Under Article VII, Section 7.4 of the Bylaws of GP Holdings, GP Holdings
may purchase and maintain insurance, in such amounts and against such risks as
the board of directors deems appropriate, on behalf of any person who is or was
a director, advisory director, officer, employee or agent of the corporation, or
of any entity a majority of the voting stock of which is owned by the
corporation, or who is or was serving at the request of the corporation as a
director, advisory director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power or would
be required to indemnify him against such liability.

     Golfsmith Holdings, L.P. and Golfsmith International, L.P.  Golfsmith
Holdings, L.P. and Golfsmith International, L.P. are limited partnerships
organized under the laws of the State of Delaware. Section 17-108 of the
Delaware Revised Uniform Limited Partnership Act provides that, subject to such
                                       II-2
standards and restrictions, if any, as are set forth in its partnership
agreement, a limited partnership may, and shall have the power to, indemnify and
hold harmless any partner or other person from and against any and all claims
and demands whatsoever.

     Article 4, Section 4.7 of the Amended and Restated Limited Partnership
Agreement of Golfsmith Holdings, L.P. provides that to the fullest extent
allowed by the Delaware Revised Uniform Limited Partnership Act, Golfsmith
Holdings, L.P. shall indemnify its general partner and its officers, directors,
shareholders, employees and agents from any expenses, liabilities, claims,
causes of action, losses or damages incurred by reason of any act or omission
performed or omitted by or on behalf of the general partner in good faith on
behalf of the partnership or the limited partners and in a manner reasonably
believed by the general partner or its officers, directors, shareholders,
employees or agents to be within the scope of authority granted to it, or if the
general partner or its officers, directors, shareholders, employees or agents
reasonably believed the act or omission was not opposed to the partnership's
best interests and was not unlawful, regardless of whether such act or omission
constituted the sole, partial or concurrent negligence of the general partner or
its officers, directors, shareholders, employees or agents. In addition, under
Article 7, Section 7.14 of the Amended and Restated Limited Partnership
Agreement of Golfsmith Holdings, L.P., the partnership shall indemnify the
officers to the extent and in the manner described above.

     Article II, Section 2.8 of the Limited Partnership Agreement of Golfsmith
International, L.P. provides that to the full extent permitted by applicable
law, and except for loss or damages incurred by a partner by reason of its gross
negligence, willful misconduct or bad faith, the partnership will indemnify a
partner from, and reimburse a partner for, all judgments, penalties, including
excise and similar taxes, fines, settlements and reasonable expenses, including
attorneys' fees, if such partner was, is or is threatened to be a named
defendant or respondent in a proceeding because the partner is or was a general
partner.

     Golfsmith GP, L.L.C., Golfsmith Delaware, L.L.C., Golfsmith Canada, L.L.C.,
Golfsmith Europe, L.L.C., Golfsmith USA, L.L.C., Golfsmith NU, L.L.C. and
Golfsmith Licensing, L.L.C.  Each of Golfsmith GP, L.L.C., Golfsmith Delaware,
L.L.C., Golfsmith Canada, L.L.C., Golfsmith Europe, L.L.C., Golfsmith USA,
L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing, L.L.C. is a limited
liability company organized under the laws of the State of Delaware. Section
18-108 of the Delaware Limited Liability Company Act provides that, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement, a limited liability company may, and shall have the
power to, indemnify and hold harmless any member or manager or other person from
and against any and all claims and demands whatsoever.

     Consistent with Section 18-108 of the Delaware Limited Liability Company
Act, Article 4, Section 4.7 of the Company Agreement of each of Golfsmith GP,
L.L.C., Golfsmith Delaware, L.L.C., Golfsmith Canada, L.L.C., Golfsmith Europe,
L.L.C., Golfsmith USA, L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing,
L.L.C. provides that to the fullest extent allowed by the Delaware Limited
Liability Company Act and other applicable law, each company will indemnify the
managers from any expenses, liabilities, claims, causes of action, losses or
damages incurred by reason of any act or omission performed or omitted by the
managers in good faith on behalf of the company or the members and in a manner
reasonably believed by such managers to be within the scope of the authority
granted to it by each Company Agreement, regardless of whether such act or
omission constituted the sole, partial or concurrent negligence of such manager.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     On January 29, 2002, Golfsmith issued options to purchase an aggregate of
163,000 shares of its common stock at an exercise price of $6.55 per share to
members of its management under its 1997 Incentive Plan. Golfsmith issued these
options without registration under the Securities Act in reliance on the
exemption provided by Rule 701 under the Securities Act.

