GOLFSMITH INTERNATIONAL HOLDINGS INC S-1/A Filing by GOLF-Agreements

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                                    As filed with the Securities and Exchange Commission on June 1, 2006
                                                                                                                                Registration No. 333-132414


                     UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                                            Washington, D.C. 20549

                                                              AMENDMENT NO. 3
                                                                   TO
                                                                   Form S-1
                                                    REGISTRATION STATEMENT
                                                             UNDER
                                                    THE SECURITIES ACT OF 1933


                        Golfsmith International Holdings, Inc.
                                                     (Exact name of Registrant as specified in its charter)

                    Delaware                                                 5940                                                    16-1634897
          (State or other jurisdiction of                       (Primary standard industrial                                      (I.R.S. Employer
         incorporation or organization)                          classification code number)                                     Identification No.)


                                                                    11000 N. IH-35
                                                               Austin, Texas 78753-3195
                                                                    (512) 837-8810
                                                     (Address, including zip code, and telephone number,
                                                including area code, of Registrant’s principal executive offices)


                                                             James D. Thompson
                                                Chief Executive Officer, President and Director
                                                                11000 N. IH-35
                                                          Austin, Texas 78753-3195
                                                                (512) 837-8810
                                                  (Name, address, including zip code, and telephone number,
                                                          including area code, of agent for service)


                                                                         Copies to:
                           Mark L. Mandel, Esq.                                                                     Michael J. Schiavone, Esq.
                            White & Case LLP                                                                        Shearman & Sterling LLP
                        1155 Avenue of the Americas                                                                   599 Lexington Avenue
                        New York, New York 10036                                                                    New York, New York 10022
                            Tel: (212) 819-8200                                                                        Tel: (212) 848-4000
                            Fax: (212) 354-8113                                                                        Fax: (212) 848-7179


     Approximate date of commencement of proposed sale to the public: As soon as practicable after effectiveness 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, as amended (the ―Securities Act‖), 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, 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(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earliest effective registration statement for the same offering. 
   If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, check the following box. 


    The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date
until the Registrant 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 or until the Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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 The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the
 registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell
 these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

                                                          Subject to Completion
                                                 Preliminary Prospectus dated June 1, 2006

PROSPECTUS

                                                           6,000,000 Shares


                                                             Common Stock

      This is Golfsmith International Holdings, Inc.’s initial public offering. We are offering 6,000,000 shares of our common stock. We
expect the initial public offering price to be between $14.00 and $16.00 per share.

       Currently, no public market exists for our shares of common stock. We have applied to have our shares of common stock approved for
quotation on the Nasdaq National Market under the symbol ―GOLF.‖

      Investing in shares of our common stock involves risks that are described in the “Risk Factors” section
beginning on page 7 of this prospectus.

                                                                                                              Per Share               Total

Public offering price                                                                                                     $                   $
Underwriting discount                                                                                                     $                   $
Proceeds, before expenses, to Golfsmith International Holdings, Inc.                                                      $                   $

      The underwriters may also purchase up to an additional 900,000 shares from us at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover overallotments.

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

       The shares will be ready for delivery on or about               , 2006.



Merrill Lynch & Co.                                                                                                           JPMorgan
                                                 Lazard Capital Markets
                                               The date of this prospectus is            , 2006.
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                                                           TABLE OF CONTENTS
 Prospectus Summary                                                                                                                             1
 Risk Factors                                                                                                                                   7
 Special Note Regarding Forward-Looking Statements                                                                                             17
 Use of Proceeds                                                                                                                               18
 Dividend Policy                                                                                                                               19
 Capitalization                                                                                                                                20
 Dilution                                                                                                                                      21
 Unaudited Pro Forma Condensed Consolidated Financial Statements                                                                               22
 Selected Consolidated Financial and Other Data                                                                                                30
 Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                         34
 Business                                                                                                                                      52
 Management                                                                                                                                    72
 Certain Relationships and Related Party Transactions                                                                                          85
 Principal Stockholders                                                                                                                        90
 Description of Capital Stock                                                                                                                  93
 Shares of Common Stock Eligible for Future Sale                                                                                               96
 U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock                                                                      99
 Underwriting                                                                                                                                 103
 Legal Matters                                                                                                                                108
 Experts                                                                                                                                      108
 Where You Can Find Additional Information                                                                                                    109
 Index to the Consolidated Financial Statements                                                                                               F-1
 EX-1.1: FORM OF PURCHASE AGREEMENT
 EX-3.2: FORM OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
 EX-3.4: FORM OF AMENDED AND RESTATED BYLAWS
 EX-4.1: SPECIMEN COMMON STOCK CERTIFICATE
 EX-5.1: OPINION OF WHITE & CASE LLP
 EX-10.3: TERMINATION AGREEMENT
 EX-10.21: EMPLOYMENT AGREEMENT
 EX-10.22: EMPLOYMENT AGREEMENT
 EX-10.24: TERMINATION AGREEMENT
 EX-10.27: 2006 INCENTIVE COMPENSATION PLAN
 EX-10.33: FORM OF INDEMNIFICATION AGREEMENT
 EX-10.34: MANAGEMENT RIGHTS AGREEMENT
 EX-10.35: COMMITMENT LETTER
 EX-23.1: CONSENT OF ERNST & YOUNG LLP



       You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to
provide you with information different from or in addition to that contained in this prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it. We are offering to sell, and are seeking offers to buy, shares of common stock 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 the common stock. Our business, financial conditions, results
of operations and prospects may have changed since that date.

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                                                          PROSPECTUS SUMMARY
         This summary highlights information contained elsewhere in this prospectus, but does not contain all the information that is important
  to you. You should read this entire prospectus carefully, including the section entitled “Risk Factors,” and our consolidated financial
  statements and the related notes included elsewhere in this prospectus before making an investment decision.


                                                     Golfsmith International Holdings, Inc.

          Golfsmith is the nation’s largest specialty retailer of golf equipment, apparel and accessories based on sales. Since our founding in
  1967, we have established Golfsmith as a leading national brand in the golf retail industry. We operate as an integrated multi-channel
  retailer, providing our customers, who we refer to as guests, the convenience of shopping in our 55 stores across the nation, including three
  new stores opened in the second quarter of 2006, through our leading Internet site, www.golfsmith.com , and from our comprehensive
  catalogs. Our stores feature an activity-based shopping environment where our guests can test the performance of golf clubs in our in-store
  hitting areas. We offer an extensive product selection that features premier national brands as well as our proprietary products and pre-owned
  clubs. We also offer a number of guest services and customer care initiatives that we believe differentiate us from our competitors, including
  our SmartFit TM custom club-fitting program, in-store golf lessons, our club trade-in program, our 90-day playability guarantee, our 115%
  low-price guarantee and our proprietary credit card. Our advanced distribution and fulfillment center and management information systems
  support and integrate our distribution channels and provide a scalable platform to support our planned expansion.

         We began as a clubmaking company, offering custom-made clubs, clubmaking components and club repair services. In 1972, we
  opened our first retail store, and in 1975, we mailed our first general golf products catalog. Over the next 25 years, we continued to expand
  our product offerings, opened larger retail stores and expanded our direct-to -consumer business by adding to our catalog titles. In 1997, we
  launched our Internet site to further expand our direct-to -consumer business. In October 2002, an investment fund managed by First Atlantic
  Capital, Ltd. acquired us from our original founders, Carl, Barbara and Franklin Paul. Since then, we have invested in our business through
  capital expenditures totaling $30.9 million and acquisitions totaling $9.9 million and have undertaken a series of significant strategic and
  operating initiatives, including the following:



            •        enhancing our guests’ in-store experience by providing an activity-based shopping environment featuring expanded hitting areas,
                     putting greens and ball launch monitor technology;

            •        determining that our stores are best suited to a 15,000 to 20,000 square foot concept, which enables us to accommodate key
                     elements of our activity-based environment;

            •        increasing our store base from 26 stores in December 2002 to 55 stores in May 2006; and

            •        expanding into the tennis category through our acquisition of six Don Sherwood Golf & Tennis stores in July 2003 and the
                     subsequent introduction of tennis equipment, apparel and accessories in the majority of our stores.

         As a result of our strategic and operating initiatives and our significant investment, in 2005 we generated revenues of $323.8 million,
  operating income of $14.7 million and net income of $3.0 million, and we believe that we are well-positioned to further expand our business.
  In 2004, we generated revenues of $296.2 million and operating income of $9.7 million, and had a net loss of $4.8 million. Our net loss in
  2004 resulted primarily from lower operating income as a percentage of revenues due to increased selling, general and administrative
  expenses from the opening of new stores, and also from the recording of a full valuation allowance against our net deferred tax assets of
  $4.3 million. In 2003, we generated revenues of $257.8 million, operating income of $12.7 million and net income of $1.1 million.

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         For the three months ended April 1, 2006, we generated revenues of $74.8 million and operating income of $1.9 million, and had a net
  loss of $0.9 million. For the comparable three months ended April 2, 2005, we generated revenues of $64.0 million and operating income of
  $0.8 million, and had a net loss of $2.0 million.
        According to industry sources, the golf retail market that we target represented approximately $6 billion in sales in the United States
  in 2005 and is highly-fragmented relative to other retail industries, with no single golf retailer accounting for more than 6% of sales
  nationally in 2005.

                                                               Competitive Strengths
          We believe that the following competitive strengths have allowed us to establish and maintain our leadership in the golf specialty
  retail industry, while positioning us for future growth and expansion.
         Nationally recognized golf brand with multi-channel model. We believe our national presence and multi-channel retailing model,
  consisting of our retail stores, Internet site and catalogs, differentiates us from other specialty golf retailers and gives us a substantial
  competitive advantage.
         Comprehensive product offering. We provide golfers and tennis players of all skill levels and ages a broad product offering and are
  one of the largest retailers of premier branded golf merchandise. We also offer an extensive assortment of our proprietary branded golf
  merchandise and pre-owned clubs to appeal to more value-conscious guests.
         Differentiated in-store experience. We offer our guests an activity-based shopping environment, featuring hitting areas, putting
  greens and ball launch technology. In addition, we offer customized golf-related services, such as our on-site club repair services, our
  SmartFit ™ customized fitting program, Hot Stix ® Technology, which analyzes a guest’s swing and recommends the clubs and balls best
  suited to that individual, and in-store golf lessons through GolfTEC Learning Centers.
         Superior customer service and innovative customer care initiatives. We offer a variety of customer care initiatives to foster our
  guests’ loyalty and promote confidence in their purchases, including our 90/90 Playability Guarantee, our 115% Low Price Guarantee, our
  ClubVantage Program, our Golfsmith Credit Card and our Player Rewards Loyalty Program. See ―Business — Competitive Strengths —
  Superior Customer Service and Innovative Customer Care Initiatives.‖
        Flexible, established, cost-effective infrastructure. Our advanced distribution and fulfillment center and management information
  systems provide a scalable platform to support our planned expansion. We believe that other off-course specialty retailers would have to
  make a sizable investment in time and capital to replicate our infrastructure.
        Proven management team. Our senior management team has an average of over 17 years of experience in the retail sector, including
  substantial multi-channel retailing experience, and an average tenure with us of approximately seven years.

                                                                   Growth Strategy
          We intend to enhance our position as the premier golf and tennis retailer by executing the following strategies:
        Expand our store base. Between December 2002 and May 2006 we more than doubled our store base from 26 to 55 stores and intend
  to open between seven and nine additional new stores in 2006 and between 14 and 16 new stores in 2007.
         Increase store revenues and profitability. Our retail stores are an integral part of our multi-channel strategy. Our strategy to increase
  store revenues and profitability includes the following elements:
            •         improve store design and enhance our activity-based shopping environment;

            •         increase sales of our higher margin proprietary brands;

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            •        enhance our apparel offering;

            •        target the underserved female demographic; and

            •        expand the tennis category.
         Grow our direct-to -consumer channel. We believe that we are well-positioned in the golf industry to capitalize on the expected
  growth of Internet sales due to our best-in -class Internet site functionality, our 39-year history as a direct-to -consumer retailer and our
  ability to leverage inventory across our supply chain to fill orders.


                                                                   Risks Affecting Us
        Our business is subject to numerous risks as discussed more fully in the section entitled ―Risk Factors‖ beginning on page 7 of this
  prospectus. In particular, the risks affecting us include the following:
            •        we depend on the demand for golf products which is affected by the popularity of golf, the number of golf participants, the number
                     of rounds of golf being played by these participants and the amount of coverage that golf receives in the media;

            •        our growth strategy depends on our ability to open new stores and operate them profitably;

            •        our sales may be affected by economic downturns in the metropolitan areas in which our stores are clustered;

            •        our growth may be harmed by increased competition from other golf specialty retailers;

            •        our operating results may be adversely affected by unseasonable weather during the peak golf season; and

            •        if we are not able to access adequate capital, our ability to expand our business may be impaired.


                                                             Company Information
         Golfsmith International Holdings, Inc. was formed on September 4, 2002 and became the parent company of Golfsmith International,
  Inc. on October 15, 2002 when it acquired all of the outstanding stock of Golfsmith International, Inc. Golfsmith International Holdings, Inc.
  is a holding company and has no material assets other than all of the capital stock of Golfsmith International, Inc. In this prospectus, unless
  the context indicates otherwise, the term ―Golfsmith‖ refers to Golfsmith International, Inc. and its subsidiaries. The term ―Golfsmith
  Holdings‖ refers to Golfsmith International Holdings, Inc. and its subsidiaries. The terms ―we,‖ ―us‖ and ―our‖ refer to Golfsmith prior to its
  acquisition by Golfsmith Holdings and to Golfsmith Holdings after giving effect to the acquisition of Golfsmith.
         Our principal executive office is located at 11000 N. IH-35, Austin, Texas 78753-3195, and our telephone number is
  (512) 837-8810. Our Internet site address is www.golfsmith.com. The information on, or accessible through, our Internet site is not part of
  this prospectus.



         The names ―Golfsmith,‖ ―ASI,‖ ―Black Cat,‖ ―Crystal Cat,‖ ―GearForGolf,‖ ―GiftsForGolf,‖ ―Killer Bee,‖ ―Lynx,‖ ―Parallax,‖
  ―Predator,‖ ―Snake Eyes,‖ ―Tigress‖ and ―Zevo,‖ and our logo are trademarks, service marks or trade names owned by us. All trademarks,
  trade names or service marks appearing in this prospectus are owned by their respective holders.

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                                                                      The Offering


  Common stock offered by us                     6,000,000 shares.




  Common stock to be outstanding after this      15,472,676 shares.
  offering




   Use of proceeds                               We estimate that the net proceeds from the offering will be $80.7 million, after deducting the
                                                 underwriting discount and estimated offering expenses payable by us. We intend to use the net
                                                 proceeds, together with borrowings under our new senior secured credit facility, as follows:




                                                 • to retire $93.75 million aggregate principal amount at maturity of our 8.375% senior secured notes
                                                 due 2009, which had an accreted book value of $83.6 million as of May 27, 2006; and




                                                 • to pay fees and expenses of approximately $1.0 million related to our new senior secured credit
                                                 facility and to pay a one-time $3.0 million fee to terminate our management consulting agreement with
                                                 First Atlantic Capital, Ltd. upon completion of this offering. This agreement currently obligates us to
                                                 pay approximately $600,000 per year, plus expenses, to First Atlantic Capital, Ltd. until 2012.



  Proposed Nasdaq National Market symbol         ―GOLF‖
        The number of shares of common stock to be outstanding after this offering is based on 9,472,676 shares outstanding as of April 28,
  2006 and excludes:


            •         2,670,237 shares reserved for issuance under our 2002 Incentive Stock Plan and 2006 Incentive Compensation Plan, of which
                      options to purchase 870,237 shares at a weighted average exercise price of $7.38 per share had been granted and were outstanding
                      as of April 28, 2006; and




            •         331,569 shares of common stock issuable immediately following the closing of this offering upon the conversion, for no additional
                      consideration, of equity units held by certain of our existing and former officers and employees.

          Unless otherwise indicated, all information in this prospectus:


            •         assumes an initial public offering price of $15.00 per share of common stock, the midpoint of the range of the estimated initial
                      public offering price set forth on the cover of this prospectus;




            •         assumes that the underwriters do not exercise their option to purchase 900,000 shares from us to cover overallotments; and




            •         reflects a 1-to -100 stock split of our common stock that was effected in 2002 and a 1-for-2.2798 stock split that was effected on
May 25, 2006.

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                                      SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
          You should read the following summary consolidated financial and other data in conjunction with ―Management’s Discussion and
  Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and the related notes included
  elsewhere in this prospectus. The summary consolidated financial data as of and for the fiscal years ended January 3, 2004, January 1, 2005
  and December 31, 2005 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our
  fiscal year ends on the Saturday closest to December 31 of such year. All fiscal years presented include 52 weeks of operations, except 2003,
  which includes 53 weeks, where week 53 occurred in the fourth quarter of fiscal 2003. The summary consolidated financial data as of and for
  the three months ended April 2, 2005 and April 1, 2006 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 operation for the three months ended April 1, 2006 may not be indicative of results that may be
  expected for the full year. The three-month periods ended April 2, 2005 and April 1, 2006 both consisted of 13 weeks.
         The pro forma consolidated balance sheet data as of April 1, 2006 gives effect to (i) this offering and our receipt of estimated net
  proceeds of approximately $80.7 million, after deducting the underwriting discount and estimated offering expenses payable by us and
  assuming an initial public offering price of $15.00 per share of common stock, the midpoint of the range of the estimated initial public
  offering price set forth on the cover of this prospectus, and (ii) the application of such net proceeds, together with borrowings under our new
  senior secured credit facility, as described under ―Use of Proceeds,‖ as if such transactions had occurred on April 1, 2006.
                                                                        Fiscal Year Ended                                                              Three Months Ended

                                                    January 3, 2004         January 1, 2005               December 31, 2005                   April 2, 2005                 April 1, 2006

                                                                                                                                                              (unaudited)
                                                                                    (dollars in thousands, except share and per share data)
  Statement of Operations Data:
  Net revenues                                  $         257,745       $          296,202            $            323,794              $            63,958             $          74,810
  Cost of products sold                                   171,083                  195,014                         208,044                           41,195                        49,008

  Gross profit                                              86,662                 101,188                         115,750                           22,763                        25,802
  Selling, general and administrative                       73,400                  90,763                          99,310                           21,400                        23,702
  Store pre-opening/closing expenses                           600                     743                           1,765                              517                           200

  Total operating expenses                                  74,000                  91,506                         101,075                           21,917                        23,902

  Operating income                                          12,662                   9,682                           14,675                             846                          1,900
  Interest expense                                         (11,157 )               (11,241 )                        (11,744 )                        (2,862 )                       (3,059 )
  Interest income                                               40                      64                               73                              17                             11
  Other income, net                                            164                   1,162                              354                              (1 )                          279

  Income (loss) from operations before
    income taxes                                              1,709                   (333 )                           3,358                         (2,000 )                         (869 )
  Income tax benefit (expense)                                 (645 )               (4,423 )                            (400 )                           —                              —

  Net income (loss)                             $             1,064     $           (4,756 )          $                2,958            $            (2,000 )           $             (869 )

  Basic and diluted income (loss) per share
   of common stock (1)                          $              0.11     $             (0.49 )         $                  0.30           $              (0.20 )          $            (0.09 )

  Weighted average number of shares
   outstanding used in basic income (loss)
   per share calculation (1)                            9,441,148               9,803,712                        9,803,712                      9,803,712                      9,803,712
  Weighted average number of shares
   outstanding used in diluted income
   (loss) per share calculation (1)                     9,441,148               9,803,712                        9,943,443                      9,803,712                      9,803,712

  Other Financial Data:
  Gross profit as a percentage of net
   revenues                                                    33.6 %                  34.2 %                            35.7 %                         35.6 %                        34.5 %

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                                                                            Fiscal Year Ended                                     Three Months Ended

                                                   January 3, 2004          January 1, 2005      December 31, 2005        April 2, 2005              April 1, 2006

                                                                                                                                       (unaudited)
  Store Data (not in thousands):
  Comparable store sales increase                                                                                                        )
    (decrease) (2)                                            7.4 %                      0.7 %                2.6 %                 (8.1 %                  12.3 %
  Number of stores at period end                               38                         46                   52                     46                      52
  Gross square feet at period end                         759,981                    849,677              905,827               825,107                  905,827
  Net sales per selling square foot for
    stores open at beginning and end of
    period (3)                                    $            302          $            333     $             353       $          104             $           119
                                                                                                                                   April 1, 2006

                                                                                                                         Actual                     Pro Forma

                                                                                                                                   (in thousands)
                                                                                                                                     (unaudited)
  Balance Sheet Data:
  Inventories                                                                                                        $        81,535         $            81,535
  Working capital (4)                                                                                                         21,943                       6,396
  Cash and cash equivalents                                                                                                    3,664                       3,664
  Total assets                                                                                                               217,616                     214,166
  Total debt                                                                                                                  88,667                      21,714
  Total stockholders’ equity                                                                                                  56,279                     120,439



  (1)    Includes 331,569 shares of common stock issuable immediately following the closing of this offering upon the conversion, for no additional
         consideration, of equity units held by certain of our existing and former officers and employees.



  (2)    We consider sales by a new store to be comparable commencing in the fourteenth month after the store was opened or acquired. We consider
         sales by a relocated store to be comparable if the relocated store is expected to serve a comparable customer base and there is not more than a
         30-day period during which neither the original store nor the relocated store is closed for business. We consider sales by stores with modified
         layouts to be comparable. We consider sales by stores that are closed to be comparable in the period leading up to closure if they met the
         qualifications of a comparable store and do not meet the qualifications to be classified as discontinued operations under Statement of Financial
         Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Long-Lived Assets. Comparable store results for a 53-week fiscal
         year are presented on a 52/52 week basis by omitting the last week of the 53-week period.

  (3)    Calculated using net sales of all stores open at both the beginning and the end of the period and the selling square footage for such stores. Selling
         square feet includes all retail space including but not limited to hitting areas, putting greens and check-out areas. It does not include back-room
         and receiving space, management offices, employee breakrooms, restrooms, vacant space or area occupied by GolfTEC Learning Centers.

  (4)    Defined as total current assets minus total current liabilities.

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                                                                RISK FACTORS
       Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with the
financial and other information contained in this prospectus before deciding whether to invest in our common stock. If any of the following
risks actually occurs, our business, financial condition and results of operations would suffer. In that event, the trading price of our shares of
common stock would likely decline and you might lose all or part of your investment.

Risks Relating to Our Business

     A reduction in the number of rounds of golf played and the popularity of golf may adversely affect our sales of golf products.
       We generate substantially all of our net revenues from the sale of golf equipment, apparel and accessories. The demand for 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.
According to the National Golf Foundation, the number of rounds played annually in the United States declined from 518.4 million in 2000 to
499.6 million in 2005. This decline is attributable to a number of factors, including the state of the nation’s economy. If golf participation and
the number of rounds of golf played decreases, sales of our products may be adversely affected. We cannot assure you that the overall dollar
volume of the market for golf-related products will grow, or that it will not decline, in the future.
       The demand for golf products is also directly related to the popularity of magazines, cable channels and other media dedicated to golf,
television coverage of golf tournaments and attendance at golf events. We depend on the exposure of the products we sell, especially the
premier branded golf merchandise, through advertising and the media or at golf tournaments and events. Any significant reduction in television
coverage of, or attendance at, golf tournaments and events or any significant reduction in the popularity of golf magazines or golf channels,
may reduce the visibility of the brands that we sell and could adversely affect our sales of golf products.


     A reduction in discretionary consumer spending could adversely affect our sales of golf products.
       Golf products are recreational in nature and are therefore discretionary purchases for consumers. Consumers are generally more willing
to make discretionary golf product purchases during favorable economic conditions. Discretionary spending is affected by many factors,
including general business conditions, interest rates, the availability of consumer credit, taxation and consumer confidence in future economic
conditions. Purchases of our products could decline during periods when disposable income is lower, or during periods of actual or perceived
unfavorable economic conditions. Any significant decline in general economic conditions or uncertainties regarding future economic prospects
that adversely affect discretionary consumer spending, whether in the United States generally or in a particular geographic area in which our
stores are located, could lead to reduced sales of our products.


     Our sales and profits may be adversely affected if we or our suppliers fail to develop and introduce new and innovative products that
     appeal to our customers.
        Our future success depends, in part, upon our and our suppliers’ continued ability to develop and introduce new and innovative products.
This is particularly true with respect to golf clubs, which accounted for approximately 45% of our net revenues in fiscal 2005 and 47% of our
net revenues for the three months ended April 1, 2006. We believe our guests’ desire to test the performance of the latest golf equipment drives
traffic into our stores and increases sales. This is particularly true when significant technological advancements in golf clubs and other
equipment occur, although such advances generally only occur every few years. Furthermore, the success of new products depends not only
upon their performance, but also upon the subjective preferences of golfers, including how a club looks, sounds and feels, and the level of
popularity that a golf club enjoys among professional and recreational golfers. Our success depends, in large part, on our and our suppliers’
ability to identify and anticipate the changing preferences of our customers and our ability to stock our stores with a wide selection of quality
merchandise that appeals to

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customer preferences. If we or our suppliers fail to successfully develop and introduce on a timely basis new and innovative products that
appeal to our customers, our revenues and profitability may suffer.
        On the other hand, if our suppliers introduce new golf clubs too rapidly, it could result in closeouts of existing inventories. Closeouts 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.


     Competition from new and existing competitors could have an adverse effect on our sales and profitability.
       Our principal competitors are currently other off-course specialty retailers, franchise and independent golf retailers, on-course pro shops,
conventional sporting goods retailers, mass merchants and warehouse clubs, and online retailers of golf equipment. These businesses compete
with us in one or more product categories. In addition, traditional sports retailers and specialty golf retailers are expanding more aggressively in
marketing and supplying brand-name golf equipment, thereby competing directly with us for products, customers and locations. Some of these
potential competitors have greater financial or marketing resources than we do and may be able to devote greater resources to sourcing,
promoting and selling their products. We may also face increased competition due to the entry of new competitors, including current suppliers
that decide to sell their products directly. 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 margins and our results of operations in general.


     Our growth will be adversely affected if we are unable to open new stores and operate them profitably.
       Our growth strategy involves opening additional stores in new and existing markets. We are in the early stages of our store expansion. At
May 1, 2006, we had 55 stores, more than half of which we opened or acquired during the last three years. We plan to open between seven and
nine additional new stores in 2006 and between 14 and 16 new stores in 2007. In addition to capital requirements, our ability to open new
stores on a timely and profitable basis is subject to various contingencies, including but not limited to, our ability to successfully:

         •          identify suitable store locations that meet our target demographics;

         •          negotiate and enter into long-term leases upon acceptable terms;

         •          build-out or refurbish sites on a timely and cost-effective basis;

         •          hire, train and retain skilled managers and personnel; and

         •          integrate new stores into existing operations.
       After identifying a new store site, we typically try to negotiate a long-term lease, generally between 10 and 20 years. Long-term leases
typically result in long-term financial obligations that we are obligated to pay regardless of whether the store generates sufficient traffic and
sales. There can be no assurance that new stores will generate sales levels necessary to achieve store-level profitability or profitability
comparable to that of existing stores. New stores may also have lower sales volumes or profits compared to previously opened stores or they
may have losses. In the past, we have experienced delays and cost-overruns in obtaining proper permitting, building and refurbishing stores.
We cannot assure you that we will not experience these problems again in the future.
        Furthermore, our expansion into 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
activity-based store design and concept, added strain on our distribution and fulfillment center and management information systems, and
diversion of management attention from existing operations.

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       We cannot assure you that we will be successful in meeting the challenges described above or that any of our new stores will be a
profitable deployment of our capital resources. If we fail to open additional stores successfully or if any of our new stores are not profitable, we
may not be able to grow our revenues and our results of operations and financial position may be adversely affected.


     If our key suppliers limit the amount or variety of products they sell to us or if they fail to deliver products to us in a timely manner and
     upon customary pricing terms, our sales and profitability may be reduced.
       We rely on a limited number of suppliers for a significant portion of our product sales. During fiscal 2004 and 2005, three of our
suppliers each accounted for approximately 10% of our purchases. We depend on access to the latest golf equipment, apparel and accessories
from the premier national brands in order to drive traffic into our stores and through our direct-to -consumer channel. We do not have any
long-term supply contracts with our suppliers providing for continued supply, pricing, allowances or other terms. In addition, certain of our
vendors have established minimum advertised pricing requirements, which, if violated, could result in our inability to obtain certain products. If
our suppliers refuse to distribute their products to us, limit the amount or variety of products they make available to us, or fail to deliver such
products on a timely basis and upon customary pricing terms, our sales and profitability may be reduced.
       In addition, some of our proprietary products require specially developed manufacturing molds, techniques or processes which make it
difficult to identify and utilize alternative suppliers quickly. Any significant production delay or the inability of our current suppliers to deliver
products on a timely basis, including clubheads and shafts in sufficient quantities, or the transition to alternate suppliers, could have a material
adverse effect on our results of operations.


     Our sales could decline if we are unable to process increased traffic or prevent security breaches on our Internet site and our network
     infrastructure.
       A key element of our strategy is to generate high-volume traffic on, and increase sales through, our Internet site. Accordingly, the
satisfactory performance, reliability and availability of our Internet site, transaction processing systems and network infrastructure are critical
to our reputation and our ability to attract and retain guests. Our Internet revenues will depend on the number of visitors who shop on our
Internet site and the volume of orders we can fill on a timely basis. Problems with our Internet site or order fulfillment performance would
reduce the volume of goods sold and could damage our reputation. We may experience system interruptions from time to time. If there is a
substantial increase in the volume of traffic on our Internet site or the number of orders placed by customers, we may be required to expand and
further upgrade our technology, transaction processing systems and network infrastructure. We cannot assure you that we will be able to
accurately project the rate or timing of increases, if any, in the use of our Internet site, or that we will be able to successfully and seamlessly
expand and upgrade our systems and infrastructure to accommodate such increases on a timely and cost-effective basis.
        The success of our Internet site depends on the secure transmission of confidential information over network and the Internet and on the
secure storage of data. We rely on encryption and authentication technology licensed from third parties to provide the security and
authentication necessary to effect secure transmission and storage of confidential information, such as customer credit card information. In
addition, we maintain an extensive confidential database of customer profiles and transaction information. We cannot assure you 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 security we use to protect customer transaction and personal data contained in our customer database. In addition, other
companies in the retail sector have from time to time experienced breaches as a result of actions by their employees. If any compromise of our
security were to occur, it could have a material adverse effect on our reputation, business, operating results and financial condition, and could
result in a loss of customers. A party who is able to circumvent our security measures could damage our reputation, cause interruptions in our
operations and/or misappropriate proprietary information which, in turn, could cause us to incur liability

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for any resulting losses. We may be required to expend significant capital and other resources to protect against security breaches or to alleviate
problems caused by breaches.


     We may be unable to expand our business if adequate capital is not available.
       Our ability to open new stores depends on the availability of adequate capital, which in turn depends in large part on our cash flow from
operations and the availability of equity and debt financing. We currently anticipate spending approximately $1.8 million to open each
additional store, which includes pre-opening expenses, capital expenditures and inventory costs. We cannot assure you that our cash flow from
operations will be sufficient or that we will be able to obtain equity or debt financing on acceptable terms or at all to implement our growth
strategy. The new senior secured credit facility that we plan to enter into upon the closing of this offering may contain provisions which restrict
our ability to incur additional indebtedness, make capital expenditures, or make substantial asset sales which might otherwise be used to
finance our expansion. Our obligations under the new senior secured facility may be secured by substantially all of our assets, which may
further limit our access to capital or lending sources. As a result, we cannot assure you that adequate capital will be available to finance our
current expansion plans.


     We lease almost all of our store locations. If we are unable to maintain those leases or locate alternative sites for our stores in our
     target markets and on terms that are acceptable us, our net revenues and profitability could be adversely affected.
       We lease 54 of our 55 current stores. In fiscal 2005, we closed two stores when the leases for those locations expired. In both instances,
we opened a new store in similar locations during fiscal 2005. We cannot assure you that we will be able to maintain our existing store
locations as leases expire, extend the leases or be able to locate alternative sites in our target markets and on favorable terms. If we cannot
maintain our existing store locations, extend the leases or locate alternative sites on favorable or acceptable terms, our net revenues and
profitability could be adversely affected.


     Our operating costs and profitability could be adversely affected if we are unable to accurately predict and respond to seasonal
     fluctuations in our business.
        Our business is seasonal. The golf season and the number of rounds played in the markets we serve fluctuate based on a number of
factors, including the weather. Accordingly, our sales leading up to and during the warm weather golf season, as well as the Christmas holiday
gift-giving season, have historically contributed to a higher percentage of our annual net revenues and annual net operating income than other
periods in our fiscal year. During fiscal 2005, the fiscal months of March through September and December, which together comprise 36 weeks
of our 52-week fiscal year, contributed over three-quarters of our annual net revenues and substantially all of our annual operating income. We
make decisions regarding merchandise well in advance of the season in which it will be sold. We incur significant additional expenses leading
up to and during these periods in anticipation of higher sales, including acquiring additional inventory, preparing and mailing our catalogs,
advertising, creating in-store promotions and hiring additional employees. In the event of unseasonable weather during the peak season in
certain markets, our sales may be lower and we may not be able to adjust our inventory or expenses in a timely fashion. This seasonality may
result in volatility or have an adverse effect on our results of operations and the market price of our common stock.


     Many of our stores are clustered in particular metropolitan areas, and an economic downturn or other adverse events in these areas
     may significantly reduce the sales for stores located in such areas.
       A significant portion of our stores are clustered in certain geographic areas, including seven in each of the Tri-State (New York, New
Jersey and Connecticut) and the San Francisco Bay area, six in Los Angeles, four in each of Chicago and Dallas, and three in each of Atlanta,
Denver, Detroit, Houston and Phoenix. If any of these areas were to experience a downturn in economic conditions, natural disasters such as
hurricanes, floods or earthquakes, terrorist attacks, or other negative events, the stores in these areas may be adversely affected.

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     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;

         •          unseasonable weather during certain periods for certain geographic regions;

         •          changes in our product mix;

         •          our decision to relocate or refurbish certain stores;

         •          the launch of promotional events;

         •          the opening of new stores by us and our competitors in our existing markets; and

         •          changes in economic conditions in the areas in which our stores are located.
       Our comparable store sales have fluctuated significantly in the past and such fluctuation may continue in the future. The percentage
increase or decrease in comparable store sales compared to the prior fiscal year or period in the prior fiscal year was 7.4% in 2003, 0.7% in
2004, 2.6% in 2005, (8.1)% for the three months ended April 2, 2005 and 12.3% for the three months ended April 1, 2006. We believe that the
introduction of our 90/90 Playability Guarantee in the second quarter of 2003 may have positively impacted our comparable store sales for the
subsequent four quarters and created challenging comparisons for the following four quarters. We have also experienced decreases in
comparable store sales during certain quarterly periods during the last two fiscal years and we cannot assure you that our comparable store sales
will not decrease again in the future. Comparable store sales is an important measure to research analysts that may cover our company. Any
reduction in or failure to increase our comparable store sales or to meet analysts’ expectations could negatively impact the trading price of our
common stock.


     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 sales and profitability may be adversely affected.
       Our results of operations depend in part on the success of our direct-to -consumer channel, which consists of our Internet site and
multiple catalogs. Within our direct-to -consumer distribution channel, we believe that the success of our catalog operations also contributes to
the success of our Internet site, because many of our customers who receive catalogs choose to purchase products through our Internet site. We
believe that the success of our catalogs depend on our ability to:
         •          achieve adequate response rates to our mailings;

         •          offer an attractive merchandise mix;

         •          cost-effectively add new customers;

         •          cost-effectively design and produce appealing catalogs; and

         •          timely deliver products ordered through our catalogs to our guests.
       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 could materially and adversely
affect our sales and profitability.


    If we lose the services of our Chief Executive Officer, we may not be able to manage our operations and implement our growth strategy
    effectively.
       We depend on the continued service of James D. Thompson, our President and Chief Executive Officer, who possesses significant
expertise and knowledge of our business and industry. Currently, we do not maintain key person insurance for any of our officers or managers.
We have entered into an employment agreement with Mr. Thompson that expires, subject to automatic one-year extensions, in October 2006.
Any loss or interruption of the services of Mr. Thompson could significantly reduce our ability to effectively manage our operations and
implement our growth strategy, and we cannot assure you that we would be able to find an appropriate replacement should the need arise.

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     Our sales, profitability and company-wide operations would be adversely affected if the operations of our Austin, Texas call center or
     distribution and fulfillment center were interrupted or shut down.
        We operate a centralized call center and distribution and fulfillment center in Austin, Texas. We handle almost all of our Internet site and
catalog orders through our Austin facility. We also receive and ship a significant portion of our retail stores’ inventory through our Austin
facility. Any natural disaster or other serious disruption to this facility would substantially disrupt our operations and could damage all or a
portion of our inventory at this facility, impairing our ability to adequately stock our stores and fulfill guest orders. 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, a disruption at our Austin facility would adversely
affect our sales, profitability and operations throughout our company.


     A disruption in the service or a significant increase in the cost of our primary delivery service for our direct-to -consumer operations
     would have a material adverse effect on our sales and profitability.
       We use United Parcel Service, or UPS, for substantially all of our ground shipments of products sold through our Internet site and
catalogs to our guests in the United States. Any significant disruption to UPS’s services would impede our ability to deliver our products
through our direct-to -consumer channel, which could cause us to lose sales or guests. In addition, if UPS were to significantly increase its
shipping charges, we may not be able to pass these additional shipping costs on to our guests and still maintain the same level of direct-to
-consumer sales. In the event of disruption to UPS’s services or a significant increase in its shipping charges, we may not be able to engage
alternative carriers to deliver our products in a timely manner on favorable terms, which could have a material adverse effect on our sales and
profitability.


     An increase in the costs of mailing, paper, and printing our catalogs would adversely affect our profitability.
       Unlike many of our competitors, we generate a significant percentage of our revenues through our direct-to-consumer channel, including
catalog orders. 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 profitability.


     If we are unable to enforce our intellectual property rights our sales and profitability may decline.
        Our success and ability to compete are dependent, in part, on sales of our proprietary branded merchandise. We currently hold a
substantial number of registrations for trademarks and service marks to protect our own proprietary brands. We also rely to a lesser extent on
trade secret, patent and copyright protection, employee confidentiality agreements and license agreements to protect our intellectual property
rights. We believe that the exclusive right to use trademarks and service marks has helped establish our market share. If we are unable to
continue to protect the trademarks and service marks for our proprietary brands, if such marks become generic or if third parties adopt marks
similar to our marks, our ability to differentiate our products and services may be diminished. In the event that our trademarks or service marks
are successfully challenged by third parties, we could lose brand recognition and be forced to devote additional resources to advertising and
marketing new brands for our products.
       From time to time, we may be compelled to protect our intellectual property, which may involve litigation. Such litigation may be
time-consuming, expensive and distract our management from running the day-to -day operations of our business, and could result in the
impairment or loss of the involved intellectual property. There is no guarantee that the steps we take to protect our intellectual property,
including litigation when necessary, will be successful. The loss or reduction of any of our significant

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intellectual property rights could diminish our ability to distinguish our products from competitors’ products and retain our market share for our
proprietary products. Our proprietary products sold under our proprietary brands generate higher margins than products sold under third party
manufacturer brands. If we are unable to effectively protect our proprietary intellectual property rights and fewer of our sales come from our
proprietary products, our net revenues and profits may decline.


     We may become subject to intellectual property suits that could cause us to incur substantial costs or pay substantial damages or
     prohibit us from selling our products.
       Third parties may from time to time 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
may divert the attention of our management and key personnel from our business operations. Claims for alleged infringement and any resulting
lawsuit, if successful, could subject us to significant liability for damages, increase the costs of selling some of our products and damage our
reputation. Any potential intellectual property litigation could also force us to stop selling certain products, obtain a license from the owner to
use the relevant intellectual property, which license may not be available on reasonable terms, if at all, or redesign our products to avoid using
the relevant intellectual property.


     We may be subject to product warranty claims or product recalls which could harm our reputation, adversely affect our sales and
     cause us to incur substantial costs or pay substantial damages.
       We may be subject to risks associated with our proprietary branded products, including product liability. Our existing or future
proprietary 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 operations and financial condition would be harmed. In addition, product recalls could adversely
affect our reputation in the marketplace and, in turn, sales of our products. In May 2002, we learned that some of our proprietary 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 $300,000 in product return and replacement
expenses. We cannot assure you that problems like this will not happen again in the future, or if they do, that the costs and other adverse
consequences will not be more severe. In addition, it is possible that we could face similar risks with respect to the premier branded products
we sell.


     Disruption of operations of ports through which our products are imported from Asia could have a material adverse effect on our sales
     and profitability.
       We import substantially all of our proprietary products from Asia under short-term purchase orders, and a significant amount of the
premier branded products we sell is also manufactured in Asia. If a disruption occurs in the operations of ports through which our products are
imported, we and our vendors may have to ship some or all of our products from Asia by air freight. Shipping by air is significantly more
expensive than shipping by boat, and if we cannot pass these increased shipping costs on to our guests, our profitability will be reduced. A
disruption at ports through which our products are imported would have a material adverse effect on our sales and profitability.


     We may pursue strategic acquisitions, which could have an adverse impact on our sales and operating results, and could divert the
     attention of our management.
       Although we currently do not have any agreement or understanding to make any acquisitions, from time to time, we may grow our
business by acquiring complementary businesses, products or technologies. In May 2003, we acquired the assets and technology of Zevo Golf
Co., Inc., and, in July 2003, we acquired six Don Sherwood Golf & Tennis stores. Other acquisitions that we may make in the future entail a
number of risks that could materially and adversely affect our business and operating results. Negotiating potential acquisitions or integrating
newly acquired businesses, products or technologies into our business could divert our management’s attention from other business concerns
and could be expensive and time consuming. Acquisitions could expose our business to unforeseen liabilities or risks

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associated with entering new markets or businesses. In addition, we might lose key employees while integrating new organizations.
Consequently, we might not be successful in integrating any acquired businesses, products or technologies, and might not achieve anticipated
sales and cost benefits. In addition, future acquisitions could result in customer dissatisfaction, performance problems with an acquired
company, or issuances of equity securities that cause dilution to our existing stockholders. Furthermore, we may incur contingent liabilities or
possible impairment charges related to goodwill or other intangible assets or other unanticipated events or circumstances, any of which could
harm our financial condition.

Risks Related to this Offering

     Atlantic Equity Partners III, L.P. will have significant influence over us, including the ability to designate a majority of our board of
     directors, and its interests may conflict with the interests of our other stockholders.
       Upon completion of this offering, the largest beneficial owner of our shares, Atlantic Equity Partners III, L.P. (―Atlantic Equity
Partners‖), an investment fund managed by First Atlantic Capital, Ltd. (―First Atlantic Capital‖), will beneficially own 61.0% of our
outstanding common stock, or 57.6% assuming exercise of the overallotment option granted to the underwriters. This number includes 9.8%, or
9.2% assuming exercise of the overallotment option, of our outstanding stock owned by Carl and Franklin Paul over which Atlantic Equity
Partners has voting power pursuant to a voting rights and stockholders’ agreement among Atlantic Equity Partners and Carl and Franklin Paul.
Under the agreement, Carl and Franklin Paul have also agreed that they will only transfer the shares subject to the agreement on a pro rata basis
when Atlantic Equity Partners transfers its shares. As a result of its own stockholdings and this agreement, Atlantic Equity Partners, and
indirectly First Atlantic Capital, will have the ability to control all matters submitted to our stockholders for approval, including:

         •          the composition of our board of directors, which has the authority to direct our business and appoint and remove our
                    officers;

         •          approving or rejecting a merger, consolidation or other business combination; and

         •          amending our certificate of incorporation and bylaws which govern the rights attached to our shares of common stock.
       In addition, we and Atlantic Equity Partners have entered into a management rights agreement. Pursuant to this agreement, following a
reduction of the equity owned by Atlantic Equity Partners to below 50% of our outstanding equity, it will retain the right to cause the board of
directors to nominate a specified number of designees for the board of directors, and continue to be able to significantly influence our
decisions. See ―Certain Relationships and Related Party Transactions — Management Rights Agreement.‖
       This concentration of ownership of shares of our common stock could delay or prevent proxy contests, mergers, tender offers,
open-market purchase programs or other purchases of shares of our common stock that might otherwise give you the opportunity to realize a
premium over the then-prevailing market price of our common stock. This concentration of ownership may also adversely affect our stock
price.


     Following this offering, we will be a “controlled company” within the meaning of the Nasdaq corporate governance rules. We will
     therefore qualify for, and intend to rely on, exemptions from certain Nasdaq corporate governance requirements, and, as a result, our
     stockholders may not have the same degree of protection as that afforded to stockholders of companies that are subject to all of
     Nasdaq’s corporate governance requirements.
      Following this offering, we will be a ―controlled company‖ within the meaning of the Nasdaq corporate governance rules as a result of
the ownership position of Atlantic Equity Partners and its voting rights and stockholders’ agreement Atlantic Equity Partners and Carl and
Franklin Paul. A ―controlled company‖ is a company of which more than 50% of the voting power is held by an individual, group or another
company. As a controlled company, we may elect not to comply with certain Nasdaq corporate

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governance rules, including the requirements that: (1) a majority of our board of directors consists of independent directors, and (2) we
establish a nominating committee and a compensation committee that are composed entirely of independent directors with a written charter
addressing the purpose and responsibilities of the compensation committee. Accordingly, as a controlled company, our stockholders may not
have the same degree of protection as that afforded to stockholders of companies that are subject to all of Nasdaq’s corporate governance
requirements.


     Our directors and executive officers who have relationships with First Atlantic Capital may have conflicts of interest with respect to
     matters involving our company.
       Following this offering, six of our nine directors will be affiliated with First Atlantic Capital, which manages Atlantic Equity Partners.
These persons will have fiduciary duties to both us and First Atlantic Capital. As a result, they may have real or apparent conflicts of interest on
matters affecting both us and First Atlantic Capital, which in some circumstances may have interests adverse to ours. In addition, as a result of
Atlantic Equity Partner’s ownership interest, conflicts of interest could arise with respect to transactions involving business dealings between
us and Atlantic Equity Partners or First Atlantic Capital including, but not limited to, potential acquisitions of businesses or properties, the
issuance of additional securities, the payment of dividends by us and other matters.


     There has been no prior public market for our common stock and the trading price of our common stock may be adversely affected if
     an active trading market in our common stock does not develop.
       Prior to this offering, our common stock has not been publicly traded. We cannot predict the extent to which investor interest will lead to
the development of an active trading market in shares of our common stock or whether such a market will be sustained. The initial public
offering price for the shares will be determined by negotiations between us and the representatives of the underwriters and may not be
indicative of prices that will prevail in the trading market.


     Future sales of our common stock could cause the market price of our common stock to drop significantly, even if our business is
     profitable.
       After this offering, we will have 15,472,676 shares of common stock outstanding. This includes the 6,000,000 shares of common stock
we are selling in this offering, which may be resold in the public market immediately after this offering. We expect that the remaining
9,472,676 shares of common stock and 331,569 shares of common stock issuable immediately following the closing of this offering upon the
conversion of certain equity units, will become available for resale in the public market as shown in the chart below. Our officers, directors and
the holders of substantially all of our outstanding shares of common stock have signed lock-up agreements pursuant to which they have agreed
not to sell, transfer or otherwise dispose of any of their shares for a period of 180 days following the date of this prospectus, subject to
extension in the case of an earnings release or material news or a material event relating to us. The underwriters may, in their sole discretion
and without notice, release all or any portion of the common stock subject to lock-up agreements. The lock-up agreements are also subject to a
number of exceptions. In particular, the lock-up agreements signed by our founders, Carl and Franklin Paul, and by our officers who also hold
certain equity units (including our chief executive officer, chief financial officer, two senior vice presidents and a vice president) permit each of
them to sell up to 40% of the shares of common stock underlying those equity units (representing approximately 68,700 shares of common
stock in the aggregate) to pay the taxes resulting from those units becoming convertible into shares of common stock upon the closing of this
offering. In addition, 10,965 shares held by Thomas G. Hardy, one of our directors, are not subject to any lock-up agreement. For a description
of other exceptions to the lock-up agreements, see ―Shares of Common Stock Eligible for Future Sale.‖ As restrictions on resale end, the
market price of our common stock could drop significantly if the holders of these restricted shares sell

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them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds
through future offerings of our common stock or other securities.
Number of Shares                                                                    Date of Availability for Resale into the Public Market

Approximately 240,000                                              Upon the effectiveness of this prospectus

Approximately 9.6 million                                          180 days after the date of this prospectus, of which approximately 9.5 million
                                                                   are subject to volume limitations under Rule 144
        After this offering, subject to the lock-up agreement described above, Atlantic Equity Partners may request that we register some or all
of the 7,934,418 shares that it holds for sale to the public and Atlantic Equity Partners and certain other stockholders have the right to include
their shares in public offerings we undertake in the future. After this offering we also intend to register on Form S-8 all of the shares of
common stock that we may issue under our incentive compensation plans. Upon issuance they may be freely sold in the public market, subject
to the lock-up agreements described above. The registration or sale of any of these shares could cause the market price of our common stock to
drop significantly.


     The anti-takeover provisions in our charter documents and under Delaware law could discourage or prevent others from acquiring our
     company, and, therefore, our shareholders may lose the opportunity to sell their shares at a favorable price.
       Upon the closing of this offering, our certificate of incorporation and amended and restated bylaws will contain provisions which could
make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquiror were to make a
hostile bid for us, the acquiror would not be able to call a special meeting of stockholders to remove our board of directors unless it held at least
25% in voting power of all the outstanding shares entitled to vote at that meeting. In addition, after Atlantic Equity Partners, on its own or as
part of a group, beneficially owns 40% or less of our common stock, our stockholders will not be permitted to take action by written consent
without a meeting. Modifications of certain provisions of our certificate of incorporation would require the consent of 75% of the total voting
power of all outstanding shares of stock. The acquiror would also be required to provide advance notice of its proposal to remove directors at
an annual meeting. In addition, our board of directors will be authorized to issue preferred stock in series, with the terms of each series to be
fixed by the board of directors.
      Section 203 of the Delaware General Corporation Law limits business combination transactions with 15% stockholders that have not
been approved by the board of directors. These provisions and other similar provisions make it more difficult for a third party to acquire us
without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders.
       Our board of directors could choose not to negotiate with an acquiror that it did not feel was in our strategic interest. If the acquiror were
discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by the anti-takeover measures, you
could lose the opportunity to sell your shares at a favorable price.