     On April 23, 2002, Golfsmith issued options to purchase an aggregate of
67,120 shares of its common stock at an exercise price of $6.55 per share to
members of its management under its 1997 Incentive Plan.
                                       II-3
Golfsmith issued these options without registration under the Securities Act in
reliance on the exemption provided by Rule 701 under the Securities Act.

     On September 4, 2002, Holdings issued 10 shares of its common stock to
Atlantic Equity Partners III, L.P. for an aggregate purchase price of $1.00, or
$.10 per share. Holdings issued these shares without registration under the
Securities Act of 1933, as amended, in reliance on the exemption provided by
Section 4(2) of the Securities Act as a transaction by an issuer not involving a
public offering.

     On October 15, 2002, Golfsmith issued $93,750,000 aggregate principal
amount at maturity of its 8.375% Senior Secured Notes Due 2009 for gross
proceeds of $75,000,000. Golfsmith issued these notes to Jefferies & Company,
Inc. without registration under the Securities Act as a private offering exempt
from the registration requirements of the Securities Act. The initial purchaser
sold the notes to institutional investors and non-U.S. persons in transactions
exempt from registration.

     On October 15, 2002, in connection with the merger of BGA Acquisition Corp.
with and into Golfsmith, Holdings issued an aggregate of 20,077,921 shares of
its common stock to Atlantic Equity Partners III, L.P. and to the stockholders
of Golfsmith. Holdings issued these shares without registration under the
Securities Act in reliance on the exemption provided by Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.

     On October 15, 2002, Holdings issued units entitling the holders thereof to
an aggregate of 839,268 shares of its common stock to members of its management.
Holdings issued these units without registration under the Securities Act in
reliance on the exemption provided by Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.

     On May 28, 2003, Holdings issued 83,333 shares of its common stock to
Thomas G. Hardy, one of its directors, for an aggregate purchase price of
$249,999, or $3.00 per share. Holdings issued these shares without registration
under the Securities Act in reliance on the exemption provided by Section 4(2)
of the Securities Act as a transaction by an issuer not involving a public
offering.

     On June 16, 2003, Holdings issued options to purchase an aggregate of
1,840,500 shares of its common stock at an exercise price of $3.00 per share to
members of its management under its 2002 Incentive Stock Plan. Holdings issued
these options without registration under the Securities Act in reliance on the
exemption provided by Rule 701 under the Securities Act.

     On July 24, 2003, Holdings issued 1,427,623 shares of its common stock to
Atlantic Equity Partners III, L.P., its majority stockholder, for an aggregate
purchase price of $4,282,869, or $3.00 per share. Holdings issued these shares
without registration under the Securities Act in reliance on the exemption
provided by Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

     On July 24, 2003, Holdings issued 5,710 shares of its common stock to
Thomas G. Hardy, one of its directors, for an aggregate purchase price of
$17,131, or $3.00 per share. Holdings issued these shares without registration
under the Securities Act in reliance on the exemption provided by Section 4(2)
of the Securities Act as a transaction by an issuer not involving a public
offering.

ITEM 16.  EXHIBITS

     See Exhibit Index.

ITEM 17.  UNDERTAKINGS

     The undersigned registrants hereby undertake:

          1. For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this Registration Statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrants pursuant to Rule 424(b)(1)

                                       II-4
or (4) or 497(h) under the Securities Act shall be deemed to be part of
     this Registration Statement as of the time it was declared effective.

          2. For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

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

                                       II-5
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ JAMES D. THOMPSON           Chief Executive Officer, President and   July 7, 2004
--------------------------------------  Director (Principal Executive Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE              Vice President -- Chief Financial      July 7, 2004
--------------------------------------       Officer (Principal Financial
            Virginia Bunte                     and Accounting Officer)

           /s/ CHARLES SHAW                     Chairman of the Board            July 7, 2004
--------------------------------------
             Charles Shaw

           /s/ JAMES GROVER                            Director                  July 7, 2004
--------------------------------------
             James Grover

           /s/ NOEL WILENS                             Director                  July 7, 2004
--------------------------------------
             Noel Wilens
II-6
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ ROBERTO BUARON                           Director                  July 7, 2004
--------------------------------------
            Roberto Buaron