                                                                         16
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                                 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
       This prospectus contains forward-looking statements. We have based these forward-looking statements on our current expectations and
projections about future events. These statements include but are not limited to:

         •          the timing, amount and composition of future capital expenditures;

         •          the timing and number of new store openings and our expectations as to the costs associated with new store openings;

         •          the timing and completion of the remodeling of our existing stores;

         •          our plans to grow particular areas of our business, including sales of our proprietary branded products, our apparel and
                    tennis products; and

         •          our plans to launch new customer care initiatives, including our guest loyalty program.
       These statements may be found in the sections of this prospectus entitled ―Prospectus Summary,‖ ―Risk Factors,‖ ―Use of Proceeds,‖
―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ and ―Business‖ and in this prospectus generally,
including the sections of this prospectus entitled ―Business — Overview‖ and ―Business — Industry,‖ which contain information obtained
from independent industry sources. Actual results could differ materially from those anticipated in these forward-looking statements as a result
of various factors, including all the risks discussed in ―Risk Factors‖ and elsewhere in this prospectus.
       In addition, statements that use the terms ―believe,‖ ―expect,‖ ―plan,‖ ―intend,‖ ―estimate,‖ ―anticipate‖ and similar expressions are
intended to identify forward-looking statements. All forward-looking statements in this prospectus reflect our current views about future events
and are based on assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from future
results expressed or implied by the forward-looking statements. Many of these factors are beyond our ability to control or predict. You should
not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other
applicable laws, we do not intend to update or revise any forward-looking statements.
      The forward looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended.

                                                                        17
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                                                             USE OF PROCEEDS
      Assuming an initial public offering price of $15.00 per share, the midpoint of the estimated initial public offering price range, we
estimate that we will receive net proceeds from this offering of $80.7 million, after deducting the underwriting discount and estimated offering
expenses payable by us. If the underwriters exercise their overallotment option in full, we estimate that we will receive additional net proceeds
of $12.6 million.
       The following table sets forth the estimated sources and uses of funds in connection with this offering and the other transactions
described below as if they had occurred on April 1, 2006. See also ―Unaudited Pro Forma Condensed Consolidated Financial Statements.‖
                                                                                                                                   Amount

                                                                                                                                  (millions)
Source of Funds

New senior secured credit facility (1)                                                                                     $                    21.7
Common stock offered hereby                                                                                                                     90.0

    Total sources                                                                                                          $                   111.7
Uses of Funds
Repayment of existing senior secured credit facility                                                                       $                     5.5
Redemption of 8.375% senior secured notes (2)                                                                                                   92.9
Payment of management termination fee (3)                                                                                                        3.0
Transaction fees and expenses (4)                                                                                                               10.3
      Total uses                                                                                                           $                   111.7

(1)    Our new senior secured credit facility is expected to provide for a $65.0 million revolving credit facility.



(2)    We are required to give at least 30 days prior notice prior to redeeming the senior secured notes. This amount assumes a redemption date
       of April 1, 2006. Promptly following the closing of this offering, we intend to issue a notice of redemption. Assuming the senior secured
       notes are redeemed on July 15, 2006, the amount required to redeem the notes would increase to $94.4 million requiring anticipated
       additional borrowings of approximately $1.5 million under our new senior secured credit facility as of that date.



(3)    Consists of a one-time $3.0 million fee to terminate our management consulting agreement with First Atlantic Capital, Ltd. upon
       completion of this offering. The management consulting agreement currently obligates us to pay approximately $600,000 per year, plus
       expenses, to First Atlantic Capital, Ltd. until 2012.



(4)    Transaction fees and expenses include: (i) $9.3 million related to the underwriting discount and fees and expenses associated with this
       offering, and (ii) fees and expenses of approximately $1.0 million related to our new senior secured credit facility.

       The 8.375% senior secured notes have a final maturity date of October 15, 2009, although we are required by the indenture governing
the notes to make the principal payments on the notes of $18.75 million in 2007 and $9.375 million in 2008.
       Interest on outstanding borrowings under our existing senior secured credit facility is payable, at our option, at either an index rate or a
LIBOR rate. Index rate loans bear interest at a floating rate equal to the higher of (i) the base rate on corporate loans quoted by The Wall Street
Journal or (ii) the federal funds rate plus 50 basis points per annum, in either case plus 1.00%. LIBOR rate loans bear interest at a rate based on
LIBOR plus 2.50%. We have the option to choose 1-, 2-, 3- or 6-month LIBOR periods for borrowings bearing interest at the LIBOR rate. In
addition, the existing senior secured credit facility requires us to pay a monthly fee of 2.50% per annum of the amount available under
outstanding letters of credit. We are also required to pay a monthly commitment fee equal to 0.5% per annum of the undrawn availability, as
calculated under the agreement. Amounts currently outstanding under the existing senior secured credit facility are due and payable in
April 2007 and bear interest at a rate of 8.5%.

                                                                         18
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                                                            DIVIDEND POLICY
       Since our acquisition in October 2002, no dividends have been declared or paid on our shares of common stock and we do not anticipate
paying any cash dividends on shares of our common stock in the future. We currently intend to retain all future earnings to finance our
operations and to expand our business. Any future determination relating to our dividend policy will be made at the discretion of our board of
directors and will depend on a number of factors, including our earnings, capital requirements, results of operations, financial condition,
financing arrangements, future prospects and other factors our board of directors may deem relevant. We expect that the terms of our new
senior secured credit facility will include provisions that restrict the payment of cash dividends on our common stock. See ―Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources‖ for additional information
regarding our debt.

                                                                      19
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                                                                CAPITALIZATION
       The following table sets forth our cash and cash equivalents and our capitalization as of April 1, 2006:
         •           on an actual basis;

         •           on a pro forma basis to give effect to the following transactions as if they had occurred on April 1, 2006:


                     •         an amendment to our certificate of incorporation to authorize the issuance of up to 100,000,000 shares of common
                               stock and 10,000,000 shares of undesignated preferred stock; and




                     •         the issuance and sale of 6,000,000 shares of common stock in this offering, our receipt of estimated net proceeds
                               of approximately $80.7 million, after deducting the underwriting discount and estimated offering expenses
                               payable by us and assuming an initial public offering price of $15.00 per share of common stock, the midpoint of
                               the range of the estimated initial public offering price set forth on the cover of this prospectus, and the application
                               of such net proceeds, together with borrowings under our new senior secured credit facility, as described under
                               ―Use of Proceeds.‖

      You should read the following table in conjunction with ―Selected Consolidated Financial Data,‖ ―Management’s Discussion and
Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and related notes thereto included
elsewhere in this prospectus.
                                                                                                                             April 1, 2006

                                                                                                                    Actual                Pro Forma

                                                                                                                             (in thousands)
                                                                                                                               (unaudited)
Existing senior secured credit facility                                                                         $      5,509          $            —
New senior secured credit facility                                                                                        —                    21,714
8.735% senior secured notes                                                                                           83,158                       —

Total indebtedness                                                                                              $     88,667          $        21,714

Stockholders’ equity:
    Common stock, $.001 par value per share; 40,000,000 shares authorized and 9,472,143 shares
      issued and outstanding, actual; 100,000,000 shares authorized and 15,472,143 shares issued
      and outstanding, pro forma                                                                                              9                   156
    Preferred stock, $.001 par value per share; no shares authorized, issued and outstanding, actual;
      10,000,000 shares authorized, and no shares issued and outstanding, pro forma                                          —                        —
    Restricted common stock units, $.001 par value per unit; 331,569 units issued and outstanding,
      actual, and zero units issued and outstanding,
      pro forma                                                                                                            1                        1
    Additional capital                                                                                                60,301                  140,854
    Other comprehensive income                                                                                           157                      157
    Accumulated deficit                                                                                               (4,189 )                (20,729 )

Total stockholders’ equity                                                                                            56,279                  120,439

Total capitalization                                                                                            $    144,946          $       142,153


      The preceding table excludes 2,670,237 shares reserved for issuance under our 2002 Incentive Stock Plan and 2006 Incentive
Compensation Plan, of which options to purchase 870,894 shares at a weighted average exercise price of $7.38 per share had been granted and
were outstanding as of April 1, 2006.

                                                                          20
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                                                                     DILUTION
       Our net tangible book value as of April 1, 2006 was $(12.7) million, or $(1.30) per share of common stock, including 331,569 shares of
common stock issuable immediately following the closing of this offering upon the conversion, for no additional consideration, of equity units
held by certain of our existing and former officers and employees. Net tangible book value per share represents the amount of total tangible
assets, less total liabilities, divided by the number of shares of common stock outstanding. After giving effect to (i) the sale by us of
6,000,000 shares of common stock at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated initial public
offering price range, after deducting the underwriting discount and estimated offering expenses payable by us, and (ii) the application of such
net proceeds, together with additional borrowings under our new senior secured credit facility, as described under ―Use of Proceeds,‖ as if such
transactions had occurred on April 1, 2006; our adjusted net tangible book value as of April 1, 2006 would have been $51.4 million, or
$3.25 per share of common stock. This represents an immediate increase in net tangible book value of $4.55 per share of common stock to
existing stockholders and an immediate dilution of $11.75 per share of common stock to new investors purchasing shares of common stock in
this offering. Dilution per share represents the difference between the price per share to be paid by new investors for the shares of common
stock sold in this offering and the net tangible book value per share immediately after this offering. The following table illustrates this per share
dilution:
Assumed initial public offering price per share                                                                                                 $   15.00

     Historical net tangible book value per share as of April 1, 2006                                                       $       (1.30 )

     Increase per share attributable to new investors                                                                               4.55

Historical net tangible book value per share after this offering                                                                                        3.25

Dilution per share to new investors                                                                                                             $   11.75

      The following table presents the differences between the total consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing common stock in this offering:
                                                        Shares Purchased                    Total Consideration
                                                                                                                                        Average Price
                                                   Number                  Percent         Amount                 Percent                Per Share

Existing stockholders                                9,803,712                62.0 %   $    67,051,596               42.7 %     $                    6.84
New investors                                        6,000,000                38.0 %   $    90,000,000               57.3 %     $                   15.00
      Total                                         15,803,712               100.0 %   $   157,051,596              100.0 %
      The preceding table excludes 2,670,237 shares reserved for issuance under our 2002 Incentive Stock Plan and 2006 Incentive
Compensation Plan, of which options to purchase 870,894 shares at a weighted average exercise price of $7.38 per share had been granted and
were outstanding as of April 1, 2006.
       Assuming the underwriters exercise in full their overallotment option to purchase 900,000 additional shares of common stock, our
adjusted net tangible book value as of April 1, 2006, would have been $64.0 million, or $3.83 per share. This represents an immediate increase
in the net tangible book value of $5.13 per share to existing stockholders and an immediate dilution of $11.17 per share to new investors
participating in this offering.

                                                                             21
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                      UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      The following unaudited pro forma condensed consolidated financial statements have been derived by the application of pro forma
adjustments to our historical consolidated financial statements appearing elsewhere in this prospectus.
       The unaudited pro forma condensed consolidated balance sheet gives effect to:

         •          this offering;

         •          $21.7 million of borrowings under our new senior secured credit facility;

         •          the redemption of $93.75 million aggregate principal amount at maturity of our 8.375% senior secured notes due 2009
                    issued on October 15, 2002, which had an accreted book value of $83.2 million as of April 1, 2006;

         •          the repayment of outstanding borrowings of $5.5 million under our existing senior secured credit facility;

         •          the payment of a one-time $3.0 million fee to terminate our management consulting agreement with First Atlantic Capital,
                    Ltd. upon completion of this offering; and



         •          the payment of (i) $9.3 million related to the underwriting discount and other fees and expenses associated with this offering
                    and (ii) $1.0 million of fees and expenses related to our new senior secured credit facility,

as if these transactions (the ―Transactions‖) had occurred on April 1, 2006. The unaudited pro forma condensed consolidated statements of
operations for the fiscal year ended December 31, 2005 and for the three months ended April 1, 2006 give effect to the Transactions as if they
had occurred on January 2, 2005, the first day of fiscal year 2005, except for the payment of the one-time $3.0 million fee described above to
terminate our management consulting agreement with First Atlantic Capital, Ltd. due to the non-recurring nature of such payment.
Furthermore, such unaudited pro forma condensed consolidated statements of operations also do not reflect (i) any charges related to the
expected loss on extinguishment of debt resulting from the repayment of the above-referenced debt due to the non-recurring nature of such
repayment, or (ii) any impact on income tax expense due to our net operating loss carry-forwards that are expected to exist on a pro forma basis
for the fiscal year ended December 31, 2005 and the three months ended April 1, 2006. We estimate that we will record a loss of approximately
$12.0 million related to the extinguishment of such debt in fiscal 2006.
      The unaudited pro form adjustments are based upon available information and certain assumptions that we believe are reasonable, but
which are subject to change and are described in the accompanying notes. The unaudited pro forma condensed consolidated financial
statements:

         •          are presented for informational purposes only;

         •          do not purport to represent what our results of operations or financial condition would have been had the Transactions
                    actually occurred on the dates indicated;

         •          do not purport to project our results of operations or financial condition for any future period or as of any future date; and

         •          should be read in conjunction with the information contained in ―Selected Consolidated Financial and Other Data‖,
                    ―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ and our consolidated financial
                    statements and related notes appearing elsewhere in this prospectus.

                                                                         22
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                                             GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                             UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                                                                                        As of April 1, 2006

                                                                         Historical         Adjustments               Pro Forma

                              ASSETS
Current assets:
    Cash and cash equivalents                                        $     3,664,380    $                 — (1)   $      3,664,380
    Receivables, net of allowances                                         2,226,607                      —              2,226,607
    Inventories                                                           81,534,562                      —             81,534,562
    Prepaid and other current assets                                       8,381,071                      —              8,381,071

Total current assets                                                      95,806,620                                    95,806,620
Net property and equipment                                                47,871,027                      —             47,871,027
Goodwill                                                                  41,634,525                      —             41,634,525
Tradename                                                                 11,158,000                      —             11,158,000
Trademarks                                                                14,156,127                      —             14,156,127
Customer database, net of accumulated amortization                         2,077,292                      —              2,077,292
Debt issuance costs, net of accumulated amortization                                                       )
                                                                            4,450,528           (3,450,528 (2)           1,000,000
Other long-term assets                                                        462,032                   —                  462,032

Total assets                                                         $   217,616,151    $       (3,450,528 )      $   214,165,623

       LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
    Accounts payable                                                 $    54,628,420    $              —          $     54,628,420
    Accrued expenses and other current liabilities                        13,726,099             (657,654 )             13,068,445
    Line of credit                                                         5,509,001           16,204,820 (1)           21,713,821

Total current liabilities                                                 73,863,520           15,547,166               89,410,686
Long-term debt                                                                                                )
                                                                          83,158,164          (83,158,164 (1)                   —
Deferred rent                                                              4,315,589                   —                 4,315,589

Total liabilities                                                        161,337,273          (67,610,998 )            93,726,275
Total stockholders’ equity                                                56,278,878           64,160,470 (3)         120,439,348

Total liabilities and stockholders’ equity                           $   217,616,151    $       (3,450,528 )      $   214,165,623



See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

                                                                23
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                    NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

      (1) The unaudited pro forma condensed consolidated balance sheet gives effect to the following estimated sources and uses from the
issuance of common stock offered hereby:
Sources:
Issuance of common stock                                                                                                  $          90,000,000
Proceeds from our new senior secured credit facility                                                                                 21,713,821

                                                                                                                          $        111,713,821

Uses:
Repayment of 8.375% senior secured notes (a)                                                                              $          92,904,820
Repayment of indebtedness under existing senior secured credit facility                                                               5,509,001
Underwriters fees                                                                                                                     6,300,000
Fees and expenses associated with this offering                                                                                       6,000,000
Debt issuance costs related to our new senior secured credit facility                                                                 1,000,000
                                                                                                                          $        111,713,821




       (a) Includes the following components related to the repayment of the senior secured notes:
Accreted book value of the notes at April 1, 2006                                                                         $          83,158,164
Contractual accreted value at October 15, 2006 in excess of accreted book value at April 1, 2006 (i)                                  2,035,669

    Subtotal — contractual accreted value                                                                                            85,193,833
Pre-payment premium of 6.5% of contractual accreted value (ii)                                                                        5,537,599
Present value discount of contractual accreted value and pre-payment premium (iii)                                                   (2,600,592 )
Present value of scheduled interest payments through October 2006 (iv)                                                                4,116,326
Accrued and unpaid interest through April 1, 2006                                                                                       657,654

          Total                                                                                                           $          92,904,820




             (i)    Represents the accreted value of the senior secured notes at October 15, 2006, as determined in accordance with the
                    indenture governing the notes, in excess of the recorded book value of the senior secured notes at April 1, 2006. The
                    indenture governing the senior secured notes provides that in the event the notes are redeemed prior to October 15, 2006,
                    the redemption price is calculated based on the discounted present value of the contractual accreted value of the notes as
                    of, and the remaining interest payment on the notes through, October 15, 2006.



             (ii)   Represents a pre-payment premium of 6.5% on the contractual accreted value of the senior secured notes at October 15,
                    2006, as required by the terms of the notes.

            (iii)   Represents the present value discount of the contractual accreted value of the notes at October 15, 2006 and the 6.5%
                    pre-payment premium discussed in note (ii) above, assuming a discount rate of 5.47%. In accordance with the terms of the
                    senior secured notes, the discount rate will be determined on the third business day preceding the actual redemption date.

             (iv)   Represents the present value of remaining interest payment on the senior secured notes from April 2, 2006 through
                    October 15, 2006, assuming a discount rate of 5.47%.

      (2) Reflects the write-off of debt issuance costs of $4.5 million related to our 8.375% senior secured notes and the existing senior
secured credit facility and the recording of $1.0 million of debt issuance costs related to our new senior secured credit facility.
24
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       (3) Reflects the following adjustments to stockholders’ equity related to this offering:
Issuance of common stock in this offering                                                                                     $          90,000,000
Loss on debt related to repayment of 8.375% senior secured notes (a)                                                                    (13,539,530 )
Underwriters fees                                                                                                                        (6,300,000 )
Fees and expenses associated with this offering (b)                                                                                      (6,000,000 )
       Total                                                                                                                  $          64,160,470




         (a)         This amount reflects a one-time charge associated with the estimated loss on extinguishment of long-term debt of $13.5 million
                     and is comprised of the following components:
Contractual accreted value at October 15, 2006 in excess of accreted book value at April 1, 2006 (i)                              $       2,035,669
6.5% premium of contractual accreted value (ii)                                                                                           5,537,599
Present value discount of contractual accreted value and pre-payment premium (iii)                                                       (2,600,592 )
Present value of scheduled interest payments through October 2006 (iv)                                                                    4,116,326
Write-off of debt issuance costs related to senior secured notes and existing senior secured credit facility                              4,450,528

      Total                                                                                                                       $      13,539,530



               (i)            Represents the accreted value of the senior secured notes at October 15, 2006, as determined in accordance with the
                              indenture governing the notes, in excess of the recorded accreted book value of the senior secured notes at April 1,
                              2006.

               (ii)           Represents a pre-payment premium of 6.5% on the contractual accreted value of the senior secured notes at
                              October 15, 2006, as required by the terms of the notes.

               (iii)          Represents the present value discount of the contractual accreted value of the notes at October 15, 2006 and the 6.5%
                              pre-payment premium discussed in note (ii) above, assuming a discount rate of 5.47%. In accordance with the terms of
                              the senior secured notes, the discount rate will be determined on the third business day preceding the actual redemption
                              date.

               (iv)           Represents the present value of the remaining interest payments on the senior secured notes from April 2, 2006
                              through October 15, 2006, assuming a discount rate of 5.47%.



         (b)         This amount includes $3.0 million in estimated expenses associated with this offering as well as a $3.0 million one-time
                     termination fee paid to First Atlantic Capital, Ltd. to terminate our management consulting agreement.

                                                                            25
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                                          GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                    UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                                                           Year Ended December 31, 2005

                                                                          Historical               Adjustments                Pro Forma

Net revenues                                                          $   323,794,225          $                 —        $   323,794,225
Cost of products sold                                                     208,044,286                            —            208,044,286

Gross profit                                                              115,749,939                            —            115,749,939
Selling, general and administrative                                                                                  )
                                                                           99,310,158                    (681,000 (1)           98,629,158
Store pre-opening expenses                                                  1,764,685                          —                 1,764,685

Total operating expenses                                                  101,074,843                    (681,000 )           100,393,843
Operating income                                                           14,675,096                     681,000              15,356,096
Interest expense                                                          (11,744,232 )                 9,252,754 (2)          (2,491,478 )
Interest income                                                                73,263                          —                   73,263
Other income                                                                  469,841                          —                  469,841
Other expense                                                                (116,331 )                        —                 (116,331 )

Income (loss) from operations before income taxes                            3,357,637                  9,933,754               13,291,391
Income tax expense                                                            (400,003 )                       —                  (400,003 )

Net income (loss)                                                     $      2,957,634         $        9,933,754         $     12,891,388

Basic net income (loss) per share of common stock (3)                 $           0.30                                    $           0.82
Basic weighted average common shares outstanding (3)                         9,803,712                                          15,803,712
Diluted net income (loss) per share of common stock (3)               $           0.30                                    $           0.81
Diluted weighted average common shares
 outstanding (3)                                                             9,943,443                                          15,943,443

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                                              STATEMENT OF OPERATIONS
                                               Year Ended December 31, 2005

     (1) Adjustment reflects the elimination of $0.7 million in expenses recorded during the year ended December 31, 2005 related to
management advisory services provided by First Atlantic Capital, Ltd.
       (2) The adjustments to interest expense are comprised of the following:
Elimination of interest related to historical coupon value                                                                  $           7,829,992
Elimination of amortization of original issue discount of senior secured notes                                                          2,641,968
Elimination of amortization of historical deferred financing costs                                                                      1,063,999
Elimination of interest for senior secured credit facility                                                                                208,273

      Total                                                                                                                 $         11,744,232
Amortization of deferred financing costs related to new credit facility (a)                                                             (200,000 )
Interest under new credit facility borrowings at 6.5% (b)                                                                             (2,291,478 )
     Total                                                                                                                  $          (2,491,478 )
Net pro forma adjustment                                                                                                    $           9,252,754



         (a)    Assumes $1.0 million of debt issuance costs related to the new senior secured credit facility amortized over a 5-year estimated
                life of the new senior secured credit facility.



         (b)    Represents historical interest expense under our existing senior secured credit facility of $0.2 million on historical borrowings
                used for working capital purposes plus estimated interest expense of $2.1 million related to borrowings under the new senior
                secured credit facility. Borrowings under the new senior secured credit facility are estimated to be $32.1 million if the
                Transactions had occurred at January 1, 2005. Interest is calculated assuming a 6.5% interest rate and assuming pro forma
                borrowings of $32.1 million are outstanding for the entire period presented.

       (3) Pro forma weighted average shares and net income (loss) per share assume that the 9,803,712 shares outstanding and the
6,000,000 shares expected to be issued pursuant to this offering were outstanding for the year ended December 31, 2005. The number of shares
outstanding include 331,569 shares of common stock issuable immediately following the closing of this offering upon the conversion, for no
additional consideration, of equity units held by certain of our existing and former officers and employees.

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                                         GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                    UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                                                          Three Months Ended April 1, 2006

                                                                             Historical             Adjustments                  Pro Forma

Net revenues                                                             $    74,810,296        $                 —          $    74,810,296
Cost of products sold                                                         49,007,939                          —               49,007,939

Gross profit                                                                  25,802,357                          —               25,802,357
Selling, general and administrative                                                                                   )
                                                                              23,702,479                 (200,000 (1)             23,502,479
Store pre-opening expenses                                                       199,749                                             199,749

Total operating expenses                                                      23,902,228                 (200,000 )               23,702,228
Operating income                                                               1,900,129                  200,000                  2,100,129
Interest expense                                                              (3,059,426 )              2,385,640 (2)               (673,786 )
Interest income                                                                   10,783                       —                      10,783
Other income                                                                     322,064                       —                     322,064
Other expense                                                                    (42,944 )                     —                     (42,944 )

Income (loss) from operations before income taxes                                 (869,394 )            2,585,640                  1,716,246
Income tax expense                                                                      —                      —                          —

Net income (loss)                                                        $        (869,394 )    $       2,585,640            $     1,716,246

Basic and diluted net income (loss) per share of common stock (3)        $         (0.09 )                                   $          0.11
Basic and diluted weighted average common shares outstanding (3)               9,803,712                          —               15,803,712

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

                                                                    28
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                                              STATEMENT OF OPERATIONS
                                              Three Months Ended April 1, 2006

     (1) Adjustment reflects the elimination of $0.2 million in expenses recorded during the three months ended April 1, 2006 related to
management advisory services provided by First Atlantic Capital, Ltd.
       (2) The adjustments to interest expense are comprised of the following:
Elimination of interest related to historical coupon value                                                                     $       1,962,891
Elimination of amortization of original issue discount of senior secured notes                                                           708,165
Elimination of amortization of historical deferred financing costs                                                                       281,085
Elimination of interest for senior secured credit facility                                                                               107,285

      Total                                                                                                                    $       3,059,426
Amortization of deferred financing costs related to new credit facility (a)                                                              (50,000 )
Interest under new credit facility borrowings at 6.5% (b)                                                                               (623,786 )

     Total                                                                                                                     $        (673,786 )
Net pro forma adjustment                                                                                                       $       2,385,640



         (a)    Assumes $1.0 million of debt issuance costs related to the new senior secured credit facility amortized over a 5-year estimated
                life of the new senior secured credit facility.



         (b)    Represents historical interest expense under our existing senior secured credit facility of $0.1 million on historical borrowings
                used for working capital purposes plus estimated interest expense of $0.5 million related to borrowings under the new senior
                secured credit facility. Borrowings under the new senior secured credit facility are estimated to be $32.1 million if the
                transaction had occurred at January 1, 2005. Interest is calculated assuming a 6.5% rate and assuming pro forma borrowings of
                $32.1 million are outstanding for the entire period presented.

       (3) Pro forma weighted average shares and net income (loss) per share assume that the 9,803,712 shares outstanding and the
6,000,000 shares expected to be issued pursuant to this offering were outstanding for the three months ended April 1, 2006. The number of
shares outstanding include 331,569 shares of common stock issuable immediately following the closing of this offering upon the conversion,
for no additional consideration, of equity units held by certain of our existing and former officers and employees.

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                                    SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
        You should read the following selected consolidated financial and other data in conjunction with ―Management’s Discussion and
Analysis of Financial Condition and Results of Operations‖ and our consolidated financial statements and the related notes included elsewhere
in this prospectus. The selected consolidated financial data as of and for the fiscal years ended January 3, 2004, January 1, 2005 and
December 31, 2005 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected
consolidated financial data as of and for the fiscal year ended December 29, 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 have been derived from the audited consolidated financial statements of Golfsmith International
Holdings, Inc., which are not included in this prospectus. Our fiscal year ends on the Saturday closest to December 31 of such year. All fiscal
years presented include 52 weeks of operations, except 2003, which includes 53 weeks, where week 53 occurred in the fourth quarter of fiscal
2003. The selected consolidated financial data as of and for the three months ended April 2, 2005 and April 1, 2006 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 operation for the three months ended April 1,
2006 may not be indicative of results that may be expected for the full year. The three-month periods ended April 2, 2005 and April 1, 2006
both consisted of 13 weeks.
       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 its merger with and into BGA Acquisition Corp., our wholly owned subsidiary. Golfsmith International
Holdings, Inc. is a holding company and had no material assets or operations prior to acquiring all of the capital stock of Golfsmith
International, Inc. The application of purchase accounting rules to the financial statements of Golfsmith International Holdings, Inc. resulted in
different accounting bases from Golfsmith International, Inc. and, hence, different financial information for the periods beginning on
October 16, 2002. We refer to Golfsmith International Holdings, Inc. and all of its subsidiaries, including Golfsmith International, Inc.
following the acquisition on October 15, 2002, as the successor for purposes of the presentation of financial information below. We refer to
Golfsmith International, Inc. prior to being acquired by Golfsmith International Holdings, Inc. as the predecessor for purposes of the
presentation of financial information below.

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                                        Predecessor                                                                       Successor

                                                  Period from        Period from
                                Fiscal Year       December 30,        October 16,                            Fiscal Year Ended                                 Three Months Ended
                                  Ended           2001 through       2002 through
                               December 29,        October 15,       December 28,            January 3,            January 1,         December 31,          April 2,                 April 1,
                                   2001               2002               2002                  2004                  2005                 2005               2005                     2006

                                                                                                                                                                       (unaudited)
                                                                         (in thousands, except share, per share and store data)
Statement of Operations
  Data:
Net revenues                   $    221,439       $    180,315       $       37,831      $       257,745       $       296,202      $      323,794      $       63,958         $         74,810
Cost of products sold               143,118            117,206               25,147              171,083               195,014             208,044              41,195                   49,008

Gross profit                         78,321             63,109               12,684               86,662               101,188             115,750              22,763                   25,802
Selling, general and
  administrative                     64,081             48,308               13,581               73,400                90,763              99,310              21,400                   23,702
Store pre-opening/closing
  expenses                               —                 122                   93                  600                   743                1,765                    517                      200
Amortization of deferred
  compensation (1)                      458              6,033                   —                    —                     —                    —                      —                       —

Total operating expenses             64,539             54,463               13,674               74,000                91,506             101,075              21,917                   23,902

Operating income (loss)              13,782               8,646                (990 )             12,662                 9,682               14,675                 846                    1,900
Interest expense                     (6,825 )            (5,206 )            (2,210 )            (11,157 )             (11,241 )            (11,744 )            (2,862 )                 (3,059 )
Interest income                         597                 331                   7                   40                    64                   73                  17                       11
Other income, net                     1,031               2,365                  14                  164                 1,162                  354                  (1 )                    279
Minority interest                      (581 )              (844 )                —                    —                     —                    —                   —                        —
Loss on debt extinguishment
  (2)                                    —               (8,047 )                —                    —                     —                    —                      —                       —

Income (loss) from
  continuing operations
  before income taxes                 8,004              (2,755 )            (3,179 )              1,709                  (333 )              3,358              (2,000 )                   (869 )
Income tax benefit (expense)           (251 )              (709 )               633                 (645 )              (4,423 )               (400 )                —                        —

Income (loss) from
  continued operations                7,753              (3,464 )            (2,546 )              1,064                (4,756 )              2,958              (2,000 )                   (869 )
Income (loss) from
  discontinued operations              (590 )             (230 )                (40 )                 —                     —                    —                      —                       —
Income (loss) before
  extraordinary items                 7,163              (3,694 )            (2,586 )              1,064                (4,756 )              2,958              (2,000 )                   (869 )
Extraordinary items (3)                  —                2,022                  —                    —                     —                    —                   —                        —

Net income (loss)              $      7,163       $      (1,672 )    $       (2,586 )    $         1,064       $        (4,756 )    $         2,958     $        (2,000 )      $            (869 )


Basic and diluted income
  (loss) per share of
  common stock (4)                            *                  *   $        (0.28 )    $           0.11                 (0.49 )   $          0.30     $         (0.20 )      $           (0.09 )
Weighted average number of
  shares outstanding used in
  basic income (loss) per
  share calculation (4)                       *                  *       9,175,002             9,441,148             9,803,712           9,803,712           9,803,712                9,803,712
Weighted average number of
  shares outstanding used in
  diluted income (loss) per
  share calculation (4)                       *                  *       9,175,002             9,441,148             9,803,712           9,943,443           9,803,712                9,803,712


Other Financial Data:
Gross profit as a percentage
  of net revenues                       35.4 %             35.0 %              33.5 %                33.6 %                34.2 %              35.7 %              35.6 %                   34.5 %
Store Data (not in
  thousands):
Comparable store sales                                                                                                                                                  )
  increase (decrease) (5)                2.9 %             N/A                   0.1 %                7.4 %                 0.7 %               2.6 %              (8.1 %                   12.3 %
Number of stores at period
  end                                    24                  24                  26                   38                    46                   52                     46                      52
Gross square feet at period
  end                               581,890                      *         596,206               759,981               849,677             905,827             825,107                  905,827
Net sales per selling square
  foot for stores open at
  beginning and end of
  period (6)                   $   268   *   $   271   $    302   $   333   $   353   $   104   $   119

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                                         Predecessor                                                               Successor

                                                  Period from     Period from
                             Fiscal Year          December 30,     October 16,                          Fiscal Year Ended                          Three Months Ended
                               Ended              2001 through    2002 through
                            December 29,           October 15,    December 28,             January 3,                          December 31,       April 2,              April 1,
                                                                                                              January 1,
                                 2001                  2002            2002                  2004                                  2005            2005                  2006
                                                                                                                2005

                                                                                       (as restated)       (as restated)                      (as restated)
                            (as restated) (8)                     (as restated) (8)
                                                                                              (8)                (8)                                (8)
                                                                                                                                                          (unaudited)
                                                                      (in thousands)
Balance Sheet Data
  (at period end):
Cash and cash
  equivalents               $       33,735       $        3,788   $        6,950       $        1,051     $        8,575       $      4,207   $         —         $        3,664
Inventories                         33,776               33,152           32,352               51,213             54,198             71,472         72,083                81,535
Working capital (7)                 47,152               18,753           16,946               18,329             20,309             22,800         19,493                21,943
Total assets                       105,686              153,135          155,548              177,449            186,929            204,836        196,726               217,616
Long-term debt                      33,720               75,000           75,380               77,483             79,808             82,450         80,432                83,158
Total stockholders’
  equity                             32,519              56,011            53,473              58,976             54,313             57,127          52,285               56,279


      *       Not meaningful.


(1)       During fiscal 2000, the predecessor company’s board of directors authorized Golfsmith to reprice stock options granted to employees and
          officers with exercise prices in excess of the then-current fair market value. Options to purchase a total of 1,716,780 shares of common
          stock were repriced. Golfsmith recorded deferred compensation of $4.1 million related to the repriced options during the period from
          December 30, 2001 through October 15, 2002. 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, Golfsmith amortized $6.0 million (including all remaining
          amounts as of the merger date) 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.



(2)       On October 15, 2002, immediately prior to the merger with Golfsmith Holdings, Golfsmith repaid existing subordinated notes held by a
          third party lender. 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.

(3)       Immediately prior to the merger in October 2002, Golfsmith repurchased a minority interest held by a third party. Golfsmith repurchased
          the minority interest which had a carrying value of $13.1 million for cash consideration of $9.0 million resulting in a $2.1 million write
          down of long term assets associated with the minority interest and negative goodwill of $2.0 million. In accordance with Statement of
          Financial Accounting Standard (SFAS) No. 141, Business Combinations, the negative goodwill is recorded in the period from
          December 30, 2001 through October 15, 2002, as an extraordinary item in the consolidated statement of operations. The extraordinary
          item is recorded without a tax effect due to Golfsmith’s election to be treated as a Subchapter S corporation during the predecessor
          period.



(4)       For all periods subsequent to October 15, 2002, includes 331,569 shares of common stock issuable immediately following the closing of
          this offering upon the conversion, for no additional consideration, of equity units held by certain of our existing and former officers and
          employees.



(5)       We consider sales by a new store to be comparable commencing in the fourteenth month after the store was opened or acquired. We
          consider sales by a relocated store to be comparable if the relocated store is expected to serve a comparable customer base and there is
          not more than a 30-day period during which neither the original store nor the relocated store is closed for business. We consider sales by
          stores with modified layouts to be comparable. We consider sales by stores that are closed to be comparable in the period leading up to
          closure if they met the qualifications of a comparable store and do not meet the qualifications to be classified as discontinued operations
          under SFAS No. 144, Accounting for the Impairment of Long-Lived Assets. Comparable store results for a 53-week fiscal year are
          presented on a 52/52 week basis by omitting the last week of the 53-week period.
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      Comparable store sales are reported for a combined fiscal 2002 — predecessor period from December 30, 2001 through October 15,
      2002 plus successor period from October 16, 2002 through December 28, 2002 — compared predecessor fiscal 2001 and are not reported
      for the interim periods.

(6)   Calculated using net sales of all stores open at both the beginning and the end of the period and the selling square footage for such stores.
      Selling square feet includes all retail space including but not limited to hitting areas, putting greens and check-out areas. It does not
      include back-room and receiving space, management offices, employee breakrooms, restrooms, vacant space or area occupied by
      GolfTEC Learning Centers.

(7)   Defined as total current assets minus total current liabilities.

(8)   Certain adjustments have been made to the prior year financial statements related to the correction of an error in applying generally
      accepted accounting principles. Adjustments have been made to the consolidated balance sheets for the periods presented to decrease
      both cash and cash equivalents and accounts payable in connection with outstanding checks written but not presented for payment prior
      to the financial statement date. The adjustments are the result of the Company funding the related cash accounts at the time the
      outstanding checks are presented for payment, which has historically been after the date on which the reporting period ends, instead of
      the date on which the checks are written. The adjustments do not affect previously reported net income, retained earnings or earnings per
      share in any period presented.

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                                   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
                                         CONDITION AND RESULTS OF OPERATIONS
     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected
Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus.

Overview
       We are the nation’s largest specialty retailer of golf equipment, apparel and accessories based on sales. We operate as an integrated
multi-channel retailer, offering our guests the convenience of shopping in our 55 stores across the nation, including three new stores opened in
the second quarter of 2006, and through our direct-to -consumer channel, consisting of our leading Internet site, www.golfsmith.com , and our
comprehensive catalogs.
       We were founded in 1967 as a clubmaking company offering custom-made clubs, clubmaking components and club repair services. In
1972, we opened our first retail store, and in 1975, we mailed our first general golf products catalog. Over the next 25 years, we continued to
expand our product offerings, opened larger retail stores and added to our catalog titles. In 1997, we launched our Internet site to further expand
our direct-to -consumer business. In October 2002, Atlantic Equity Partners III, L.P., an investment fund managed by First Atlantic Capital,
Ltd., acquired us from our original founders, Carl, Barbara and Franklin Paul. We accounted for this acquisition under the purchase method of
accounting for business combinations. In accordance with the purchase method of accounting, in connection with the transaction, 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
value of these assets, and goodwill. The assets that have had their fair values adjusted included inventory, property and equipment and certain
intangible assets.
       Since our acquisition, we have accelerated our growth plan by opening additional stores in new and existing markets. We opened three
new stores in the second quarter of 2006, six new stores during fiscal 2005, eight new stores during fiscal 2004 and 12 new stores during fiscal
2003, including six stores from the acquisition of Don Sherwood Golf & Tennis in July 2003. We plan to open an additional seven to
nine stores in 2006 and between 14 and 16 stores in 2007. Based on our past experience, opening a new store within our core 15,000 to
20,000 square foot format requires approximately $750,000 for capital expenditures, $150,000 for pre-opening expenses and $875,000 for
inventory depending on the level of work required at the site and the time of year that it is opened. Our store model has produced favorable
results, including positive store-level cash flow in the first full year of operations in most of our stores.
      In 2005, we generated revenues of $323.8 million, operating income of $14.7 million and net income of $3.0 million. In 2004, we
generated revenues of $296.2 million, operating income of $9.7 million, and had a net loss of $4.8 million. Our net loss in 2004 resulted
primarily from lower operating income as a percentage of revenues due to increased selling, general and administrative expenses from the
opening of new stores, and also from the recording of a full valuation allowance against our net deferred tax assets of $4.3 million. In 2003, we
generated revenues of $257.8 million, operating income of $12.7 million and net income of $1.1 million. Our gross margin was 33.6% in 2003,
34.2% in 2004 and 35.7% in 2005. Our operating margin was 4.9% in 2003, 3.3% in 2004 and 4.5% in 2005.
       In the three months ended April 1, 2006, we generated revenues of $74.8 million and operating income of $1.9 million, and had a net
loss of $0.9 million. In the three months ended April 2, 2005, we generated revenues of $64.0 million and operating income of $0.8 million,
and had a net loss of $2.0 million. Our gross margin was 34.5% in the three months ended April 1, 2006 compared to 35.6% in the three
months ended April 2, 2005. Our operating margin was 2.5% in the three months ended April 1, 2006 compared to 1.3% in the three months
ended April 2, 2005.

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     Industry Trends
       Sales of our products are affected by increases and decreases in participation rates. Over the last 35 years, the golf industry has realized
significant growth in both participation and popularity. According to the National Golf Foundation, the number of rounds played in the United
States grew from 266.0 million in 1970 to a peak of 518.4 million rounds played in 2000. More recently, however, there has been a slight
decline in the number of rounds of golf played from the peak in 2000 to 499.6 million rounds in 2005, according to the National Golf
Foundation. The number of rounds of golf played and, in turn, the amount of golf-related expenditures can be attributed to a variety of factors
affecting recreational activities including the state of the nation’s economy, weather conditions and discretionary spending. As a result of the
factors described above, the golf retail industry is expected to remain stable or grow slightly. Therefore, we expect that retail growth for any
particular company will result primarily from market share gains.
       According to industry sources, the golf retail industry is highly fragmented with no single golf retailer accounting for more than 6% of
sales nationally in 2005. We expect that market share gains in the future will lead to the industry being dominated by a small number of large
competitors. In light of our nationally-recognized brand and our leading national position based on sales, we believe that this anticipated
development presents us with a significant opportunity for growth. We are in the early stages of our store expansion and, in meeting this
opportunity, we will need to implement our strategy of rapidly opening additional stores in new and existing markets. Among other things, this
will require us to identify suitable locations for such stores at the same time as our competitors are doing the same and successfully negotiate
leases and build-out or refurbish sites on a timely and cost-effective basis. In addition, we will need to expand and compete effectively in the
direct-to-consumer channel and continue to develop our proprietary brands. To the extent that golf continues to enjoy its current popularity or
grows and we are able to compete effectively against new and existing competitors, we believe that we are well positioned to capture additional
market share.


     Fiscal Year
       Our fiscal year ends on the Saturday closest to December 31 and generally consists of 52 weeks, although occasionally our fiscal year
will consist of 53 weeks, as it did in fiscal 2003. Fiscal 2004 and fiscal 2005 each consisted of 52 weeks. Each quarter of each fiscal year
generally consists of 13 weeks.


     Don Sherwood Acquisition
       On July 24, 2003, we acquired all of the issued and outstanding shares of Don Sherwood Golf & Tennis for a total purchase price of
$9.2 million, including related acquisition costs of $0.4 million. We acquired all six Don Sherwood retail stores as part of this acquisition. The
operations of these stores are included in our statements of operations and cash flows as of July 25, 2003.
       The total purchase consideration was 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 $6.3 million. Goodwill is assigned at the reporting unit level and is not deductible for income tax purposes.

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      Revenues

      Revenue Trends and Drivers
       Revenue channels. We generate substantially all of our revenues from sales of golf and tennis products in our retail stores, through our
direct-to -consumer distribution channels, from international distributors and from the Harvey Penick Golf Academy. The following table
provides information about the breakdown of our revenues for the periods indicated:
                                                                                                                                 Three Months Ended

                                      Fiscal 2003               Fiscal 2004                 Fiscal 2005              April 2, 2005                     April 1, 2006

                                     $              %          $              %            $              %          $               %                 $               %

                                     (in                       (in                         (in                       (in                               (in
                                 thousands)                thousands)                  thousands)                thousands)                        thousands)
                                                                                                                                     (unaudited)
Stores                           $   162,073        62.9 % $   204,498        69.0 % $    234,261         72.3 % $   42,897          67.1 % $          53,137          71.0 %
Direct-to-consumer                    89,021        34.5        84,372        28.5         83,040         25.7       19,849          31.0              20,207          27.0
International distributors and
  other (1)                              6,651      2.6            7,332      2.5              6,493      2.0            1,213         1.9                 1,466        2.0


(1)    Consists of (a) sales made through our international distributors and our distribution and fulfillment center near London, (b) revenues
       from the Harvey Penick Golf Academy, and (c) our recognition of gift card breakage, as described below.
       Our revenues have grown consistently in recent years, driven by the expansion of our store base. The percentage of total sales from our
direct-to -consumer channel has decreased due to the increase in our store base and store revenues during the periods indicated. The decrease in
direct-to -consumer channel revenues was primarily due to planned reductions in catalog circulation that resulted in increased direct-to
-consumer channel profitability. Substantially all of our net revenues are derived from the sale of golf products. Net revenues related to tennis
products and golf- and tennis-related services are not material for any period presented.
      Store revenues. Changes in revenues that we generate from our stores are driven primarily by the number of stores in operation and
changes in comparable store sales. We consider sales by a new store to be comparable commencing in the fourteenth month after the store was
opened or acquired. We consider sales by a relocated store to be comparable if the relocated store is expected to serve a comparable customer
base and there is not more than a 30-day period during which neither the original store nor the relocated store is closed for business. We
consider sales by retail stores with modified layouts to be comparable. We consider sales by stores that are closed to be comparable in the
period leading up to closure if they meet the qualifications of a comparable store and do not meet the qualifications to be classified as
discontinued operations under Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Long-Lived
Assets.
       Branded compared to proprietary products. The majority of our sales are from premier branded golf equipment, apparel and accessories
from leading manufacturers, including Callaway ® , Cobra ® , FootJoy ® , Nike ® , Ping ® , TaylorMade ® and Titleist ® . In addition, we sell
our own proprietary branded equipment, components, apparel and accessories under the Golfsmith ® , Killer Bee ® , Lynx ® , Snake Eyes ® ,
Zevo ® , ASI TM , GearForGolf TM , GiftsForGolf TM and other product lines. Sales of our proprietary branded products accounted for 14.7% of
our net revenues in the three months ended April 1, 2006, 15.6% of our net revenues in 2005, 18.0% of our net revenues in 2004 and 17.4% of
our net revenues in 2003. These proprietary branded products are sold through both of our channels and generally generate higher gross profit
margins than non-proprietary branded products.
       Seasonality. Our business is seasonal, and our sales leading up to and during the warm weather golf season and the Christmas holiday
gift-giving season have historically contributed a higher percentage of our annual net revenues and annual net operating income than other
periods in our fiscal year. During fiscal 2005, the fiscal months of March through September and December, which together comprised
36 weeks of our 52-week fiscal year, contributed over three-quarters of our annual net revenues and substantially all of our annual operating
income. See ―— Quarterly Results of Operations and Seasonality.‖

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     Revenue Recognition

       We recognize revenue from retail sales at the time the customer takes possession of the merchandise and purchases are paid for,
primarily with either cash or by credit card. We recognize revenues from catalog and Internet sales upon shipment of merchandise. The
Company also operates the Harvey Penick Golf Academy, an instructional school incorporating the techniques of the well-known golf
instructor, the late Harvey Penick. We recognize revenues from the Harvey Penick Golf Academy at the time the services, the golf lessons, are
performed.

        We recognize revenue from gift cards when (1) the gift card is redeemed by the customer or (2) the likelihood of the gift card being
redeemed by the customer is remote (gift card breakage), and we determine that there is no legal obligation to remit the value of the
unredeemed gift cards to the relevant jurisdictions. Gift card breakage is based on the redemption recognition method. Estimated breakage is
calculated and recognized as revenue over a 48-month period following the gift card sale, in amounts based on the historical redemption
patterns of used gift cards. During fiscal 2005, we concluded that we had accumulated sufficient historical gift card information to accurately
calculate estimated breakage. Amounts in excess of the total estimated breakage, if any, will be recognized as revenue at the end of the 48
months following the gift card sale, at which time we deem the likelihood of any further redemptions to be remote, and provided that such
amounts are not required to be remitted to the relevant jurisdictions. Gift card breakage income is included in net revenue in the consolidated
statements of operations. During the fourth quarter of fiscal 2005, we recognized $0.9 million in net revenues related to the initial recognition
of gift card breakage. During the first quarter of fiscal 2006, we recognized approximately $0.1 million in net revenues related to the
recognition of gift card breakage.
       For all merchandise sales, we reserve for sales returns in the period of sale using estimates based on our historical experience.


     Cost of Goods Sold
       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 these costs from cost of goods sold and instead include
them in a line item such as selling and administrative expenses, our gross margins may not be comparable to those of these other retailers.
Salary and facility expenses, such as depreciation and amortization, associated with our distribution and fulfillment center in Austin, Texas are
included in cost of goods sold. Income received from our vendors through our co-operative advertising program that does not pertain to
incremental direct advertising costs is recorded as a reduction to cost of goods sold when the related merchandise is sold.


     Operating Expenses
       Selling, general and administrative. Our selling, general and administrative expenses consist of all expenses associated with general
operations for our stores and general operations for corporate and international expenses. This includes salary expenses, occupancy expenses,
including rent and common area maintenance, advertising expenses and direct expenses, such as supplies for all retail and corporate facilities.
A portion of our occupancy expenses are offset through our subleases with GolfTEC Learning Centers. Additionally, income received through
our co-operative advertising program for reimbursement of incremental direct advertising costs is treated as a reduction to our selling, general
and administrative expenses. Selling, general and administrative expenses also include the fees and other expenses we pay for services rendered
to us pursuant to the management consulting agreement between us and First Atlantic Capital. Under this agreement, we paid First Atlantic
Capital fees and related expenses totaling $0.7 million in fiscal 2005, $0.6 million in fiscal 2004 and $0.8 million in fiscal 2003. We paid First
Atlantic Capital fees and related expenses totaling $0.2 million in the first quarter of fiscal 2006 and $0.2 million in the first quarter of fiscal
2005. We and First Atlantic Capital intend to terminate the management consulting agreement upon the closing of this offering and we expect
to pay a final $3.0 million termination fee to First Atlantic Capital, which will be expensed at such time.