         /s/ THOMAS G. HARDY                           Director                  July 7, 2004
--------------------------------------
           Thomas G. Hardy

            /s/ JAMES LONG                             Director                  July 7, 2004
--------------------------------------
              James Long

           /s/ CARL F. PAUL                            Director                  July 7, 2004
--------------------------------------
             Carl F. Paul
II-7
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ JAMES D. THOMPSON           Chief Executive Officer, President and   July 7, 2004
--------------------------------------  Director (Principal Executive Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE              Chief Financial Officer (Principal     July 7, 2004
--------------------------------------    Financial and Accounting Officer)
            Virginia Bunte

           /s/ CHARLES SHAW                     Chairman of the Board            July 7, 2004
--------------------------------------
             Charles Shaw

           /s/ JAMES GROVER                            Director                  July 7, 2004
--------------------------------------
             James Grover

           /s/ NOEL WILENS                             Director                  July 7, 2004
--------------------------------------
             Noel Wilens

          /s/ ROBERTO BUARON                           Director                  July 7, 2004
--------------------------------------
            Roberto Buaron
II-8
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ THOMAS G. HARDY                           Director                  July 7, 2004
--------------------------------------
           Thomas G. Hardy

            /s/ JAMES LONG                             Director                  July 7, 2004
--------------------------------------
              James Long

           /s/ CARL F. PAUL                            Director                  July 7, 2004
--------------------------------------
             Carl F. Paul
II-9
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH HOLDINGS, L.P.

                                          By: Golfsmith GP Holdings, Inc., its
                                          General Partner

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson                 of Golfsmith GP Holdings, Inc.

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------        and Accounting Officer) of
            Virginia Bunte                   Golfsmith GP Holdings, Inc.

           /s/ JAMES GROVER               Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             James Grover

           /s/ NOEL WILENS                Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             Noel Wilens
II-10
SIGNATURE                                 TITLE                        DATE
              ---------                                 -----                        ----
/s/ JAMES LONG                Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
              James Long

           /s/ CARL F. PAUL               Director of Golfsmith GP Holdings,     July 7, 2004
--------------------------------------                   Inc.
             Carl F. Paul
II-11
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH GP HOLDINGS, INC.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                      DATE
              ---------                                 -----                      ----
/s/ JAMES D. THOMPSON                Chief Executive Officer and       July 7, 2004
--------------------------------------     President (Principal Executive
          James D. Thompson                           Officer)

          /s/ VIRGINIA BUNTE             Chief Financial Officer (Principal    July 7, 2004
--------------------------------------    Financial and Accounting Officer)
            Virginia Bunte

           /s/ JAMES GROVER                           Director                 July 7, 2004
--------------------------------------
             James Grover

           /s/ NOEL WILENS                            Director                 July 7, 2004
--------------------------------------
             Noel Wilens

            /s/ JAMES LONG                            Director                 July 7, 2004
--------------------------------------
              James Long

           /s/ CARL F. PAUL                           Director                 July 7, 2004
--------------------------------------
             Carl F. Paul
II-12
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH GP, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
II-13
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH DELAWARE, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
II-14
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH CANADA, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
II-15
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH EUROPE, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                 TITLE                       DATE
              ---------                                 -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive      July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial      July 7, 2004
--------------------------------------         and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                             Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                            Manager                  July 7, 2004
--------------------------------------
             James Grover
II-16
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH USA, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
II-17
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH NU, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
II-18
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH LICENSING, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
/s/ JAMES D. THOMPSON               President (Principal Executive       July 7, 2004
--------------------------------------                 Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte

           /s/ NOEL WILENS                              Manager                  July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                             Manager                  July 7, 2004
--------------------------------------
             James Grover
II-19
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          GOLFSMITH INTERNATIONAL, L.P.

                                          By: Golfsmith GP, L.L.C.

                                          By:        /s/ NOEL WILENS
                                            ------------------------------------
                                              Name: Noel Wilens
                                              Title:   Vice President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
/s/ JAMES D. THOMPSON              President of Golfsmith GP, L.L.C.     July 7, 2004
--------------------------------------       (Principal Executive Officer)
          James D. Thompson

          /s/ VIRGINIA BUNTE               Treasurer of Golfsmith GP, L.L.C.     July 7, 2004
--------------------------------------         (Principal Financial and
            Virginia Bunte                        Accounting Officer)

           /s/ NOEL WILENS                  Manager of Golfsmith GP, L.L.C.      July 7, 2004
--------------------------------------
             Noel Wilens

           /s/ JAMES GROVER                 Manager of Golfsmith GP, L.L.C.      July 7, 2004
--------------------------------------
             James Grover
II-20
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 7, 2004.