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       Prior to the closing of this offering, we expect to grant certain officers and employees options to purchase shares of our common stock at
an exercise price equal to the midpoint of the estimated initial public offering price range. In addition, we intend to modify the vesting schedule
of certain outstanding options. As a result of the proposed grant and modification, we expect that options to purchase approximately
500,000 shares of our common stock will be vested and exercisable upon the closing of this offering. We expect to record a compensation
expense in our statement of operations in connection with the grant of new stock options and the acceleration of outstanding stock options.
Based on the midpoint of the estimated initial public offering price range, we expect the expense to be recorded in fiscal 2006 to be
approximately $1.0 million.
       Store pre-opening expenses. Our store pre-opening expenses consist of costs associated with the opening of a new store and include
costs of hiring and training personnel, supplies and certain occupancy and miscellaneous costs. Rent expense recorded after possession of the
leased property but prior to the opening of a new retail store is recorded as store pre-opening expenses.
       Interest expense. Our interest expenses consist of costs related to our 8.375% senior secured notes and our senior secured credit facility.
       Interest income. Our interest income consists of amounts earned from our cash balances held in short-term money market accounts.
       Other income. Other income consists primarily of income from the sale of rights to certain intellectual property.
       Other expense. Other expense consists primarily of exchange rate variances.
       Taxes. Our income taxes consist of federal, state and foreign taxes, based on the effective rate for the fiscal year.
        Extinguishment of debt. We expect to use the proceeds from this offering, together with borrowings under our new senior secured credit
facility, to redeem all of our outstanding 8.375% senior secured notes due in 2009 and repay all outstanding amounts under our existing senior
secured credit facility. We estimate that we will record a loss of approximately $12.0 million related to the extinguishment of this long-term
debt in fiscal 2006.

Critical Accounting Policies
      Our significant accounting policies are more fully described in Note 1 of our audited consolidated financial statements. Certain of our
accounting policies are particularly important to the portrayal of our financial position and results of operations. In applying these critical
accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Those
estimates are based on our historical experience, the terms of existing contracts, our observance of trends in the industry, information provided
by our customers and information available from other outside sources, as appropriate. These estimates are subject to an inherent degree of
uncertainty.


     Inventory Valuation
        Inventory value is presented as a current asset on our balance sheet and is a component of cost of goods sold in our statement of
operations. It therefore has a significant impact on the amount of net income or loss 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 write down inventory value for damaged, obsolete, excess and
slow-moving inventory and for inventory shrinkage due to anticipated book-to -physical adjustments. 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

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have a material adverse impact on our net income. Write-downs for inventory shrinkage are booked on a monthly basis at 0.2% to 1.0% of net
revenues depending on the distribution channel (direct-to -consumer channel or retail channel) in which the sales occur. Inventory shrinkage
expense recorded in the statements of operations was 0.7% of net revenues for the first fiscal quarter ended April 1, 2006, 0.8% of net revenues
for the first fiscal quarter ended April 2, 2005, 0.65% of net revenues in fiscal 2005, 0.75% of net revenues in fiscal 2004 and 0.66% of net
revenues in fiscal 2003. Inventory shrinkage expense recorded is a result of physical inventory counts made during these respective periods and
write-down amounts recorded for periods outside of the physical inventory count dates. These write-down amounts are based on management’s
estimates of shrinkage expense using historical experience.


     Long-lived Assets, Including Goodwill and Identifiable Intangible Assets
       We account for the impairment or disposal of long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment of
Long-Lived Assets , which requires long-lived assets, such as property and equipment, to be evaluated for impairment whenever events or
changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated
future undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are
less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair
value. Based on our analyses, included in selling, general and administrative expenses for fiscal 2005 is a $1.5 million non-cash loss on the
write-off of property and equipment. The losses were primarily due to the remodeling of stores and the modification of one store to a smaller
store layout, all of which resulted in certain assets having little or no future economic value. In fiscal 2004, a $0.5 million non-cash loss on the
write-off of property and equipment is included in selling, general and administrative expenses. The loss was due to store relocations, which
resulted in certain assets having little or no future economic value. We did not record any impairment losses in fiscal 2003 or in either of the
three-month periods ended April 1, 2006 and April 2, 2005.
       Goodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business
combination. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets , we assess the carrying value of our goodwill for
indications of impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill or
intangible asset may be impaired. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares the
fair value of the company or reporting unit to the net book value of the company or reporting unit. We allocate goodwill to one enterprise-level
reporting unit for impairment testing. In determining fair value, we utilize a blended approach and calculate fair value based on discounted cash
flow analysis and revenues and earnings multiples based on industry comparables. Step two of the analysis compares the implied fair value of
goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to
that excess. We perform our annual test for goodwill impairment on the first day of the fourth fiscal quarter of each year.
       We test for possible impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount of
the asset is not recoverable based on management’s 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 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.
       Based on our analyses, no impairment of goodwill or identifiable intangible assets was recorded in fiscal 2005, fiscal 2004, fiscal 2003
or in either of the three-month periods ended April 1, 2006 and April 2, 2005.

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     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, current returns policies 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 1.8% to 10.0% 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 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 during fiscal 2005 due to the expiration of lease terms. There were no expenses associated with either closed store
recorded in accordance with SFAS No. 146. In both instances, we subsequently opened a new store in fiscal 2005 to serve the same customer
base of the closed stores. We did not close any stores in the three-month period ended April 1, 2006 or in fiscal 2004 or fiscal 2003. We do not
currently have any plans to close any additional stores, although we regularly evaluate our stores and the necessity to record expenses under
SFAS No. 146.


     Operating Leases
        We lease stores under operating leases. Store lease agreements often include rent holidays, rent escalation clauses and contingent rent
provisions for percentage of sales in excess of specified levels. Most of our lease agreements include renewal periods at our option. We
recognize rent holiday periods and scheduled rent increases on a straight-line basis over the lease term beginning with the date we take
possession of the leased space. We record tenant improvement allowances and rent holidays as deferred rent liabilities on our consolidated
balance sheets and amortize the deferred rent over the term of the lease to rent expense on our consolidated statements of operations. We record
rent liabilities on our consolidated balance sheets for contingent percentage of sales lease provisions when we determine that it is probable that
the specified levels will be reached during the fiscal year. We record direct costs incurred to affect a lease in other long-term assets and
amortize these costs on a straight-line basis over the lease term beginning with the date we take possession of the leased space.


     Deferred Tax Assets
       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. As of April 1, 2006, we recorded a full valuation allowance against accumulated net
deferred tax assets due to the uncertainties regarding the realization of deferred tax assets. If we generate taxable income in future periods or if
the facts and circumstances on which our estimates and assumptions are based were to change, thereby impacting the likelihood of realizing the
deferred tax assets, judgment would have to be

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applied in determining the amount of valuation allowance no longer required. Reversal of all or a part of this valuation allowance could have a
significant positive impact on our net income in the period that it becomes more likely than not that certain of our deferred tax assets will be
realized.

Results of Operations
      The following table sets forth selected consolidated statements of operations data for each of the periods indicated expressed as a
percentage of net revenues:
                                                                                                                    Three Months Ended

                                                                                                                April 2,            April 1,
                                                       Fiscal 2003       Fiscal 2004        Fiscal 2005          2005                2006

Statement of Operations Data:
Net revenues                                                 100.0 %           100.0 %            100.0 %           100.0 %              100.0 %
Cost of products sold                                         66.4              65.8               64.3              64.4                 65.5

Gross profit                                                  33.6              34.2               35.7              35.6                   34.5
Selling, general and administrative                           28.5              30.6               30.7              33.5                   31.7
Store pre-opening/closing expenses                             0.2               0.3                0.5               0.8                    0.3

Total operating expenses                                      28.7              30.9               31.2              34.3                   32.0

Operating income                                                4.9               3.3                4.5               1.3                   2.5
Interest expense                                               (4.3 )            (3.8 )             (3.6 )            (4.5 )                (4.1 )
Interest income                                                   *                 *                  *                 *                     *
Other income, net                                               0.1               0.4                0.1              n/m                   (0.4 )

Income (loss) from continuing operations before                                                                            )                     )
  income taxes                                                  0.7              n/m                 1.0              (3.1 %                (1.2 %
Income tax benefit (expense)                                   n/m               n/m                n/m                  *                     *

Net income (loss)                                                                                                          )                     )
                                                                0.4 %            n/m                 0.9 %            (3.1 %                (1.2 %



*   Less than 0.1%.
n/m Not meaningful.


     Comparison of Three Months Ended April 1, 2006 to Three Months Ended April 2, 2005
       Net revenues. Net revenues increased by $10.8 million, or 17.0%, to $74.8 million in the three months ended April 1, 2006 from
$64.0 million in the three months ended April 2, 2005. The increase was mostly comprised of an increase in comparable store revenues of
$5.2 million, or 12.3%, and an increase in non-comparable store revenues of $5.0 million. Additionally, we experienced an increase in our
direct-to-consumer channel revenues of $0.4 million, or 1.8%, as well as an increase in our international revenues of $0.2 million, or 16.6%.
       Growth in comparable store revenues from the three months ended April 2, 2005 to the three months ended April 1, 2006 was driven by
a $4.2 million increase in golf club sales, which are higher priced products than other products we sell. Additionally, four stores entered the
comparable store base for the first time during the three months ended April 1, 2006, contributing $0.9 million to the increase in comparable
store sales. We believe this growth was positively impacted by continued high levels of consumer confidence and the continued effects of
executing our business strategy. We also believe that comparable store revenues continued to be negatively impacted by increased competition
in select markets. In comparison, comparable store revenues for the three months ended April 2, 2005 decreased by $3.2 million, or 8.1%,
compared to the first fiscal quarter of 2004.
       Non-comparable store revenues for the three months ended April 1, 2006 primarily include revenues from six stores in operation that
were opened subsequent to April 2, 2005 and one store that became comparable during the three months ended April 1, 2006, but which
contributed $0.2 million in non-comparable store revenues during the three months ended April 1, 2006.

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       Gross profit. Gross profit increased by $3.0 million, or 13.4%, to $25.8 million in the three months ended April 1, 2006 from
$22.8 million in the three months ended April 2, 2005. Increased net revenues led to higher gross profit for the three months ended April 1,
2006. Gross profit was 34.5% of net revenues in the three months ended April 1, 2006 compared to 35.6% of net revenues in the three months
ended April 2, 2005. The decrease in gross margin percentage was primarily due to increased sales of lower margin products during the three
months ended April 1, 2006. Additionally, increased distribution costs relating to our receiving and shipping of products, mainly related to
promotional shipping terms offered to our guests, as well as increased freight costs due to rising gas prices accounted for decreases in gross
profit of $1.3 million during the three months ended April 1, 2006 as compared to the three months ended April 2, 2005. These declines in
gross profit were partially offset by increases in vendor allowances of $0.7 million.
       Selling, general and administrative. Selling, general and administrative expenses increased by $2.3 million, or 10.8%, to $23.7 million in
the three months ended April 1, 2006 from $21.4 million in the three months ended April 2, 2005. Selling, general and administrative expenses
were 31.7% of net revenues in the three months ended April 1, 2006 compared to 33.5% of net revenues in the three months ended April 2,
2005. The increase in selling, general and administrative expenses resulted from an increase of $0.6 million related to comparable stores, an
increase of $1.5 million related to non-comparable retail stores and an increase of $0.2 million related to our consumer direct channel,
corporate and international operations.
       The increase in comparable retail store expenses of $0.6 million was largely due to increases in variable expenses, including increases in
advertising expenses of $0.2 million and increases in payroll and general store operating expenses of $0.2 million. The increase in
non-comparable retail store expenses of $1.5 million was mainly related to the opening of six new stores during fiscal 2005 and was comprised
of $0.8 million in fixed expenses, including occupancy and depreciation costs and $0.7 million in variable expenses, consisting mainly of
payroll and advertising. The increase of $0.2 million related to our consumer direct channel, corporate and international operations was
primarily due to an increase of $0.5 million in variable expenses consisting mainly of payroll and advertising offset by a decrease in
professional services of $0.4 million.
       Store pre-opening expenses. Store pre-opening expenses decreased by $0.3 million, or 61.3%, to $0.2 million in the three months ended
April 1, 2006 from $0.5 million in the three months ended April 2, 2005. During the three months ended April 1, 2006, we incurred
$0.2 million related to the planned opening of four new retail locations during the second fiscal quarter of 2006. During the three months ended
April 2, 2005, we incurred $0.5 million related to the opening of one new retail location and the planned opening of five new retail locations
during the second fiscal quarter of 2005.
        Interest expense. Interest expense increased by $0.2 million, or 6.9%, to $3.1 million in the three months ended April 1, 2006 from
$2.9 million in the three months ended April 2, 2005 as a result of higher average outstanding balances under our existing senior secured credit
facility and increases in the accreted value of our senior secured notes.
      Interest income. Interest income decreased by approximately $6,000, or 38.2%, to $11,000 in the three months ended April 1, 2006 from
$17,000 in the three months ended April 2, 2005.
       Other income. Other income increased by $300,000 to $322,000 in the three months ended April 1, 2006 from $23,000 in the three
months ended April 2, 2005. The increase resulted from declared settlement income resulting from the Visa Check / MasterMoney Antitrust
Litigation class action lawsuit, in which we are a claimant, related to the overcharging of credit card processing fees by Visa and MasterCard
during the period October 25, 1992 to June 21, 2003.
     Other expense. Other expense increased by $19,000 to $43,000 in the three months ended April 1, 2006 from $24,000 in the three
months ended April 2, 2005. The increase resulted from foreign exchange losses.

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     Comparison of Fiscal 2005 to Fiscal 2004
      Net revenues. Net revenues increased by $27.6 million, or 9.3%, to $323.8 million in fiscal 2005 from $296.2 million in fiscal 2004. The
majority of this increase was comprised of a $24.7 million increase in non-comparable store revenues and an increase in comparable store
revenues of $5.0 million, or 2.6%. These increases were partially offset by a decrease in direct-to -consumer channel revenues of $1.4 million,
or 1.7%, and a decrease in international revenues of $1.7 million, or 25.5%.
       Growth in comparable store net revenues from fiscal 2004 to fiscal 2005 was driven by comparable store revenue increases of 6.2% in
the third quarter and 13.5% in the fourth quarter of fiscal 2005. We believe this growth was positively affected by improvements in our product
return rate, improved holiday season sales related to increased consumer confidence and continued positive effects of executing our business
strategy. We also believe that comparable store revenues were negatively impacted by increased competition in select markets. In comparison,
comparable store revenues for fiscal 2004 increased by $1.0 million compared to fiscal 2003, or 0.7%.
       Non-comparable store net revenues primarily comprise revenues from seven stores that were opened after January 1, 2005 and five
stores that became comparable during fiscal 2005, but which contributed $4.2 million in non-comparable store net revenues during fiscal 2005.
       The decrease in direct-to -consumer channel revenues was primarily due to planned reductions in catalog circulation that resulted in
increased direct-to -consumer channel profitability. The decrease in international net revenues was primarily due to the sale of the rights to a
trademark in fiscal 2004. Sales of products using this trademark contributed approximately one-third of international net revenues during fiscal
2004, but did not contribute any international net revenues during fiscal 2005.
        Additionally, during the fourth quarter of fiscal 2005, we recognized $0.9 million of income related to gift card breakage. The fourth
quarter of fiscal 2005 was the first period in which sufficient information was available for us to analyze historical redemption patterns and was
the first period in which we recognized such income related to gift cards sold since the inception of the gift card program.
        Gross profit. Gross profit increased by $14.6 million, or 14.4%, to $115.8 million in fiscal 2005 from $101.2 million in fiscal 2004.
Increased net revenues for fiscal 2005 compared to fiscal 2004 led to higher gross profit for fiscal 2005. Gross profit was 35.7% of net revenues
in fiscal 2005 compared to 34.2% of net revenues in fiscal 2004. The increase in gross profit was due to increases in vendor allowances of
$1.7 million, the recognition of $0.9 million of revenues related to gift card breakage and the realization of economies of scale due to continued
retail store growth that allowed us to purchase products in higher volumes and with more favorable pricing. These favorable impacts on gross
profits were partially offset by increased distribution costs related to our receiving and shipping our products of $1.2 million, mainly related to
promotional shipping terms offered to our guests during fiscal 2005.
        Selling, general and administrative. Selling, general and administrative expenses increased by $8.5 million, or 9.4%, to $99.3 million in
fiscal 2005 from $90.8 million in fiscal 2004. Selling, general and administrative expenses were 30.7% of net revenues in fiscal 2005 compared
to 30.6% of net revenues in fiscal 2004. This increase in selling, general and administrative expenses resulted from an increase of $1.7 million
related to comparable stores and $7.8 million related to non-comparable retail stores, offset by a decrease of $1.0 million related to our
consumer direct channel, corporate and international operations.
       The increase in comparable retail store expenses of $l.7 million was largely driven by increases in variable expenses, including increases
in advertising expenses of $0.8 million and increases in general store operating expenses of $0.8 million. The increase in non-comparable retail
store expenses of $7.8 million was mainly related to the opening of six new stores during fiscal 2005 and was comprised of $3.2 million in
fixed expenses including occupancy and depreciation costs, and $4.6 million in variable expenses consisting mainly of payroll and advertising
expenses. The decrease of $1.0 million related to our consumer direct channel, corporate and international operations was primarily related to
decreases in general corporate professional service fees and reduced advertising expenses. Although expense for professional fees

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decreased in 2005, going forward we expect legal, accounting and other expenses to increase as a result of becoming as a public company.
       Store pre-opening expenses. Store pre-opening expenses increased by $1.0 million, or 137.4%, to $1.8 million in fiscal 2005 from
$0.7 million in fiscal 2004. This increase resulted from opening six new retail locations and two relocated retail locations in fiscal 2005
compared to eight new retail locations in fiscal 2004. This increase was largely due to increased costs associated with the date of possession of
the leased space and store opening dates.
       Interest expense. Interest expense increased by $0.5 million, or 4.5%, to $11.7 million in fiscal 2005 from $11.2 million in fiscal 2004 as
a result of higher average outstanding balances under our existing senior secured credit facility and increases in the accreted value of our senior
secured notes.
       Interest income. Interest income increased by $9,000, or 14.6% to $73,000 in fiscal 2005 from $64,000 in fiscal 2004.
        Other income. Other income decreased by $0.7 million, or 60.1%, to $0.5 million in fiscal 2005 from $1.2 million in fiscal 2004. In
fiscal 2004, we sold the rights to certain intellectual property for gross proceeds of $2.1 million, resulting in a $1.1 million gain. In fiscal 2005,
we sold the rights to certain intellectual property for gross proceeds of $0.7 million, resulting in a $0.3 million gain.
       Other expense. Other expense increased by $100,000 to $116,000 in fiscal 2005 from $17,000 in fiscal 2004. The increase resulted from
foreign exchange losses.
       Taxes. Income tax expense decreased by $4.0 million to $0.4 million in fiscal 2005 from $4.4 million in fiscal 2004. The primary reason
for the decrease in income tax expense was the initial recording of a full valuation allowance in fiscal 2004. In addition, non-U.S. taxes
represented $0.2 million in income tax expense in fiscal 2005.


     Comparison of Fiscal 2004 to Fiscal 2003
       Net revenues. Net revenues increased by $38.5 million, or 14.9%, to $296.2 million in fiscal 2004 from $257.7 million in fiscal 2003.
This increase consisted primarily of a $41.5 million increase in non-comparable store revenues and a $1.0 million increase, or 0.7%, in
comparable store revenues. These increases were offset by a $4.7 million decrease, or 5.2%, in direct-to -consumer channel revenues.
Non-comparable store revenues in fiscal 2004 included revenues from eight additional stores that were opened during fiscal 2004 and 10 stores
that became comparable during fiscal 2004 but which contributed $27.0 million in non-comparable store revenues in fiscal 2004 before they
became comparable. In addition, international revenues increased $0.7 million, or 12.8%, from the year ended January 3, 2004 to the year
ended January 1, 2005.
      We believe the lack of significant growth in comparable store revenues in fiscal 2004 was influenced by the 0.1% decrease in the
number of golf rounds played in the United States during the 2004 calendar year compared to the corresponding period in 2003, as reported by
Golf Datatech. The decrease in direct-to -consumer channel revenues resulted primarily from a decrease in catalog circulation and increased
competition.
       Gross profit. Gross profit increased by $14.5 million, or 16.7%, to $101.2 million in fiscal 2004 from $86.7 million in fiscal 2003.
Increased net revenues for fiscal 2004 compared to fiscal 2003 led to higher gross profit for fiscal 2004. Gross profit was 34.2% of net revenues
in fiscal 2004 compared to 33.6% of net revenues in fiscal 2003. The increase in gross profit was due to the realization of economies of scale
due to continued retail store growth, which allowed us to purchase products in higher volumes with more favorable pricing. These favorable
impacts on gross profit were partially offset by increased distribution costs related to receiving and shipping of our products of $1.4 million.
       Selling, general and administrative. Selling, general and administrative expenses increased by $17.4 million, or 23.7%, to $90.8 million
in fiscal 2004 from $73.4 million in fiscal 2003. This increase resulted from an increase of $13.0 million in expenses related to eight new stores
opened in 2004 as well

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as the full year impact of 12 stores opened or acquired during 2003 and an increase of $4.4 million for corporate and international expenses.
The increase of $13.0 million in expenses related to the non-comparable stores noted above was comprised of $5.3 million of fixed expenses
including occupancy and depreciation costs, and $7.7 million in variable expenses consisting mainly of payroll and advertising expenses. The
increase of $4.4 million related to our consumer direct, corporate and international operations was related mainly to increases in payroll
expenses of $2.3 million and to increases in professional service fees of $1.7 million related to general corporate matters during our first full
year as a reporting company.
       Store pre-opening expenses. Store pre-opening expenses increased by $0.1 million, or 24%, to $0.7 million in fiscal 2004 from
$0.6 million in fiscal 2003. This increase resulted from the opening of eight new retail locations in fiscal 2004 compared to six new retail
locations in fiscal 2003.
       Interest expense. Interest expense remained the same at $11.2 million for fiscal 2004 and fiscal 2003. Interest expense consisted of
interest payable on our 8.375% senior secured notes and our senior secured credit facility.
        Interest income. Interest income increased by $24,000, or 60.7%, to $64,000 in fiscal 2004 from $40,000 in fiscal 2003.
      Other income. Other income increased $1.0 million to $1.2 million in fiscal 2004 from $0.2 million in fiscal 2003. This increase resulted
primarily from the sale of rights to certain intellectual property in fiscal 2004 for gross proceeds of $2.1 million, resulting in a $1.1 million
gain.
        Other expense. The change in other expense was not material from fiscal 2003 to fiscal 2004.
       Taxes. Income tax expense increased by $3.8 million to $4.4 million on a pre-tax loss of $0.3 million in fiscal 2004 from $0.6 million on
pre-tax income of $1.7 million in fiscal 2003. The primary reason for the income tax expense in fiscal 2004 was the recording of a valuation
allowance equal to our net deferred tax assets of $4.3 million due to uncertainties regarding whether these assets will be realized in future
periods in accordance with SFAS No. 109, Accounting for Income Taxes. In addition, non-U.S. taxes payable and state taxes represented
$0.1 million in income tax expense for fiscal 2004.

Quarterly Results of Operations and Seasonality
       The following table sets forth certain unaudited financial and operating data in each fiscal quarter during fiscal 2003, fiscal 2004, fiscal
2005 and the first quarter of fiscal 2006. The unaudited quarterly information includes all normal recurring adjustments that we consider
necessary for a fair presentation of the information shown. This information should be read in conjunction with the audited consolidated
financial statements and notes thereto appearing elsewhere in this prospectus.
                                                                                                                                                                                                     Fiscal
                                  Fiscal 2003                                                 Fiscal 2004                                                     Fiscal 2005                            2006

                    Q1          Q2              Q3        Q4                Q1              Q2              Q3              Q4                 Q1            Q2               Q3         Q4           Q1

                                                               (in thousands, except share per share data and comparable store sales growth)
Net revenues    $ 45,830      $ 79,256      $ 71,141    $ 61,518       $ 65,782         $ 96,944        $ 73,896        $ 59,581        $ 63,958          $ 102,494         $ 85,521   $ 71,821     $ 74,810
Gross profit      14,858        25,803        23,360      22,640         22,975           33,374          24,517          20,321          22,763             37,833           29,883     25,272       25,802
Operating
 income               599        6,460          4,362      1,241             2,478           6,417           2,581          (1,795 )                846       8,982            4,105          742      1,900
Net income
 (loss)            (1,217 )      2,221          1,012       (951 )            (203 )         2,265               536        (7,354 )           (2,000 )       6,002            1,211     (2,255 )       (869
Basic income
 (loss) per
 share              (0.13 )       0.24           0.11      (0.10 )           (0.02 )          0.23             0.05           (0.75 )           (0.20 )           0.61          0.12      (0.23 )       (0.09
Comparable
 store sales
 growth           (2.2)%         8.4%           12.6%      8.1%             23.9%            0.7%           (7.9)%          (4.9)%             (8.1)%        (0.5)%            6.2%      13.5%        12.3%
Net revenues as
 a percentage
 of full year
 results           17.8%        30.7%           27.6%     23.9%             22.2%           32.7%           24.9%           20.2%              19.7%          31.6%           26.4%      22.3%             n/a

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       As a result of the seasonal fluctuations in our business, we experience a concentration of sales in the period leading up to and during the
warm weather golf season, as well as the Christmas holiday gift-giving season. The increase in sales during these periods have historically
contributed a greater percentage to our annual net revenues and annual net operating income than other periods in our fiscal year. Our net
revenues have historically been highest during the second and third quarters of each year, because of increased sales during the warm weather
golf season. Our net revenues tend to be the lowest during the first quarter of each year.
       Our results of operations are also subject to quarterly variation due to factors other than seasonality. For example, we believe that the
introduction of our 90/90 Playability Guarantee in the second quarter of 2003 may have positively impacted our comparable store sales for the
subsequent four quarters and created challenging comparisons for the following four quarters. In addition, the timing of the introduction of
product innovations can similarly impact our results of operations.
      We also incur significant costs associated with opening new stores. The opening of new retail locations in one quarter and none in
another impacts our total quarterly operating expenses and our quarterly net income.
       Due to these and other factors results for any particular quarter may not be indicative of results to be expected for any other quarter or
for a full fiscal year.

Liquidity and Capital Resources
      To date, we have financed our activities through cash flow from operations, a private placement of debt securities (subsequently
exchanged for registered notes under the Securities Act of 1933) and borrowings under our senior secured credit facility. As of April 1, 2006,
we had cash and cash equivalents of $3.7 million, working capital of $21.9 million and outstanding debt obligations of $88.7 million. We had
$6.5 million in borrowing availability under our existing senior secured credit facility as of April 1, 2006, after giving effect to required
reserves of $500,000. We plan to terminate our existing senior secured credit facility and enter into a new senior secured credit facility
following the closing of this offering.
       Based on our current business plan, we believe that the net proceeds from this offering, together with our existing cash balances and cash
generated from operations, and borrowing availability under our new senior secured credit facility, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at least the next 12 months. If our estimates of revenues, expenses or capital or
liquidity requirements change or are inaccurate or if cash generated from operations is insufficient to satisfy our liquidity requirements, we may
seek to sell additional equity or arrange additional debt financing. In addition, we may seek to sell additional equity or arrange debt financing to
give us financial flexibility to pursue attractive opportunities that may arise in the future.


     Cash Flows

     Operating Activities
        Net cash used in operating activities was $3.2 million in the three months ended April 1, 2006, compared to net cash used in operating
activities of $7.1 million in the three months ended April 2, 2005. The decrease in cash used of $3.9 million in the three months ended April 1,
2006 was principally due to a decrease in cash used for inventories of $7.8 million as we have been able to extend payment terms on inventory
purchases with our vendors due to increased purchasing power and have been able to strategically maintain optimal inventory levels in our
retail locations and Austin, Texas warehouse to efficiently support our current business requirements. This decrease in cash used was partially
offset by increases in cash used related to accounts payable and other operating asset and liability accounts of $5.5 million, mainly due to the
timing of payments on account or payments for services to be rendered in future periods. A decrease in our net loss during the three months
ended April 1, 2006 further reduced cash used in operating activities by $1.1 million.

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        Net cash provided by operating activities was $7.7 million in fiscal 2005, compared to $15.3 million in fiscal 2004. The decrease of
$7.6 million in fiscal 2005 was principally due to an increase in cash used for inventories of $14.3 million offset by an increase in net income
of $7.7 million in fiscal 2005. This increase in cash used for inventories was primarily the result of an increase in the number of retail stores,
from 46 stores as of January 1, 2005 to 52 stores as of December 31, 2005, and the related increase in inventory stock. Additionally, strategic
initiatives to optimize inventory levels in our retail locations, combined with additive inventory for tennis products and apparel, increased
inventory levels and the cash requirements to fund the increased inventory levels.
        Net cash provided by operating activities was $15.3 million in fiscal 2004, compared to $3.6 million in fiscal 2003. The increase of
$11.7 million was primarily due to cash provided by operations of $11.2 million related to inventory management. These changes in inventory
levels in fiscal 2004 compared to fiscal 2003 provided net cash of $11.2 million. In addition, the increase in net cash provided by operating
activities from fiscal 2003 to fiscal 2004 was partially offset by a decrease in net income of $5.9 million, from net income of $1.1 million in
fiscal 2003 to a net loss of $4.8 million in fiscal 2004, net of non-cash adjustments (depreciation, amortization, loss on write-off of property
and equipment and gain on sale of assets) of $8.2 million for fiscal 2003 and $8.3 million for fiscal 2004. The change in net deferred tax assets
resulting from a valuation allowance increased cash provided by operating activities by $4.0 million. Changes in other operating accounts
increased cash provided by operating activities by $2.2 million.


     Investing Activities
       Net cash used in investing activities was $2.8 million for the three months ended April 1, 2006, compared to $1.5 million for the three
months ended April 2, 2005. Net cash used in investing activities for the three months ended April 1, 2006 was almost entirely the result of
capital expenditures related to new and existing stores. For the three months ended April 2, 2005, capital expenditures were comprised of
$1.4 million for new and existing stores and $0.1 million for corporate projects.
       Net cash used in investing activities was $11.9 million for fiscal 2005, compared to $6.5 million for fiscal 2004. Net cash used in
investing activities for fiscal 2005 was almost entirely the result of capital expenditures for new and existing stores. In fiscal 2005, capital
expenditures were comprised of $12.1 million for new and existing stores and $0.6 million for infrastructure investments. Net cash used in
investing activities for fiscal 2004 of $6.5 million was the result of $8.6 million in capital expenditures, offset by proceeds of $2.1 million from
the sale of assets. We sold our trademarks for Lynx ® in certain jurisdictions outside the United States in August 2004 for gross proceeds of
$2.1 million. In fiscal 2004, capital expenditures were comprised of $7.4 million for new and existing stores and $1.2 million for infrastructure
investments.
      Net cash used in investing activities was $15.3 million for fiscal 2003 and 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. In fiscal 2003, capital expenditures were
comprised of $5.2 million for new and existing stores and $0.6 million for infrastructure investments.


     Financing Activities
       Net cash provided by financing activities was $5.5 million for the three months ended April 1, 2006, compared to net cash used in
financing activities of $2,000 for the three months ended April 2, 2005. Net cash provided by financing activities for the three months ended
April 1, 2006 was comprised of proceeds from our senior secured credit facility, net of payments. Net cash used in financing activities for the
three months ended April 2, 2005 consisted primarily of equal proceeds from and payments on our senior secured credit facility.
        Net cash used in financing activities was $2,000 for fiscal 2005, compared to $1.4 million for fiscal 2004. Net cash used in financing
activities for fiscal 2005 was not material and consisted of proceeds and payments on our senior secured credit facility.

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       Net cash used in financing activities was $1.4 million for fiscal 2004 and was comprised primarily of payments on our senior secured
credit facility of $1.4 million, net of proceeds from borrowings.
        Net cash provided by financing activities was $5.6 million for fiscal 2003 and was comprised of proceeds from our senior secured credit
facility 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 & Tennis, offset by $0.1 million relating to payments of debt issuance costs and notes payable.


     Historical Indebtedness
       We intend to use the proceeds of this offering, together with borrowings under our new senior secured credit facility, to redeem all of our
outstanding senior secured notes and repay all outstanding amounts under our existing senior secured credit facility described below.


     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. The covenants in the indenture governing the notes restrict our ability to incur debt,
make capital expenditures, pay dividends or repurchase capital stock.
       Within 120 days after the end of each fiscal year, we are required by the indenture governing the notes to 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. 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. As of the end of fiscal 2005 and fiscal 2004, we determined that we did
not have any excess cash flow, as defined in the indenture, and were thus not required to offer to repurchase any of the notes. The notes have a
final maturity date of October 15, 2009, although we are required by the indenture governing the notes to make principal payments on the notes
of $18.75 million in 2007 and $9.375 million in 2008.



     Senior Secured Credit Facility
       We have a senior secured credit facility with availability of up to $12.5 million (after giving effect to required reserves of $500,000),
subject to customary conditions. The facility is secured by a pledge of our inventory, receivables and certain other assets. The facility provides
for same-day funding of the revolver, as well as letters of credit up to a maximum of $1.0 million. Interest on outstanding borrowings is
payable, at our option, at either an index rate or a LIBOR rate. In addition, the senior secured credit facility requires us to pay a monthly fee of
2.50% per annum of the amount available under outstanding letters of credit. We are also required to pay a monthly commitment fee equal to
0.5% per annum of the undrawn availability, as calculated under the agreement.
       Available amounts under the senior secured credit 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 credit agreement, plus the lesser of (1) 65% of the value of eligible inventory and (2) 60%
of the net orderly liquidation value of eligible inventory, and minus $2.5 million, which is an availability block used to calculate the borrowing
base.
        In March 2005, several financial covenants in the senior secured credit facility were amended. The limit on capital expenditures in each
fiscal year was increased to the greater of (a) one-third of our EBITDA (as defined in the senior secured credit facility) in the immediately
preceding fiscal year, and (b) the sum of: (i) $12.0 million, (ii) the amount, if any, of the excess cash flow offer (as described above under
―— Liquidity and Capital Resources — Senior Secured Notes‖) made and not accepted by the holders of the senior secured notes during the
immediately preceding fiscal year, and (iii) any amounts, up to an aggregate of $1,000,000, previously permitted to be made as capital
expenditures that

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have not previously been made as capital expenditures. In addition, the covenants regarding minimum interest coverage ratios and minimum
earnings levels were removed for the fiscal period ending on or about September 30, 2004 and all fiscal periods thereafter. Finally, the
definition of borrowing base in the senior secured credit facility was amended to include an availability block of $2.5 million, as used to
calculate the borrowing base under the senior secured credit facility.
       As of April 1, 2006, we had $5.5 million in borrowings outstanding, and $6.5 million of borrowing availability after giving effect to
required reserves of $500,000 under the credit agreement, and we believe we were in compliance with the covenants contained in the senior
secured credit facility.
        Borrowings under our senior secured credit facility typically increase as working capital requirements increase 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 senior secured 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.


     Indebtedness Following this Offering
        We plan to terminate our existing senior secured credit facility and enter into a new senior secured credit facility through our
wholly-owned subsidiary, Golfsmith International, Inc., concurrently with the closing of this offering. We have signed a commitment letter and
term sheet with General Electric Capital Corporation, the administrative agent under our existing senior secured credit facility and under the
proposed new facility. The commitment letter terminates in the event that we have not signed a definitive agreement on or before July 31, 2006.
We anticipate that the new senior secured credit facility will provide availability for up to $65 million of borrowings under a revolving credit
facility, including letters of credit of up to $5 million, with the right to increase the borrowings on the same terms by an additional $25 million,
subject to the consent of the administrative agent. The facility is expected to be guaranteed by us and all of our subsidiaries, and secured by a
pledge of all of the capital stock of Golfsmith International, Inc. and our other subsidiaries, as well as our and their inventory, receivables and
certain other assets. The maximum outstanding borrowings that are permitted under the facility is based on a formula which takes into account,
among other things, the value of certain of assets securing the facility.
       Interest on outstanding borrowings under the facility is expected to be payable, at our option, at either a floating base rate minus an
applicable margin or LIBOR plus an applicable margin. In both cases, the amount of the margin depends on the amount of availability
remaining under the facility. We will also be required to pay a quarterly commitment fee equal to 0.375% per annum, when outstanding
amounts are less than $32.5 million, or 0.25% per annum, when outstanding amounts exceed $32.5 million, of the undrawn availability, as
calculated under the agreement. We expect that the new senior secured credit facility will contain provisions which restrict our ability to incur
additional indebtedness or make substantial asset sales which might otherwise be used to finance our expansion.
       In the event that we do not succeed in closing the new senior secured credit facility prior to, or concurrently with, the closing of this
offering, General Electric Capital Corporation has agreed to amend our existing senior secured credit facility on terms reasonably satisfactory
to both parties to increase the commitment under the facility by up to $15 million and otherwise permit the consummation of this offering
thereunder without any mandatory prepayment of such facility with the proceeds of this offering.

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      Contractual Obligations
      The following table of our material contractual obligations as of April 1, 2006, summarizes the aggregate effect that these obligations are
expected to have on our cash flows in the periods indicated:
                                                                                            Payments Due by Period

                                                                               Less than
Contractual Obligations                                         Total           1 Year              1-3 Years            4-5 Years       After 5 Years

                                                                                                  (unaudited)
                                                                                                (in thousands)
Long-term debt—principal (1)                                $    93,750        $       —        $      28,125        $      65,625   $              —
Long-term debt—interest (1)                                      24,564             7,852              13,293                3,420                  —
Operating leases                                                142,727            17,438              34,192               31,121              59,976
Purchase obligations (2)                                          7,797             6,787                 808                  202                  —
        Total                                               $ 268,838          $ 32,076         $      76,418        $ 100,367       $          59,976



(1)    We expect to retire all of our outstanding long-term debt with the proceeds from this offering together with borrowings under our new
       senior secured credit facility.

(2)    Purchase obligations consist of minimum royalty payments and services and goods we are committed to purchase in the ordinary course
       of business. Purchase obligations do not include contracts we can terminate without cause with little or no penalty to us.

Capital Expenditures
       Subject to our ability to generate sufficient cash flow, in fiscal year 2006 we currently plan to spend between $10.0 million and
$12.0 million on capital expenditures, to open additional stores and/or to retrofit, update or remodel existing stores. In the event that we close
this offering and are able to refinance our existing senior secured credit facility and enter into a new credit facility that does not prevent us from
incurring capital expenditures in excess of $12.5 million, we may increase our capital expenditures for our 2006 fiscal year above this range.

Off-Balance Sheet Arrangements
        As of April 1, 2006, we did not have any off-balance sheet arrangements, as defined by the rules and regulations of the SEC.

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 secured credit facility is based on variable interest rates and is therefore affected by changes in market
interest rates. As of April 1, 2006, if the maximum available under the senior secured credit facility of $12.5 million had been drawn and the
variable interest rate applicable to our variable rate debt had increased by 10 percentage points, our interest expense would have increased by
$1.25 million on an annual basis, thereby materially affecting our results from operations and cash flows. 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

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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 United States. 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.
       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.

Recent Accounting Pronouncements
       In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payment , (SFAS 123R). SFAS 123R addresses the
accounting for share-based payments to employees, including grants of employee stock options. Under the new standard, companies will no
longer be able to account for share-based compensation transactions using the intrinsic value method in accordance with APB Opinion No. 25.
Instead, companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated
statement of income. We expect to use the Black-Scholes option pricing model to determine the fair value of our stock-based awards. In
adopting SFAS 123R, companies may use either the prospective, the modified-prospective or the modified-retrospective transition method. We
intend to use the prospective transition method. Under this method, compensation cost is recognized for all awards granted or modified after
the adoption date. SFAS 123R was originally effective for reporting periods that began after June 15, 2005. In April 2005, the SEC announced
the adoption of a new rule allowing companies to implement SFAS 123R at the beginning of their next fiscal year that begins after June 15,
2005. We adopted SFAS 123R at the beginning of the first quarter of fiscal 2006. We expect that the adoption of SFAS 123R will have a
significant long-term negative impact on our results of operations, but will not impact our overall financial position. The long-term impact of
adopting SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.
        In June 2005, the FASB’s Emerging Issues Task Force (―EITF‖) reached a consensus on Issue No. 05-6, Determining the Amortization
Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (EITF No. 05-6). EITF No. 05-6
provides guidance on the amortization period for leasehold improvements in operating leases that are either acquired after the beginning of the
initial lease term or acquired as the result of a business combination. This guidance requires leasehold improvements purchased after the
beginning of the initial lease term to be amortized over the shorter of the assets’ useful life or a term that includes the original lease term plus
any renewals that are reasonably assured at the date the leasehold improvements are purchased. This guidance is effective for reporting periods
beginning after June 29, 2005. The adoption of this statement did not have a material impact on our net income, cash flows or financial
position.

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                                                                    BUSINESS
Overview
       Golfsmith is the nation’s largest specialty retailer of golf equipment, apparel and accessories based on sales. Since our founding in 1967,
we have established Golfsmith as a leading national brand in the golf retail industry. We operate as an integrated multi-channel retailer,
providing our customers, who we refer to as guests, the convenience of shopping in our 55 stores across the nation, including three new stores
opened in the second quarter of 2006, through our leading Internet site, www.golfsmith.com , and from our comprehensive catalogs. Our stores
feature an activity-based shopping environment where our guests can test the performance of golf clubs in our in-store hitting areas. We offer
an extensive product selection that features premier national brands as well as our proprietary products and pre-owned clubs. We also offer a
number of guest services and customer care initiatives that we believe differentiate us from our competitors, including our SmartFit TM custom
club-fitting program, in-store golf lessons, our club trade-in program, our 90-day playability guarantee, our 115% low-price guarantee and our
proprietary credit card. Our advanced distribution and fulfillment center and management information systems support and integrate our
distribution channels and provide a scalable platform to support our planned expansion.
        We began as a clubmaking company, offering custom-made clubs, clubmaking components and club repair services. In 1972, we opened
our first retail store and, in 1975, we mailed our first general golf products catalog. Over the next 25 years, we continued to expand our product
offerings, opened larger retail stores and expanded our direct-to -consumer business by adding to our catalog titles. In 1997, we launched our
Internet site to further expand our direct-to -consumer business. In October 2002, an investment fund managed by First Atlantic Capital, Ltd.
acquired us from our original founders, Carl, Barbara and Franklin Paul. Since then, we have invested in our business through capital
expenditures totaling $30.9 million and acquisitions totaling $9.9 million and have undertaken a series of significant strategic and operating
initiatives, including the following:

         •          Enhancing our guests’ in-store experience. We have emphasized a more attractive and upscale environment, in all of the
                    stores we have opened since October 2002. We have also begun remodeling our older ―warehouse-like‖ stores. We are
                    incorporating hitting areas, putting greens and ball launch monitor technology in all of our stores, and we are introducing
                    partial-flight indoor driving ranges in our larger stores. As part of our SmartFit TM clubfitting program, we are introducing
                    Hot Stix ® technology which analyzes a guest’s swing and recommends the clubs and golf balls from our inventory best
                    suited to him or her. Additionally, a majority of our stores currently offer in-store golf lessons from a staff of PGA-certified
                    teaching pros through our relationship with GolfTEC Learning Centers. We believe that this more attractive, activity-based
                    shopping environment drives store traffic and increases revenues. We plan to complete the remodeling of our older stores by
                    the end of 2007, each of which will then incorporate key elements of our new activity-based shopping environment.

         •          Reevaluating our store format. We have undertaken a thorough evaluation of our retail store portfolio in an effort to
                    improve the financial performance of our store base. Based on our evaluation, we determined that our store concept is best
                    suited to a 15,000 to 20,000 square foot store that enables us to accommodate the key elements of our activity-based
                    shopping environment. We will generally seek to open new stores based on this prototype, although we currently operate
                    larger and smaller stores based on our historical store base, and we may open new stores outside of this range depending on
                    local market demographics and real estate prices and availability. Our larger stores enable us to devote the additional space
                    to more hitting areas and larger partial-flight indoor driving ranges.

         •          Increasing our retail store base. We doubled our store base from 26 stores in December 2002 to 52 stores in December
                    2005 and opened three new stores in the second quarter of 2006. We plan to open between seven and nine additional stores
                    in 2006 and between 14 and 16 stores in 2007.

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         •          Expanding into the tennis category. Our acquisition of six Don Sherwood Golf & Tennis stores in July 2003 marked our
                    entry into the tennis market. We believe that the tennis category is complementary to our core golf offering due to both
                    sports’ appeal to similar demographics. To date, we have tennis departments in 35 of our stores and plan to continue to
                    roll-out this category in our existing and future stores.
      As a result of our strategic and operating initiatives and our significant investment in our business, we generated revenues of
$323.8 million and operating income of $14.7 million in 2005. During the three months ended April 1, 2006, we generated revenues of
$74.8 million and operating income of $1.9 million. We believe that we are well-positioned to further expand our business.

Market Opportunity
       According to industry sources:

         •          we estimate that the golf retail market that we target represented approximately $6 billion in sales in the United States in
                    2005;

         •          the golf industry is highly fragmented relative to other retail industries, with no single golf retailer accounting for more than
                    6% of sales nationally in 2005; and

         •          off-course specialty retailers such as us have become the most popular source for golf equipment for high-spending avid
                    golfers who play 25 or more rounds and/or spend $1,000 or more on golf each year.
       We believe that we are well-positioned to capture additional market share in this highly fragmented industry.
       The tennis market that we target represented over $1 billion in sales in the United States in 2005. According to the United States Tennis
Association, the number of tennis participants in the United States grew 4.9% from 23.6 million in 2004 to 24.7 million in 2005. In addition,
while there was growth in the number of tennis players in all categories from 2004 to 2005, the number of avid tennis players, defined as those
who play tennis more than 21 times each year, grew 9.6% from 4.7 million in 2004 to 5.2 million in 2005. According to the Tennis Industry
Association, in 2005 tennis players purchased $534 million of apparel, $188 million of tennis racquets, $115 million of tennis shoes,
$88 million of tennis balls and $77 million of other tennis equipment.

Competitive Strengths
       We believe that the following competitive strengths have allowed us to establish and maintain our leadership in the golf specialty retail
industry, while positioning us for future growth and expansion:
       Nationally recognized golf brand with multi-channel model. We believe our national presence and multi-channel retailing model
differentiates us from other specialty golf retailers and gives us a substantial competitive advantage due to the following:

         •          Brand awareness and customer recognition. Our 39-year history, nationwide catalog distribution and expansive store base
                    have resulted in significant visibility of the Golfsmith brand, facilitating our entry into new markets and driving traffic to
                    our Internet site. In addition to providing shopping convenience for our guests, our catalogs and Internet site serve as sales
                    and marketing tools to increase the visibility of the Golfsmith brand and to generate greater traffic for our retail stores. As
                    we further expand our store base in new markets, we intend to capitalize on our established and recognized brand and our
                    existing customer base to enhance our position as one of the nation’s leading golf retailers.

         •          Extensive customer database. We use our extensive database, containing over 2.5 million names, to evaluate purchasing
                    trends and behaviors, identify cross-marketing opportunities and target the most attractive potential locations for new stores.
                    We also continually analyze

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                this information to evaluate advertising initiatives and improve the content of our Internet site and catalog offerings.

         •          Seamless shopping experience. Through our integrated multi-channel model, we provide our guests a seamless shopping
                    experience across our retail stores, Internet site and catalogs, maintaining consistent product offerings and promotions. In
                    addition, our multi-channel network allows guests to avoid delivery expenses and waiting time by ordering through our
                    Internet site or catalogs and picking up their order in one of our retail stores.
     Comprehensive product offering. We provide golfers and tennis players of all skill levels and ages a broad product offering across a
comprehensive range of price points:

         •          Premier branded merchandise. We are one of the largest retailers of premier branded golf merchandise. Our premier
                    branded golf merchandise includes names such as adidas ® , Callaway ® , Cleveland ® , Cobra ® , FootJoy ® , Mizuno ® ,
                    Nike ® , Ping ® , TaylorMade ® and Titleist ® . We also offer the top tennis brands such as adidas ® , Babolat ® , Head ® ,
                    Nike ® , Prince ® , Völkl ® and Wilson ® . We believe that our market position and strong vendor relationships generally
                    provide us with greater access to new product innovations and large volume purchases at reduced prices. Our extensive
                    offering of premier national brands is a critical component in driving traffic to our stores and distinguishes us from our
                    competitors with a less extensive product offering, such as on-course pro shops and general sporting goods retailers.



         •          Proprietary products. We design, develop and market our proprietary branded merchandise under a variety of brand names,
                    including Lynx ® , Snake Eyes ® and Zevo ® . These brands are priced at lower price points than the premier branded
                    merchandise we offer and generally appeal to our more value- conscious guests. Several of our brands are well-established
                    and have long histories and strong reputations for quality and product performance. Our in-house research and development
                    department has four decades of experience in the development and design of golf clubs and components. Sales of our
                    proprietary branded products, including golf club components, accounted for $50.4 million, or 15.6%, of our net revenues in
                    2005 and generally have higher margins than non-proprietary branded products. Sales of our proprietary branded products,
                    including golf club components, accounted for $11.0 million, or 14.7%, of our net revenues in the three months ended
                    April 1, 2006, compared to $11.3 million, or 17.7%, of our net revenues in the three months ended April 2, 2005.



         •          Pre-owned clubs. Our pre-owned club offering appeals to value-conscious guests seeking premier brands at attractive
                    prices. We believe our trade-in program promotes new product sales by offering our guests the ability to trade in their old
                    clubs and receive credit toward the purchase of new clubs, thereby increasing our guests’ purchasing frequency and
                    shortening their equipment replacement cycle.
      Differentiated in-store experience. We view our in-store interactions with our guests as opportunities to enhance their shopping
experience and build long-term relationships by offering the following:

         •          Activity-based shopping environment. All of our stores feature hitting areas, putting greens and ball launch monitor
                    technology that takes images of a guest’s swing and ball strike and analyzes and reports the ball’s launch angle, speed,
                    backspin, side spin and side angle to instantaneously quantify the performance of both player and equipment. Additionally,
                    our larger stores have partial-flight indoor driving ranges. We have also added tennis tunnels (areas specifically designed
                    with enough room to swing a racquet, hit a ball and view ball flight) in three stores and plan to add tennis tunnels in four
                    additional stores in 2006. Based on our experience, we believe that guests are significantly more likely to purchase a club or
                    racquet if they test it first. In addition, we believe that the activity-based format of our

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                    stores keeps our guests in the store longer, enhances our brand name and allows our store associates, who we refer to as
                    caddies, to strengthen their relationships with our guests.