                                          DON SHERWOOD GOLF SHOP

                                          By:      /s/ JAMES THOMPSON
                                            ------------------------------------
                                              Name: James Thompson
                                              Title:   Chief Executive Officer
                                                       and President

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Noel Wilens and James Grover, or any one of them,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agents or any of them, their, or his or her,
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                       DATE
              ---------                                  -----                       ----
/s/ JAMES THOMPSON             Chief Executive Officer and President   July 7, 2004
--------------------------------------       (Principal Executive Officer)
            James Thompson

          /s/ VIRGINIA BUNTE                Treasurer (Principal Financial       July 7, 2004
--------------------------------------          and Accounting Officer)
            Virginia Bunte

           /s/ JAMES GROVER                  Vice President, Secretary and       July 7, 2004
--------------------------------------                 Director
             James Grover

           /s/ CHARLES SHAW                            Director                  July 7, 2004
--------------------------------------
             Charles Shaw

          /s/ NOEL E. WILENS                  Vice-President and Director        July 7, 2004
--------------------------------------
            Noel E. Wilens
II-21
EXHIBIT INDEX
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
2.1    Agreement and Plan of Merger, dated as of September 23,
         2002, among Golfsmith International, Inc., Golfsmith
         International Holdings, Inc. and BGA Acquisition Corporation
         (filed as Exhibit 2.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.1    Certificate of Incorporation of Golfsmith International,
         Inc. (filed as Exhibit 3.1 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.2    Bylaws of Golfsmith International, Inc. (filed as Exhibit
         3.2 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.3    Amended and Restated Certificate of Incorporation of
         Golfsmith International Holdings, Inc. (filed as Exhibit 3.3
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.4    Bylaws of Golfsmith International Holdings, Inc. (filed as
         Exhibit 3.4 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.5    Certificate of Incorporation of Golfsmith GP Holdings, Inc.
         (filed as Exhibit 3.5 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.6    Bylaws of Golfsmith GP Holdings, Inc. (filed as Exhibit 3.6
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.7    Certificate of Limited Partnership of Golfsmith Holdings,
         L.P. (filed as Exhibit 3.7 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.8    Amended and Restated Limited Partnership Agreement of
         Golfsmith Holdings, L.P. (filed as Exhibit 3.8 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.9    Certificate of Formation of Golfsmith GP, L.L.C. (filed as
         Exhibit 3.9 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.10   Company Agreement of Golfsmith GP, L.L.C. (filed as Exhibit
         3.10 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.11   Certificate of Formation of Golfsmith Delaware, L.L.C.
         (filed as Exhibit 3.11 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.12   Company Agreement of Golfsmith Delaware, L.L.C. (filed as
         Exhibit 3.12 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.13   Certificate of Formation of Golfsmith Canada, L.L.C. (filed
         as Exhibit 3.13 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.14   Company Agreement of Golfsmith Canada, L.L.C. (filed as
         Exhibit 3.14 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.15   Certificate of Formation of Golfsmith Europe, L.L.C. (filed
         as Exhibit 3.15 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  3.16   Company Agreement of Golfsmith Europe, L.L.C. (filed as
         Exhibit 3.16 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.17   Certificate of Formation of Golfsmith USA, L.L.C. (filed as
         Exhibit 3.17 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.18   Company Agreement of Golfsmith USA, L.L.C. (filed as Exhibit
         3.18 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.19   Certificate of Formation of Golfsmith NU, L.L.C. (filed as
         Exhibit 3.19 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.20   Company Agreement of Golfsmith NU, L.L.C. (filed as Exhibit
         3.20 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  3.21   Certificate of Formation of Golfsmith Licensing, L.L.C.
         (filed as Exhibit 3.21 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
3.22   Company Agreement of Golfsmith Licensing, L.L.C. (filed as
         Exhibit 3.22 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  3.23   Certificate of Limited Partnership of Golfsmith
         International, L.P. (filed as Exhibit 3.23 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  3.24   Limited Partnership Agreement of Golfsmith International,