         •          Customized golf-related services. We complement our extensive merchandise selection and activity-based shopping
                    environment with a range of golf-related services. Guests in our stores can have a custom club fitting by one of our store
                    caddies utilizing our SmartFit TM program. We also offer Hot Stix ® technology, which analyzes a guest’s swing and
                    recommends the clubs and balls from our inventory that are best suited to that individual. In addition, most of our stores
                    offer in-store golf lessons through GolfTEC Learning Centers’ staff of PGA-certified teaching professionals.
       Superior customer service and innovative customer care initiatives. Consistent with our ―caddy for life‖ philosophy, we are committed
to providing superior customer service to our guests. We actively recruit and train golfing enthusiasts to serve as sales associates, who we refer
to as caddies, ensuring that our guests are assisted by individuals who are knowledgeable and enthusiastic about the products we sell. We also
offer a variety of customer care initiatives to foster our guests’ loyalty and promote confidence in their purchases, including the following:

         •          90/90 Playability Guarantee. Our 90/90 Playability Guarantee is designed to ensure that our guests are completely satisfied
                    with their club purchases by offering a 90% merchandise credit for certain clubs used and returned during the first 90 days
                    following purchase.

         •          115% Low Price Guarantee. We believe that we provide the most aggressive price guarantee in our industry, whereby we
                    will refund 115% of the difference in price if a guest notifies us within 30 days of purchase of a lower price offered by
                    another authorized retailer.

         •          Clubvantage Program. We offer guests the opportunity to buy a two- or three-year club maintenance program when
                    purchasing clubs, which, among other benefits, offers guests free labor on future re-gripping, re-shafting and repair services.

         •          Golfsmith Credit Card. We offer our own proprietary credit card, which provides our qualified guests with flexible payment
                    options. As a result of our relationship with Wells Fargo, we do not bear any of the financing risk associated with this
                    program.

         •          Player Rewards Loyalty Program. We launched our Player Rewards program in April 2006 in order to strengthen our
                    relationship with our guests by offering them special benefits, coupons and discounts on select products and services.
       Flexible, established and cost-effective infrastructure. Our advanced distribution and fulfillment center and management information
systems provide a scalable platform to support our planned expansion. We believe that other off-course specialty retailers would have to make
a sizable investment in time and capital to replicate our infrastructure. We utilize our flexible infrastructure to:

         •          Enhance distribution logistics. Our infrastructure provides us with the flexibility to choose between shipping merchandise
                    directly from our vendors to our stores or routing merchandise through our distribution and fulfillment center. We evaluate
                    each product to determine which store distribution method is most cost-effective while increasing product availability for
                    our guests.

         •          Provide best-in -class in-stock positions in our stores. We utilize our advanced replenishment system to monitor our
                    in-stock position at each store and generate replenishments as needed. We reduce costly out-of -stock situations and excess
                    inventory markdowns by automated supply chain monitoring. We believe that these benefits would be more costly and
                    difficult to achieve without the capabilities offered by the integrated inventory management system that we have
                    implemented across our channels.

         •          Centrally receive and allocate merchandise. The scale of our purchases, along with our centralized distribution and
                    fulfillment center, enables our third-party vendors to make large

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                    quantity container shipments directly to us. After shipment to our centralized distribution facility, we then allocate these
                    products optimally across our stores and direct-to -consumer channels based on demand. Our centralized distribution
                    capabilities also enable us to participate more effectively in bulk purchase programs offered by our vendors, such as ―power
                    buys‖ of prior year’s models or volume discount purchases. Our centralized distribution and fulfillment center is also
                    essential to our proprietary branded products that are sourced from overseas and shipped to us in bulk.
        Proven management team. We have a strong and deep management team that combines extensive knowledge of the golf industry with
substantial store and multi-channel retailing experience. Our senior management team has an average of over 17 years of experience in the
retail sector and an average tenure with us of approximately seven years. James D. Thompson, our Chief Executive Officer since 2002, has
served in various senior roles with us since 1999 and has over 20 years of experience in the retail sector.

Growth Strategy
      Our goal is to enhance our position as the premier golf and tennis retailer in the United States. We intend to achieve this goal using the
following strategies:
       Expand our store base. Since December 2002, we have more than doubled our store base from 26 to 55 stores, and we plan to open
between seven and nine additional new stores in 2006 and between 14 and 16 stores in 2007. In addition to opening stores in new markets, we
also plan to expand our store base by clustering our stores within major metropolitan markets to take advantage of economies of scale and
establish long-term market penetration. Based on our past experience, opening a new store within our core 15,000 to 20,000 square foot format
requires approximately $750,000 for capital expenditures, $150,000 for pre-opening expenses and $875,000 for inventory depending on the
level of work required at the site and the time of year that it is opened. Our store model has produced favorable results, including positive
store-level cash flow in the first full year of operations in most of our stores.
      Increase store revenues and profitability. Our retail stores are an integral part of our multi-channel strategy as they provide our guests
with an activity-based shopping environment that we believe resonates with our guests. Our strategy to increase store revenues and profitability
includes the following elements:

         •          Improve store design. To increase customer traffic, we have developed a new store design that we are implementing in our
                    new stores. We are also in the process of implementing key elements of our store design in most of our existing stores,
                    which we plan to complete by the end of 2007. The new design includes a new store façade, incorporating eye-catching golf
                    and tennis murals, as well as extensive remodeling of the store interior. We have improved the activity-based shopping
                    environment of our stores by installing additional hitting areas, GolfTEC Learning Centers, and Hot Stix ® club and ball
                    selection technology. To enhance the shopping experience, we have also improved the overall look of our stores,
                    particularly the apparel section, by adding laminated wood flooring, drop-down ceilings, improved lighting, inviting vendor
                    displays and numerous large screen televisions broadcasting sporting events.

         •          Grow proprietary brands. Our proprietary branded products generally have higher margins than the premier national brands
                    we offer and help to drive overall margin expansion. Because we believe that our proprietary brands appeal to more
                    value-conscious guests and do not compete directly with our premier branded merchandise, we plan to grow our current
                    portfolio of proprietary branded products to ensure that we continue to provide our guests with a compelling merchandise
                    assortment that incorporates the latest technological advances at attractive prices. We also intend to further develop our
                    range of non-golf club product categories, such as balls, tees, golf bags, travel covers and cases, golf carts, gloves, clothing,
                    golf and tennis shoes and gifts.

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         •          Enhance apparel offering. We intend to continue to increase our focus on apparel which provides attractive margins and a
                    higher frequency of repeat purchases. We believe there is significant growth potential in apparel, particularly as we
                    increasingly shift our product offering to premier brands and innovative products.

         •          Target the female demographic. We have launched several initiatives to broaden our appeal to the underserved female golf
                    enthusiast. As a result of increased media attention on women golfers, notably Michelle Wie, we believe that the female
                    golfer demographic has grown. According to the National Golf Foundation, the number of core women golfers in the United
                    States, defined as those playing at least eight rounds per year, was 2.5 million in 2004. While the number of core women
                    golfers has remained steady during recent years, the number of occasional women golfers increased substantially from
                    2.9 million in 1998 to 4.4 million in 2004. In order to target women golfers we have enhanced our apparel offerings and
                    introduced the ―Drive‖ catalog, focusing solely on women golfers and their equipment and accessory needs, and the ―Drive‖
                    portion of our Internet site that contains approximately 4,500 SKUs of women-specific products. We are also holding
                    exclusive women’s promotions and events in our stores and are a retail sponsor of the Executive Women’s Golf
                    Association.

         •          Expand the tennis category. As a result of the popularity of both golf and tennis among similar demographic groups, we
                    believe that tennis provides a business opportunity that complements our golf retail business. Tennis also reemphasizes our
                    strategy to target the female consumer who may come into our store because of our tennis product offerings and be exposed
                    to our golf offerings.
       Grow our direct-to -consumer channel. We believe that we are well-positioned in the golf industry to capitalize on the expected growth
of Internet sales due to our best-in -class Internet site functionality, our 39-year history as a direct-to -consumer retailer and our ability to
leverage inventory across our supply chain to fill orders. In addition, we believe that our catalogs are a key driver of our Internet sales growth.
We currently mail more than 10 million catalogs to our guests annually. We have found that often our guests browse our catalogs and then
proceed to place an order on-line. Our newest catalog, the Annual Buyer’s Guide, was launched in April 2005 and is designed to be the most
extensive and informative catalog in the golf retail industry, featuring golf equipment and accessories and providing pictures and descriptions
of many of the 12,000 SKUs offered. Together with our monthly club catalog, we believe that the Annual Buyer’s Guide will appeal to our
highest spending and most passionate guest, the avid golfer. We also expect that our new tennis catalog, which will launch in August 2006 to
coincide with the U.S. Open, will increase sales of our tennis products.

Store Operations
       We are the only coast-to -coast golf and tennis retailer in the United States. We opened our first golf store in 1992 and currently operate
55 stores in 14 states including in or around the following metropolitan areas:
Metropolitan Area                                                                           Location                                 Year Opened

Atlanta, Georgia                                                     Duluth, Georgia                                                        1997
                                                                     Kennesaw, Georgia                                                      1998
                                                                     Buckhead, Georgia                                                      2002
Austin, Texas                                                        Austin (Headquarters), Texas                                           1996
                                                                     Austin (Arboretum), Texas                                              1998

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Metropolitan Area                                  Location           Year Opened

Bay Area, California         San Francisco, California                       2003
                             Walnut Creek, California                        2003
                             Dublin, California                              2003
                             San Jose, California                            2003
                             Fremont, California                             2003
                             Palo Alto, California                           2003
                             San Carlos, California                          2005
Birmingham, Alabama          Birmingham, Alabama                             2006
Chicago, Illinois            Schaumburg, Illinois                            1997
                             Highland Park, Illinois                         1997
                             Downers Grove, Illinois                         1998
                             Lincoln Park, Illinois                          2002
Columbus, Ohio               Easton, Ohio                                    1998
                             Columbus (Sawmill), Ohio                        2006
Dallas, Texas                Dallas (Midway), Texas                          1996
                             Plano, Texas                                    1998
                             Arlington, Texas                                1998
                             Frisco, Texas                                   2004
Denver, Colorado             Westminster, Colorado                           1996
                             Denver, Colorado                                1997
                             Golden, Colorado                                2005
Detroit, Michigan            Troy, Michigan                                  1999
                             Northville, Michigan                            1999
                             Auburn Hills, Michigan                          2003
Houston, Texas               Houston (North), Texas                          1995
                             Houston (Westheimer), Texas                     1997
                             Baybrook, Texas                                 2004
Los Angeles, California      Ontario, California                             1999
                             Woodland Hills, California                      1999
                             Pasadena, California                            2002
                             Santa Ana, California                           2003
                             El Segundo, California                          2003
                             Oxnard, California                              2004
Miami, Florida               Hollywood, Florida                              2005
Minneapolis, Minnesota       Minnetonka, Minnesota                           1998
Orlando, Florida             Millenia, Florida                               2004
                             Altamonte Springs, Florida                      2005
Philadelphia, Pennsylvania   Moorestown, New Jersey                          2005
Phoenix, Arizona             Glendale, Arizona                               1997
                             Chandler, Arizona                               1998
                             Scottsdale, Arizona                             2004
San Diego, California        San Diego (Mission Valley), California          2004
                             Vista, California                               2006
Tri-State Area               East Northport, New York                        2003

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Metropolitan Area                                                                           Location                                Year Opened

(New York, New Jersey                                                Norwalk, Connecticut                                                   2003
and Connecticut)                                                     Scarsdale, New York                                                    2003
                                                                     Paramus, New Jersey                                                    2004
                                                                     Livingston, New Jersey                                                 2004
                                                                     Carle Place, New York                                                  2005
                                                                     Bridgewater, New Jersey                                                2005
      Our stores are typically open from 10:00 am to 8:00 pm Monday through Friday, 9:00 am to 8:00 pm on Saturday and 11:00 am to 5:00
pm on Sunday.
       Our stores accounted for 72.3% of our net revenues in fiscal 2005, 69.0% in fiscal 2004, 62.9% in fiscal 2003, 71.0% in the three months
ended April 1, 2006 and 67.1% in the three months ended April 2, 2005. From January 2003 to April 2006, we increased the number of our
stores from 26 to 54.


     Store Design
       We design our stores to provide an exciting, activity-based shopping environment that resonates with the golf and tennis enthusiast and
highlights our extensive product offering. We have determined that our store concept is best suited to a 15,000 to 20,000 square foot format.
We currently operate stores that are larger or smaller than our target range based on various earlier store concepts, acquired leases or available
space in target markets. In the future we may determine to open new stores outside of this basic range depending on local market demographics
and real estate prices and availability. For example, due to the high cost of real estate in the Tri-State area (New York, New Jersey and
Connecticut), our stores are generally smaller in size. In our larger stores, we devote the additional space to more in-store activities, including
partial flight driving ranges, and enhanced apparel and tennis offerings.
       We have designed our store layout to provide optimal variety and options for the golf enthusiast. Our unique activity-based shopping
environment is designed to make our guests feel more comfortable with their purchasing decisions by allowing them to test the performance of
many of our products before buying them. A typical Golfsmith store offers a full line of premier branded clubs, balls, apparel and accessories,
as well as our proprietary branded products. Most of our stores also offer club components, clubmaking tools, supplies and on-site clubmaking,
custom clubfitting and club repair services. Our stores incorporate technology, lessons and club demos in a range-like setting. All of our stores
offer hitting areas, putting greens and ball launch monitor technology. Our larger stores provide a more expansive array of activity-based
offerings including partial-flight indoor driving ranges and a wider assortment of demo clubs.
      We have entered into relationships with niche companies to enhance our guests’ club buying experience and to ensure that we meet the
needs of golfers in all areas of their game. For example, our SmartFit TM custom clubfitting programs incorporate Hot Stix ® technology, which
analyzes a guest’s swing and recommends the clubs and balls from our inventory that are best suited to that individual. We believe that this
technology increases our guests’ satisfaction with their club purchases, fosters guest loyalty and reduces the likelihood of returns. Our license
agreement with Hot Stix ® Golf, Inc. is valid until May 2009 and provides us with limited exclusivity to the Hot Stix ® trademark.
        In addition, a majority of our stores offer in-store golf lessons from a staff of PGA-certified teaching pros through our relationship with
GolfTEC Learning Centers, a leading provider of golf lessons in the United States with over 128,000 individual lessons given in 2005. Through
this relationship, we feature in-house PGA instruction using GolfTEC’s proprietary teaching system that applies digital video, motion analysis
and ball-flight projection to help improve golfers’ swings. Under our arrangement with GolfTEC, the guest pays GolfTEC for the lesson and
GolfTEC pays us rent based on the greater of its pro rata share of our rental expenses for that store or a percentage of its gross sales for that
store. GolfTEC typically subleases a portion of a store ranging between 1,000 and 1,500 square feet.

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     New Store Site Selection
       We believe our specialty retail store concept has broad appeal and provides significant opportunity for new store expansion. We intend
to selectively expand our store base in existing and new markets in locations that fit our selection criteria, which include:

         •          demographic characteristics, such as a high number of avid golfers and above-average annual household incomes;

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

         •          the level of our penetration in a given market, either through our existing retail stores or our direct-to -consumer channel;

         •          original equipment manufacturer information indicating that a location is within a top merchandising market;

         •          proximity to a large metropolitan area;

         •          presence and strength of competition;

         •          the ability to obtain favorable lease terms; and

         •          ―Big Box‖ retail co-tenants that are likely to draw guests who we would otherwise target within the site’s relevant market.
       After we identify a potential site, we analyze demographic and competitive data to project store revenues and develop profitability
forecasts. Once we approve a site, we negotiate lease terms and begin planning the appropriate store design and configuration for the particular
location. We typically devote six weeks from the time we take possession of a store to its opening if the store is improved by the landlord, and
10 to 12 weeks if we use our own contractors to improve or build out the store.
       In our existing markets, we seek to add stores where the density of the market can sustain multiple store locations. By clustering stores
within a major metropolitan area, we strive to take advantage of economies of scale in advertising, marketing, distribution and supervisory
costs. We believe that this clustering strategy strengthens the penetration of our national brand within particular major metropolitan areas. In
new markets, we look to expand in metropolitan areas that have historically been underserved by the golf retail industry or where we can
capitalize on our competitive strengths.

Direct-to -Consumer
        Our direct-to -consumer channel consists of our Internet and catalog businesses. Through our direct-to -consumer distribution channel,
we offer our guests a complete line of golf and tennis products, including equipment, apparel and accessories, as well as clubmaking
components and tools. Our direct-to -consumer channel accounted for 25.7% of our net revenues in fiscal 2005, 28.5% in fiscal 2004, 34.5% in
fiscal 2003, 27.0% in the three months ended April 1, 2006 and 31.0% in the three months ended April 2, 2005. The decrease in the percentage
of our net revenues derived from our direct-to -consumer channel correlates with our increased number of stores and the related growth in net
revenues.


     Internet
       We offer over 33,000 golf and tennis products through our Internet site, www.golfsmith.com , which we began in 1997 and which was
rated the number one Internet site for Golf eCommerce by Golf Datatech in 2003 (the last year the ranking was done). We also have
24 registered domain names that link to www.golfsmith.com. Our goal is to become the premier online destination for golf and tennis
enthusiasts. We believe that we are well-positioned to capitalize on the projected growth in Internet sales.
       Through our leading Internet site, we seek to extend to the direct-to -consumer channel the innovative services offered in our stores. Our
online SmartFit TM system allows our guests to custom fit their golf clubs to their personal specifications without having to leave the comfort
of their home by

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providing step-by -step instructions to walk them through the online clubfitting process. We offer an in-store pickup option for guests who want
to order an item online but avoid the delivery expenses and waiting time. We also enable our guests to enter the zip code and locate the store
nearest to them in which a selected item is in stock. Guests are provided with full access to our pre-owned club selection, including detailed
information about the type of club and its condition. Guests can also use our Club Trade-In Program online to trade-in their used clubs and in
exchange receive a merchandise credit for the value of the clubs. We also specifically cater to the woman golfer with the ―Drive‖ section of our
Internet site. In 2005, we added an extensive tennis section to our Internet site, including a detailed buyer’s guide to assist the tennis enthusiast
in making his or her purchases.
      Our Internet site also offers advanced, user-friendly search functionality. Our guests can search for an item of apparel by a specific
category, color, brand and material. For guests seeking personal follow-up, we have a call center staffed with trained caddies to guide them
through their online experience.
        Our Internet site complements our retail stores and catalogs by building guest awareness of our brand and acting as an effective
marketing vehicle for new product introductions, special product promotions and our proprietary branded products. We believe that our Internet
site also drives traffic to our stores, as evidenced by the fact that one of the most used features on the Internet site is the store locator
functionality.
       In the future, we intend to further leverage our Internet site through such initiatives as ensuring that natural Internet searches produce our
Internet site as a result, and by offering our guests the opportunity to post a review of any product they have purchased from us. We also intend
to increase both our ―how-to -buy‖ content and content that is not specifically targeting product purchases, such as golf and tennis tips. We
believe that these efforts will enable us to succeed in becoming the online destination for golf and tennis enthusiasts.


     Catalogs
       We have a 39-year history as a catalog retailer and believe that we are the industry’s leading golf specialty catalog retailer by circulation.
Our principal catalog publications are the ―Golfsmith Consumer Catalog‖ and the ―Golfsmith Clubmaking Catalog.‖ In 2005, we launched our
first Annual Buyer’s Guide, which is designed to be the most extensive and informative catalog of golf-related equipment and accessories,
providing pictures and descriptions of many of the 12,000 SKUs offered. We also launched our ―Drive‖ catalog in 2005, to specifically target
the underserved woman golfer. Our 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 consumer catalogs permits us to introduce new products regularly and make price
adjustments as necessary.
       We maintain one of the largest information databases in our industry containing approximately 2.5 million names of guests who have
purchased our products since 2000 and other individuals who have requested to receive our periodic mailings. We have developed this database
largely through our catalog and Internet site order processing and, to a lesser extent, through contests and point-of -sale data collection in our
stores. We use statistical evaluation and selection techniques to determine which guest segments are likely to contribute the greatest revenues
per mailing.
       In order to maintain the profitability of our catalogs in the future, we intend to focus specifically on profiling our customers to refine and
optimize circulation based on purchasing behavior. In addition, in 2006 we intend to launch our tennis catalog to coincide with the U.S. Open
as part of our efforts to continue to develop our catalogs as our brands and our products evolve. We believe this catalog will help enhance our
relationship with core tennis enthusiasts.

Products and Merchandising
       We offer a broad assortment of golf and tennis brands and products, including our own proprietary brands, through our retail stores,
catalogs and our Internet site. We generally price our products

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consistently across our channels. We also tailor the merchandise selection in our particular stores to meet the regional preferences of our
customers. By providing a wide-ranging, in-depth assortment, we believe we will continue to attract the full spectrum of guests from
recreational to avid golfers and tennis enthusiasts with buying interest across all price points.


     Branded Products
      We are one of the largest retailers of premier branded golf merchandise. We believe that carrying a broad selection of the latest premier
branded merchandise is critical to driving business with our highest-spending and most passionate guests, the avid golf and tennis player.
       Clubs. We carry a wide variety of premier branded golf clubs catering in particular to avid golfers who were responsible for 63% of all
golf equipment purchases in the United States in 2002, according to the National Golf Foundation. In addition to the avid golfer demographic,
we also have an extensive selection of clubs for recreational golfers and under-served guest segments including women and juniors. We believe
there are significant opportunities to gain share in these underserved markets. The premier golf club brands that we offer include Callaway ® ,
Cobra ® , Nike ® , Ping ® , TaylorMade ® , Titleist ® and Cleveland ® .
       Apparel and footwear. We offer a range of golf and tennis apparel including shirts, sweaters, vests, pants, shorts and outerwear along
with such accessories as jewelry, watches and leather goods. As a result of our competitive position within the golf retail industry and our
continuing emphasis on our apparel and accessories categories, we are able to offer our customers such premier brands as adidas ® , Callaway
® , Greg Norman ® , Nike ® and Ping ® . We also offer footwear for both golf and tennis for men, women and juniors from such top national
brands as adidas ® , Bite ® , Callaway ® , Ecco ® , Etonic ® , FootJoy ® , Lady Fairway ® , Nike ® and Oakley ® .
       Golf balls. We offer a broad range of nationally recognized golf ball brands including Bridgestone ® , Callaway ® , MaxFli ® , Nike ® ,
Titleist ® and Top-Flite ® . These premier branded golf balls provide our guests with the ability to select products that suit their desire for
distance and control.
      Accessories. We provide an extensive range of golf and tennis accessories to support our guests’ golf and tennis activities including tees,
sunglasses, cleaning and repair kits, towels, tennis bags, tennis strings and golf cart heaters. The premier brands of the accessories that we offer
include Bushnell ® , Coleman ® , Head ® , Nike ® , Oakley ® , Prince ® , Team Effort ® and Wilson ® .
       Racquets. We offer a variety of premier national tennis racquet brands, such as Babolat ® , Head ® , Prince ® , Völkl ® and Wilson ® .


     Golfsmith Proprietary Brands
      Our proprietary trademarks and service marks include Golfsmith ® , Black Cat ® , Crystal Cat ® , Killer Bee ® , Lynx ® , Parallax ® ,
Predator ® , Snake Eyes ® , Tigress ® , Zevo ® , ASI TM , GearForGolf TM and GiftsForGolf TM . In fiscal 2005, our proprietary branded
products accounted for $50.4 million of our net revenues. In the three months ended April 1, 2006, our proprietary brands accounted for
$11.0 million of our net revenues. We maintain proprietary merchandise in a number of categories including clubs, gloves, apparel, golf bags
and shoes.
       Our proprietary brands provide quality products at attractive prices and generally have higher gross margins than the non-proprietary
branded products we offer. We control the product development of our proprietary brands through our internal research and development team,
which stays on the cutting edge of product technology through constant interactions with our sophisticated and knowledgeable guests and
custom clubmakers. In addition, through our proprietary branded products, we are able to appeal to custom clubmakers and enhance our status
as equipment design experts. We believe that these capabilities provide a significant point of differentiation from our competitors.

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       We believe that our balance between premier national brands and our own proprietary products provides us with a competitive
advantage in the industry. We position our proprietary branded products to target a different customer base so as not to compete with the
premier-branded merchandise that we offer. While the premier branded merchandise we offer generally attracts avid golfers who are typically
less value-conscious, our proprietary brands generally serve our more value-conscious guests. We are therefore able to maintain strong
relationships with our OEMs while benefiting from the higher margins generally generated by our proprietary products. By maintaining an
inventory of premier branded merchandise and our proprietary brands, we are able to supply our guests a broad assortment of products along a
continuum of price points. We believe that in addition to representing an attractive source of revenues and profits, our portfolio of proprietary
brands also enhances recognition of the ―Golfsmith‖ national brand and differentiates us from our competitors.
      In the future, we intend to continue to develop our proprietary brands to increase our sales and enhance our margins. Our proprietary
growth strategy also includes selective acquisitions of existing brands, where we believe such a brand would successfully contribute to our
proprietary portfolio. For example, in 1998 we acquired the Lynx ® brand of golf clubs which were used by Fred Couples when he won the
Masters Golf Tournament in 1992 and by Ernie Els when he won the U.S. Open in 1994. In addition, we are looking to expand our proprietary
products into the tennis industry, without directly competing with our vendors’ premier branded merchandise.


     Club Components
      We offer a large selection of club components, including club heads (consisting primarily of our proprietary brands), shafts and grips,
which differentiates us from our competitors and helps us attract and maintain strong relationships with our passionate clubmaking guests. The
enthusiastic clubmaking guests include passionate hobbyists as well as professional clubmakers who view us as the source for all of their
clubmaking needs. We have cultivated these relationships throughout our 39-year history in the golf industry. Due to our extensive history in
clubmaking, we have access to the premier national brands in club components, including Aldila ® , Fujikura ® , Golf Pride ® , Lamkin ® ,
Royal Precision ® , True Temper ® , UST ® and Winn ® .