         L.P. (filed as Exhibit 3.24 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  3.25*  Articles of Incorporation of Don Sherwood Golf Shop.
  3.26*  By-laws of Don Sherwood Golf Shop.
  4.1    Indenture, dated as of October 15, 2002, among Golfsmith
         International, Inc., the guarantors named and defined
         therein and U.S. Bank Trust National Association, as trustee
         (filed as Exhibit 4.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
  4.2    Registration Rights Agreement, dated as of October 15, 2002,
         among Golfsmith International, Inc., the guarantors named
         and defined therein and Jefferies & Company, Inc., as the
         initial purchaser (filed as Exhibit 4.3 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.3    Security Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other grantors named
         and defined therein and U.S. Bank Trust National
         Association, as collateral agent (filed as Exhibit 4.4 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.4    Supplement No. 1 to Security Agreement, dated as of July 24,
         2003, between Don Sherwood Golf Shop, Inc. and U.S. Bank
         Trust National Association, as collateral agent (filed as
         Exhibit 4.4 to Golfsmith International Holdings, Inc.'s
         Annual Report on Form 10-K for the fiscal year ended January
         3, 2004, file No. 333-10117, and incorporated herein by
         reference).
  4.5    Trademark Security Agreement, dated as of October 15, 2002,
         between Golfsmith International, Inc. and U.S. Bank Trust
         National Association, as collateral agent (filed as Exhibit
         4.5 to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.6    Trademark Security Agreement, dated as of July 24, 2003,
         between Don Sherwood Golf Shop, Inc. and U.S. Bank Trust
         National Association, as collateral agent (filed as Exhibit
         4.6 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.7    Deed of Trust, dated as of October 15, 2002, by Golfsmith
         International, L.P. to M. Marvin Katz, as trustee for the
         benefit of U.S. Bank Trust National Association, as
         indenture trustee (filed as Exhibit 4.6 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.8    Open-End Leasehold Mortgage, dated November 28, 2003, from
         Golfsmith NU, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.8 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.9    Leasehold Mortgage, dated November 28, 2003, from Golfsmith
         NU, L.L.C. in favor of U.S. Bank Trust National Association,
         as indenture trustee (filed as Exhibit 4.9 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
  4.10   Leasehold Deed of Trust, dated November 28, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.10 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
4.11   Leasehold Deed of Trust, dated December 23, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.11 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.12   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.12 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.13   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.13 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.14   Leasehold Deed of Trust, dated December 15, 2003, from
         Golfsmith USA, L.L.C. in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.14 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.15   Leasehold Deed of Trust, dated November 28, 2003, from
         Golfsmith International, L.P. in favor of U.S. Bank Trust
         National Association, as indenture trustee (filed as Exhibit
         4.15 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.16   Leasehold Deed of Trust, recorded on December 22, 2003, from
         Golfsmith International, L.P. in favor of U.S. Bank Trust
         National Association, as indenture trustee (filed as Exhibit
         4.16 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
  4.17   Leasehold Mortgage, dated November 28, 2003, from Golfsmith
         NU, L.L.C. in favor of U.S. Bank Trust National Association,
         as indenture trustee (filed as Exhibit 4.17 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
  4.18   Leasehold Mortgage, dated December 23, 2003, from Golfsmith
         NU, L.L.C., in favor of U.S. Bank Trust National
         Association, as indenture trustee (filed as Exhibit 4.18 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.19   Security Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other grantors named
         and defined therein and General Electric Capital
         Corporation, as agent for the lenders (filed as Exhibit 4.7
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.20   Trademark Security Agreement, dated as of October 15, 2002,
         among Golfsmith International, Inc. and the other grantors
         named and defined therein and General Electric Capital
         Corporation, as agent for itself and the lenders (filed as
         Exhibit 4.8 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
  4.21   Trademark Security Agreement, dated as of July 24, 2003,
         between Don Sherwood Golf Shop, Inc. and General Electric
         Capital Corporation, as agent for itself and the lenders
         (filed as Exhibit 4.21 to Golfsmith International Holdings,
         Inc.'s Annual Report on Form 10-K for the fiscal year ended
         January 3, 2004, file No. 333-10117, and incorporated herein
         by reference).
  4.22   Pledge Agreement, dated as of October 15, 2002, among
         Golfsmith International, Inc. and the other pledgors named
         and defined therein and General Electric Capital
         Corporation, as secured party (filed as Exhibit 4.9 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
4.23   Intercompany Subordination Agreement, dated as of October
         15, 2002, among Golfsmith International, Inc., Golfsmith
         International Holdings, Inc., Golfsmith GP Holdings, Inc.,
         Golfsmith Holdings, L.P., Golfsmith International, L.P.,
         Golfsmith GP, L.L.C., Golfsmith Delaware, L.L.C., Golfsmith
         Canada, L.L.C., Golfsmith Europe, L.L.C., Golfsmith USA,
         L.L.C., Golfsmith NU, L.L.C. and Golfsmith Licensing L.L.C.,
         and General Electric Capital Corporation, as agent for the
         lenders (filed as Exhibit 4.10 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
  4.24   Intercreditor Agreement, dated as of October 15, 2002, among
         General Electric Capital Corporation, as senior agent, U.S.
         Bank Trust National Association, as trustee and collateral
         agent, and Golfsmith International, Inc. and the other
         credit parties named therein (filed as Exhibit 4.11 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  4.25   Assumption and Joinder Agreement in connection with the
         Intercreditor Agreement, dated as of July 24, 2003, made by
         Don Sherwood Golf Shop, Inc. in favor of General Electric
         Capital Corporation, as senior agent (filed as Exhibit 4.25
         to Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
  4.26   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith Holdings, L.P., as the issuer,
         Golfsmith International, Inc., as the pledgor, General
         Electric Capital Corporation, as the senior pledgee and U.S.
         Bank Trust National Association, as collateral agent and the
         junior pledge (filed as Exhibit 4.12 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.27   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith International, L.P., as the
         issuer, Golfsmith Delaware, L.L.C., as the pledgor, General
         Electric Capital Corporation, as the senior pledgee and U.S.
         Bank Trust National Association, as collateral agent and the
         junior pledge (filed as Exhibit 4.13 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
  4.28   Subsidiary Securities Control Agreement, dated as of October
         15, 2002, among Golfsmith GP, L.L.C. and the other issuers
         named therein, Golfsmith Holdings, L.P., as the pledgor,
         General Electric Capital Corporation, as the senior pledgee
         and U.S. Bank Trust National Association, as collateral
         agent and the junior pledge (filed as Exhibit 4.13 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
  5.1*   Opinion of King & Spalding LLP.
  9.1    Stockholders Agreement, dated as of October 15, 2002, among
         Golfsmith International Holdings, Inc., Atlantic Equity
         Partners III, L.P. and the other stockholders party thereto
         (filed as Exhibit 9.1 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.1    Redemption Agreement, dated as of September 23, 2002, among
         DLJ Investment Partners, L.P., DLJ Investment Fundings,
         Inc., DLJ ESC II L.P., Golfsmith International, Inc.,
         Golfsmith Holdings, L.P., Golfsmith GP Holdings, Inc.,
         Golfsmith International Holdings, Inc. and BGA Acquisition
         Corporation (filed as Exhibit 10.1 to Golfsmith's
         Registration Statement on Form S-4 (No. 333-101117), and
         incorporated herein by reference).
 10.2    Escrow Agreement, dated as of October 15, 2002, among
         Golfsmith International Holdings, Inc., Carl F. Paul and
         Franklin C. Paul, as stockholder representatives, and
         JPMorgan Chase Bank, as escrow agent (filed as Exhibit 10.2
         to Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
 10.3    Indemnification Agreement, dated as of October 15, 2002,
         among Golfsmith International Holdings, Inc., and Carl F.
         Paul and Franklin C. Paul, as stockholder representatives
         (filed as Exhibit 10.3 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
10.4    Management Consulting Agreement, dated as of October 15,
         2002, among Golfsmith International Holdings, Inc.,
         Golfsmith International, Inc. and First Atlantic Capital,
         Ltd. (filed as Exhibit 10.4 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.5    Credit Agreement, dated as of October 15, 2002, among
         Golfsmith International, L.P., Golfsmith NU, L.L.C., and
         Golfsmith USA, L.L.C., as borrowers, Golfsmith
         International, Inc. and the other credit parties named
         therein and General Electric Capital Corporation, as a
         lender, as the initial L/C issuer and as agent (filed as
         Exhibit 10.5 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.6    Amendment No. 1 to the Credit Agreement dated as of January
         10, 2003 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.6 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.7    Amendment No. 2 to the Credit Agreement dated as of
         September 5, 2003 among Golfsmith International, L.P.,
         Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C. as Borrowers
         And General Electric Capital Corporation as a lender (filed
         as Exhibit 10.7 to Golfsmith International Holdings, Inc.'s
         Annual Report on Form 10-K for the fiscal year ended January
         3, 2004, file No. 333-10117, and incorporated herein by
         reference).
 10.8    Amendment No. 3 to the Credit Agreement dated as of February
         10, 2004 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.8 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.9    Amendment No. 4 to the Credit Agreement dated as of March
         11, 2004 among Golfsmith International, L.P., Golfsmith NU,
         L.L.C. and Golfsmith USA, L.L.C. as Borrowers And General
         Electric Capital Corporation as a lender (filed as Exhibit
         10.9 to Golfsmith International Holdings, Inc.'s Annual
         Report on Form 10-K for the fiscal year ended January 3,
         2004, file No. 333-10117, and incorporated herein by
         reference).
 10.10   Assumption and Joinder Agreement, dated as of July 24, 2003
         in connection with the Credit Agreement, made by Don
         Sherwood Golf Shop, Inc. in favor of General Electric
         Capital Corporation, as a lender, as the initial L/C issuer
         and as agent (filed as Exhibit 10.10 to Golfsmith
         International Holdings, Inc.'s Annual Report on Form 10-K
         for the fiscal year ended January 3, 2004, file No.
         333-10117, and incorporated herein by reference).
 10.11   Guaranty, dated as of October 15, 2002, among Golfsmith
         International, Inc. and the other guarantors named and
         defined therein and General Electric Capital Corporation, as
         agent for itself and the lenders (filed as Exhibit 10.6 to
         Golfsmith's Registration Statement on Form S-4 (No.
         333-101117), and incorporated herein by reference).
 10.12   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Carl Paul (filed
         as Exhibit 10.7 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.13   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Franklin Paul
         (filed as Exhibit 10.8 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.14   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Barbara Paul
         (filed as Exhibit 10.9 to Golfsmith's Registration Statement
         on Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.15   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of Kelly Redding
         (filed as Exhibit 10.10 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
10.16   Indemnification Agreement, dated as of October 15, 2002, by
         Golfsmith International, Inc. in favor of John Moriarty
         (filed as Exhibit 10.11 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.17   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and Carl F. Paul (filed as
         Exhibit 10.12 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.18   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and Franklin C. Paul (filed as
         Exhibit 10.13 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.19   Employment Agreement, dated as of October 15, 2002, between
         Golfsmith International, Inc. and James D. Thompson (filed
         as Exhibit 10.14 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.20   Employment Agreement, dated as of January 15, 2003, between
         Golfsmith International, Inc. and Virginia Bunte (filed as
         Exhibit 10.15 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
 10.21   Golfsmith International Holdings, Inc. 2002 Incentive Stock
         Plan (filed as Exhibit 10.16 to Golfsmith's Registration
         Statement on Form S-4 (No. 333-101117), and incorporated
         herein by reference).
 10.22   Golfsmith International, Inc. Severance Benefit Plan (filed
         as Exhibit 10.17 to Golfsmith's Registration Statement on
         Form S-4 (No. 333-101117), and incorporated herein by
         reference).
 10.23*  Golfsmith 2004 Management Incentive Plan.
 10.24*  Form of Exchange Agreement between Golfsmith International
         Holdings, Inc. and Atlantic Equity Partners III, L.P.
 12.1*   Computation of Ratio of Earnings to Fixed Charges.
 21.1    Subsidiaries of the Registrant (filed as Exhibit 21.1 to
         Golfsmith International Holdings, Inc.'s Annual Report on
         Form 10-K for the fiscal year ended January 3, 2004, file
         No. 333-10117, and incorporated herein by reference).
 23.1    Consent of King & Spalding LLP (included as part of Exhibit
         5.1).
 23.2*   Consent of Ernst & Young LLP.
 24.1    Power of Attorney (included in signature pages).
 25.1    Statement of Eligibility of Trustee on Form T-1 (filed as
         Exhibit 25.1 to Golfsmith's Registration Statement on Form
         S-4 (No. 333-101117), and incorporated herein by reference).
---------------

* Filed herewith.