Innovative Customer Care Initiatives
       We offer our guests the following initiatives to foster their loyalty and promote confidence in their purchases:

         •          90/90 Playability Guarantee. We believe that our playability guarantee provides us with a distinct competitive advantage.
                    This initiative allows our guests to purchase and use certain clubs for up to 90 days. If a guest decides to return the clubs,
                    we offer the guest a merchandise credit worth 90% of the price of the clubs. We are able to provide this service in part
                    because of our ability to resell such clubs through our pre-owned club offerings, thereby minimizing the impact on our gross
                    margins.

         •          115% Price Guarantee. We offer a 115% low price guarantee that we believe to be the most aggressive guarantee in the
                    industry, whereby we will refund 115% of the difference in purchase price if a guest notifies us within 30 days of purchase
                    of a lower price offered by another authorized retailer.

         •          Club Trade-Ins. Our Club Trade-In Program allows guests to receive a merchandise credit for their pre-owned clubs which
                    can be applied toward the purchase price of new clubs or other products. Guests can trade-in their clubs at any store.
                    Alternatively, our Internet site provides a step-by -step process for guests to grade their pre-owned clubs, determine their
                    value and place an order for new clubs. The guest then sends the pre-owned clubs to us after receiving the new clubs. Our
                    Club Trade-In Program is enhanced by periodic initiatives such as our National Trade-In Days program where guests are
                    given additional value for bringing in their used clubs for an upgrade of equipment or accessories. We have

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                    also created a ―blue book‖ for golf clubs so that our customers know in advance the expected trade-in price and can be
                    assured consistent pricing across our channels. By providing an available market for our guests’ used clubs and reducing the
                    cost of new clubs for many guests, we believe that our Club Trade-In Program assists us in developing new guest
                    relationships and reduces the equipment replacement cycle. In addition, we sell the pre-owned clubs that we acquire through
                    this program in our stores and through our Internet site to value-conscious guests.

         •          Golfsmith Credit Card. To meet our guests’ needs, we offer our own proprietary credit card, which provides our qualified
                    guests with flexible payment options for their Golfsmith purchases. As a result of our partnership with Wells Fargo, we do
                    not bear any of the financing risk associated with this program.

         •          Loyalty Program. In April 2006, we launched our Player Rewards program to attract, incentivize and retain guests that shop
                    five or more times per year for either golf and tennis merchandise across all of our channels. The program will be free to all
                    guests and will offer guests advance notice of sales and special events, exclusive invitations to VIP-only events, special
                    pricing on select items, trade-in bonuses and coupons and discounts on select products and services.
       As part of our guest service philosophy, we also provide our guests with a number of innovative golf and tennis-related services,
including the following:

         •          SmartFit™ Custom Club Fitting Program. We offer guests the ability to custom fit their clubs through our SmartFit TM
                    program. Through our SmartFit TM program, we customize premier and proprietary branded clubs to the guest’s physical
                    profile (height, wrist-to -floor distance and hand size), swing speed and their desired game characteristics (trajectory,
                    control and distance). We also have the ability to custom build a set of golf clubs from scratch using our clubmaking
                    technology and components. Our SmartFit TM program is available to our guests at every store, as well as through our
                    Internet site and catalogs, which we believe differentiates us from our competitors.

         •          Hot Stix ® Precision Equipment Recommendation. We license Hot Stix ® proprietary technology, which analyzes a guest’s
                    swing and recommends the type of clubs and golf balls from our inventory that are best suited to that individual. We believe
                    that this technology increases our guests’ satisfaction with their club purchases and fosters guest loyalty and potentially
                    reduces product returns.

         •          GolfTEC Learning Centers. Our relationship with GolfTEC Learning Centers, a leading provider of golf lessons with over
                    128,000 individual lessons in 2005, complements our outstanding caddy team. GolfTEC’s proprietary system features
                    digital video, motion analysis and ball-flight projection to allow its staff of PGA-certified teaching pros to analyze our
                    guest’s swing and compare it to a database of the swings of various professional golfers. In addition, GolfTEC provides
                    software that enables guests to review their lesson, drills and instructor comments online. Guests’ participation in GolfTEC
                    lessons drives traffic and sales within our stores as our guests buy lesson packages that encourage repeat visits to our store
                    location. As of April 2006, GolfTEC provided in-store golf lessons in 31 of our stores. During 2006, we plan to modify
                    three of our existing stores to accommodate in-store golf lessons by GolfTEC.

         •          Club Repair and Clubvantage Program. We offer repair services at all of our stores. In order to encourage guests to use
                    these services, we offer two-year and three-year plans under our Clubvantage program that enable guests to cover the labor
                    costs associated with re-gripping, re-shafting and repairing individual clubs or club sets for an upfront fee. The program
                    provides additional benefits, such as an additional credit on any clubs that are traded-in and a savings certificate for the
                    Harvey Penick Golf Academy.

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         •          Expert Racquet Stringing. As a member of the U.S. Racquet Stringers Association, we are able to offer our guests expert
                    racquet stringing services. Our professionally trained Master Racquet Technicians have passed comprehensive tests to
                    ensure their knowledge and understanding of racquet service. Our Master Racquet Technicians provide our guests with a
                    full range of racquet services and answer their racquet-related questions.

Customer Service
      Our business is focused on the guest and we have a commitment to playing the role of caddy to our guests through our ―caddy for life‖
philosophy. Through this guest services philosophy, we believe we have developed a culture that has enabled us to cultivate a strong and loyal
customer base.
       In order to encourage a knowledgeable caddy team, we actively recruit golfing enthusiasts to serve as sales associates, because we
believe that they bring enthusiasm to the shopping experience and are knowledgeable about the products they sell. We also target individuals
with a strong retail background, because we believe a general understanding of retail sales is critical for marketing and selling our products.
       We emphasize product knowledge at both the hiring and training stages. As part of our interview process, we test each prospective sales
associate for knowledge specific to the department in which he or she is to work. We also utilize a program designed to measure our sales
associates’ productivity. This program allows us to identify stores in which customer service and managerial improvements are needed.
       One component of our caddies’ compensation is based on sales commissions, which we believe motivates them to learn more about our
product and service offerings and to demonstrate and explain to our guests the features of our products and services. Our commission system is
designed to ensure that our caddies focus on providing the products or services that are well suited to our guests. Like many retailers, we
believe that this approach allows us to recruit and retain an educated and professional sales force that leads to a better guest experience.

Marketing and Advertising
      Our marketing and advertising programs are designed to promote our extensive selection of premier national brands as well as our own
proprietary brands at competitive prices. Through our integrated marketing and advertising, we also emphasize our multi-channel business
model by utilizing our in-store, catalog and Internet capabilities to promote our brand and advertise our innovative services and events.
        Historically, one of the most important customer demographics that we target has been the avid golfer who plays 25 or more rounds of
golf per year. According to the National Golf Foundation, in 2002 the avid golfer accounted for 63% of all golf-related purchases. Our strategy
is to broaden our focus and target more extensively certain demographics where we think opportunities for growth exist, including: (1) the
moderate or recreational golfer, who is value-driven and value-conscious, (2) the woman golfer, who is part of a growing population and is
value- and style-conscious, (3) the junior golfer, who represents a long-term customer segment, (4) the frequent tennis player, who plays tennis
21 or more times a year and represents 60% of all tennis purchases, and (5) the recreational tennis player, who has a social interest in the sport
and is eager to learn.
       We employ a combination of print, broadcast, radio, direct mail, e-mail and billboard media, as well as in-store events, to drive
awareness of our brand. In particular, on the local level we run newspaper advertisements to promote stores and store events. Our strategy of
clustering stores in a particular market allows such local advertising techniques to be both successful and cost-effective. On the national level,
we run printed advertisements in national magazines, such as Golf Digest ® , Golf World and Golf for Women. In the past, we have run
national advertisements on The Golf Channel ® and local television advertisements in select markets to complement our direct marketing
campaign. To manage costs and increase effectiveness, we have expanded the use of e-mail for direct marketing.

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       The catalogs and magazines that we distribute throughout the year are also an important marketing tool. We mail more than 10 million
catalogs annually. We believe that our catalogs drive online and in-store traffic and also expand recognition of the Golfsmith ® brand.
        We employ additional marketing activities prior to key shopping periods, such as Father’s Day and Christmas, and in connection with
specific sales and promotions. In particular, we hold various theme- or activity-based promotions throughout the year that drive additional
traffic into our stores, including demonstration days, appearances by PGA golfers, tour vans and events focusing primarily on the female guest.
To reinforce our multi-channel model, we coordinate these events across both our retail store and direct-to -consumer channels.
       In April 2006, we launched our Player Rewards loyalty program which we believe further fosters guest loyalty and also provide us with
valuable market intelligence and purchasing information regarding our most frequent guests. We will use this information to focus our
advertising efforts, encourage repeat shopping and communicate with our target customers.
        In 2006, we also intend to expand our marketing efforts for our tennis business. We believe there is a significant opportunity for growth
in the tennis market. Like the golf market, currently the tennis market is fragmented with no national multi-channel specialty store leader. We
intend to market tennis by expanding our national and local magazine advertising as well as launching our own tennis catalog. We also have
plans to improve our in-store tennis environment along with broadening our assortment of merchandise. In addition, we will be launching a
referral program featuring lessons with tennis professionals through the Professionals Tennis Registry.

Management Information Systems
       Our management information systems provide us with a network and applications that are reliable, scalable and easy to use, maintain
and modify. Our management information systems are based on the Oracle ERP system with additional integrated state-of -the-art systems.
This infrastructure fully integrates all major aspects of our business across all channels, 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. We believe that these systems offer us the infrastructure necessary to support continued growth.
       Our 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 also supports automatic replenishment of inventory and is
integrated into product buying decisions. The system has an intuitive, user-friendly interface that minimizes new user training requirements,
allowing our caddies to focus on serving our guests.
       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 and uninterrupted operation of our Internet site and
transaction-processing systems. Our focus on reliability, availability and scalability has resulted in successful operations and the continued
addition of stores during 2005 and through the first quarter of fiscal 2006, without causing any interruptions to our point-of -sale system.

Purchasing and Distribution
       Over our 39-year history in the golf business, we have developed relationships with many of the major equipment vendors in the
industry. We have a diverse network of suppliers. In each of fiscal 2004 and 2005, three of our suppliers, Callaway Golf ® , TaylorMade ® /
adidas Golf ® , and Acushnet ® each supplied approximately 10% of our consolidated purchases. We source substantially all of our proprietary
products from contract manufacturers in Asia, which manufacture our equipment according to our specifications. We do not have long-term
supply contracts with our vendors and all of our orders are made

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on a purchase order basis. Due to our history of reliable payments to these vendors, many of them provide us with extended payment terms.
      We believe that the timing and volume of products we receive from our vendors, combined with our multi-channel model, allow us to
provide an extensive offering of the latest golf technology, enabling our guests to test the latest equipment. This allows us to continue to attract
avid golfers seeking the latest equipment.
      Our ability to centrally manage large quantity orders also makes us a preferred retailer for many of our vendors. Many of our vendors
provide us with volume purchasing rebates if we reach certain order targets. Additionally, our ability to resell pre-owned equipment and
purchase large quantities of the prior year’s models, called ―power buys,‖ increases our visibility and solidifies our relationship with our
vendors.
       As a result of our high volume of purchases, in 2005 we were able to initiate a co-operative advertising program pursuant to which the
cost of marketing certain vendor’s products or services is reimbursed by the vendor. This program offers our vendors differentiated
co-operative advertising opportunities due to our multi-channel business model and activity-based store environment. We work closely with
our vendors to find co-operative opportunities, negotiate mutually beneficial terms, and drive improved operating performance. Along with
―vendor buy-ins‖ to sponsor events, these cross-promotional arrangements have enabled us to expand our own marketing activities as a result
of vendor reimbursement of marketing expenses related to their products. As our industry consolidates and we capture more market share, we
believe that co-operative advertising agreements will continue to expand.

Distribution and Fulfillment
        We have developed a hybrid distribution system that combines our central warehouse and distribution infrastructure with the direct-ship
expertise of the vendor community. This hybrid distribution model increases our flexibility to allocate inventory to stores on an as-needed
basis, thereby improving our in-stock positions.
       We operate a 240,000 square foot distribution and fulfillment center in Austin, Texas which handles selected store inventory
replenishment and substantially all direct-to -consumer order fulfillment requirements. Store inventory replenishment is accomplished using a
warehouse management system that separates and collates shipments which are trucked to our stores by a third party dedicated fleet. We
believe that our centralized distribution and fulfillment model provides a number of advantages including more timely replenishment of store
inventory, better use of store floor space and the ability to participate in bulk purchases from our vendors. An additional benefit of our
integrated platform is that shipments to our stores from our distribution center are less time-consuming to process than multiple shipments
received from vendors directly at the store, which we believe provides us with a distinct advantage over our competitors without centralized
distribution capabilities. For those vendors whose infrastructure supports direct shipment to retail locations, our hybrid system also allows for a
direct-ship component.
       We dedicate 100,000 square feet of our distribution and fulfillment center to our direct-to -consumer shipping facility, which can handle
over one million packages annually. This facility utilizes the latest technology, including an automated conveyor system that efficiently moves
merchandise through the picking and shipping areas. While most direct-to -consumer orders are filled from this facility, our advanced
information systems allow us to search store inventory if the distribution and fulfillment center is out of stock. If needed, pick tickets are
automatically generated at the appropriate store, and store caddies ship the item directly to the guest. This capability allows us to optimize our
use of inventory across our supply chain and increases order fill rates.
     We also have two smaller distribution facilities in Toronto, Canada and near London, England, from which we service our Canadian and
European guests, respectively.
     We believe that our current distribution and fulfillment facilities will be adequate for our projected growth and foreseeable future
demands over at least the next five years as we significantly expand our retail store base and our direct-to -consumer business.

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International
       We work with a group of international agents and 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
agents and distributors. Sales through our international distributors and our distribution and fulfillment center near London accounted for 1.5%
of our net revenues in fiscal 2005, 2.2% in fiscal 2004, 2.3% in fiscal 2003 and 1.6% of our net revenues in both the three months ended
April 1, 2006 and the three months ended April 2, 2005.

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 20,000 students since its inception. We believe the academy helps contribute to sales at our adjacent
Austin store. The academy accounted for approximately 0.2% of our net revenues in fiscal 2005, 0.3% in fiscal 2004, 0.3% in fiscal 2003, 0.2%
in the three months ended April 1, 2006 and 0.3% in the three months ended April 2, 2005.

Industry Overview
       We estimate that the golf retail market that we target represented over $6 billion in sales in the United States in 2005. Over the last
35 years, the golf industry has realized significant growth in both participation and popularity. According to the National Golf Foundation, the
number of rounds played in the United States grew from 266.0 million in 1970 to a peak of 518.4 million rounds played in 2000. This growth
has been driven by the increased number of golf courses, greater television exposure to golf and golfing events and technological advances in
golf equipment. More recently, however, there has been a slight decline in the number of rounds of golf played from the peak in 2000 to
499.6 million rounds in 2005, according to the National Golf Foundation. This decrease in rounds played over the last five years can be
attributed to a variety of factors that have impacted recreational activities including the state of the nation’s economy, unfavorable weather
conditions and reduced discretionary spending.
       Another key indicator for the strength of the golf industry is the total number of golfers. Total golfers as a percentage of the United
States population has increased since 1970. In 2004, the National Golf Foundation determined the number of people who play golf in the
United States had grown from 11.2 million (approximately 5.5%) in 1970 to 30.2 million in 2004 (approximately 10.3%). As of 2003,
approximately 6.0 million of those golfers are categorized as avid golfers, who play 25 or more rounds per year.
       The golf industry has the following additional characteristics:

         • Increased access to and visibility of golf. The National Golf Foundation determined that golf course facilities have grown from
           12,846 in 1994 to 16,057 in 2005. The PGA, LPGA, USGA, World Golf Foundation and others have introduced numerous
           programs designed to attract, develop and retain golfers, including offering discounted or free lessons to beginning golfers. In
           addition, the proliferation of professional and amateur golf events and accompanying media coverage and television exposure has
           further increased the visibility of the sport. As a result of several factors, including the launch of The Golf Channel ® and the
           emergence of golf superstar Tiger Woods, advertising and promotions by equipment manufacturers have increased.

         • Fragmented market. The golf retail industry is highly fragmented relative to other retail industries, with no single golf retailer
           accounting for more than 6% of sales nationally in 2005. Specialty off-course retailers lead the retail channel for golf equipment
           and accessories, and we expect this trend to continue. This trend is driven in part by the ability of off-course retailers to offer a
           larger selection at competitive prices while offering customers putting greens, hitting areas and other amenities.

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         • Favorable demographic growth. While participation rates have leveled off over the last four years, we expect a growth in
           participation rates over the next decade as the ―baby boomer‖ generation ages and as more women participate. Golf is one of the
           few sports which people spend more time playing as they age. The United States Census Bureau estimated that there were
           approximately 78 million baby boomers in the United States in 2004. According to the National Golf Foundation, if baby boomers
           in the future behave as senior golfers, aged 60 and above, do today, the number of rounds played by this demographic will increase
           significantly. Today, baby boomers have a 12.5% participation rate and play an average of 20.5 rounds a year. If they behave like
           the current generation of senior golfers, their participation rate will drop over time to 9.7% but average rounds will rise to 39.6 per
           year. Additionally, the National Golf Foundation concluded that golfers over the age of 45 years spend a disproportionate amount
           on golf (including greens fees and other items outside our products and services). In addition, according to the National Golf
           Foundation, the number of women golfers has increased from approximately 5.4 million in 1998 to approximately 6.9 million in
           2004, representing an increase of 28%. The average annual rounds played by women is very close to the average played by men.

         • High spending by avid golfers. According to the National Golf Foundation, in 2002 there were approximately 6.0 million avid
           golfers representing 23% of all golfers and responsible for driving approximately 63% of golf equipment sales. Avid golfers are
           interested in learning about and buying the latest equipment, upgrading putters and drivers with greater regularity than casual
           golfers. In addition, avid golfers and golfers who spend $1,000 or more on golf per year purchased more equipment from
           off-course golf specialty retailers in 2003 than any other channel. For these reasons, avid golfers are an important target customer
           group.

         • Technological cycles. Substantial technological advancements in equipment over the past decade have shortened product
           replacement cycles and increased prices. Significant advances have been achieved in club head, shaft and golf ball construction,
           design and materials. The recent popularity of utility or ―hybrid‖ clubs, a category of clubs that combines elements of both woods
           and irons into their design are driving another product replacement cycle. The introduction of new and improved products, together
           with advertising and promotions by equipment manufacturers and retailers emphasizing the importance of proper equipment to
           one’s game, has encouraged golfers to change their equipment more frequently. Avid golfers, in particular, appear more willing to
           invest at the front-end of product cycles at or near the manufacturer’s recommended retail price.

Competition
       The golf industry is highly fragmented and competitive. We compete both in the off-course specialty retail segment and in the online and
catalog retail segment. The off-course specialty retail segment is characterized by sales of a complete selection of golf equipment and apparel, a
unified store image, favorable pricing and knowledgeable staff. The online and catalog retail segment is characterized by competitive pricing,
shopping convenience and a wide product selection.
       Other off-course specialty retailers. Due to the highly fragmented nature of the golf industry, off-course specialty retail stores vary
significantly in size, strategy and geographic location. Some focus on specific areas of the country, and some have focused more heavily on a
single channel, being slow to develop into other channels of commerce or develop multi-channel expertise. Most of these retailers do not have
any depth of in-store activity-based offerings such as PGA-certified professionals or advanced demonstration and trial facilities, nor do they
offer proprietary products or club repair services. Our primary competitors in this category are Edwin Watts and Golf Galaxy ® . In the second
quarter of 2006, Dick’s Sporting Goods announced the opening of golf specialty stores.

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       Online and catalog retailers of golf equipment. Online and catalog retailers of golf equipment sell a wide selection of merchandise
through the use of catalogs and the Internet. The products are competitively priced and the direct channel offers a certain convenience to
consumers. However, catalog and Internet retailers are not able to offer hands-on product testing and fitting or the same depth of product
understanding. These retailers’ single channel focus limits their ability for cross-channel marketing and sales as well as for cross-channel brand
promotion. We have been building our brand online since the launch of our Internet site in 1997 and have maintained a commitment to a
multi-channel approach. Our primary competitors in this category are The Golf Warehouse and Edwin Watts.
       Franchise and independent golf retailers. Franchise and independent golf retailers tend to be comprised of smaller stores with 2,000 to
5,000 square feet and generally are not positioned in major markets. Due in part to their more limited space and their position outside major
markets, we believe these stores generally offer a less extensive selection of golf clubs, equipment, accessories and apparel. Many promote
sales of their private label or lesser known brands. They also do not currently have PGA-certified professionals assisting guests or advanced
demonstration and testing facilities. Our main competitors in this category include Nevada Bob’s, Pro Golf Discount and Golf USA ® .
      On-course pro shops. On-course pro shops are located on-site at golf courses or on-site at other golf facilities such as driving ranges.
These retailers have significantly smaller stores with which to offer merchandise. While these shops generally have PGA professionals on staff,
they generally offer a less extensive selection of golf clubs and equipment, choosing to devote more of their limited space to showcasing
apparel. These shops also do not offer advanced demonstrations or diagnostic or testing equipment such as ball launch monitors.
       Conventional sporting goods retailers. Conventional sporting goods retailers are generally large format 20,000 to 100,000 square feet
stores that offer a wide range of sporting goods merchandise covering a variety of categories, including merchandise related to most
professional sports. These stores apply a single store format to numerous specialty areas. Prices at these stores are generally competitive, but
we believe that the limited space they devote to golf products restricts the breadth of their golf offering. These retailers often do not have full
access to all of the premier national brands and to the full assortment of those brands’ lines. Most do not currently have PGA-certified
professionals, advanced demonstration and trial facilities or club repair services. Our competitors in this category are Dick’s Sporting Goods ®
and The Sports Authority ® .
      Mass merchants and warehouse clubs. These stores typically range in size from 50,000 to 200,000 square feet and above. These
merchants and clubs offer a wide-range of products, but golf merchandise tends to represent a very small portion of their retail square footage
and their total sales. We believe that their limited product selection and limited access to the range of premier national brands does not appeal
to many golf enthusiasts. These stores also do not focus on services which address the needs of golfers specifically. Examples of such stores are
Wal-Mart ® , Target ® and Costco ® .

Facilities
        With the exception of the Austin store at our corporate headquarters, we lease all of our retail stores. All leased premises are held under
long-term leases with differing provisions and expiration dates. Leases generally provide for monthly rentals, typically computed on the basis
of a fixed amount. Three of our leases also provide for payments based on sales at those locations. Most leases contain provisions permitting us
to renew for one or more specified terms.
     We own a 41-acre Austin, Texas campus, which is home to our general offices, distribution and fulfillment center, contact center,
clubmaker training facility and the Harvey Penick ® Golf Academy. The Austin campus also includes a golf testing and practice area.

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       Details of our non-store properties and facilities are as follows:
                                                              Size
Location                                                    (sq. ft.)                         Facility Type                       Owned/Leased

Austin, Texas                                                 60,000         Office                                                       Owned
Austin, Texas                                                240,000         Distribution and Fulfillment Center                          Owned
Austin, Texas                                               17 Acres         Driving Range and Training Facility                          Owned
Toronto Canada                                                               Direct-To-Consumer Order Fulfillment
                                                                3,906        Facility                                                     Leased
St. Ives, Cambridgeshire, England                              15,900        Office, Warehouse and Shipping Facility                      Leased

Proprietary Rights and Intellectual Property
      We are the registrant of, or have pending registrations for, over 90 trademarks and service marks in more than 25 countries including
Golfsmith ® , Black Cat ® , Crystal Cat ® , Killer Bee ® , Lynx ® , Parallax ® , Predator ® , Snake Eyes ® , Tigress ® , Zevo ® , ASI TM ,
GearForGolf TM and GiftsForGolf TM . We are also the owner of 25 registered domain names.
       We believe that our trademarks and service marks have important value and are integral to building our name recognition.

Employees
       We typically staff our stores with a general manager, up to two assistant managers and, on average, 15 to 20 full-time and part-time sales
staff depending on store volume and time of year. As of December 31, 2005, we employed approximately 800 full-time and 530 part-time
personnel. We generally supplement our workforce with seasonal full-time and part-time workers at peak times during our second and fourth
quarters. None of our work force is unionized. We have not experienced any work stoppages, and we consider our relations with our associates
to be good.
       We offer competitive wages, comprehensive medical and dental insurance, company-paid and supplemental life insurance programs,
associated long-term and short-term disability insurance and a 401(k) plan to our full-time employees and some of our part-time employees.

Legal Proceedings
      We are involved in various legal proceedings arising in the ordinary course of conducting 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.

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                                                               MANAGEMENT

Executive Officers and Directors
       The following table sets forth certain information about our executive officers and directors following the completion of this offering:
Name                                                          Age                                         Position

James D. Thompson                                                43       Chief Executive Officer, President and Director
Virginia Bunte                                                   41       Senior Vice President, Chief Financial Officer and Treasurer
Kenneth Brugh                                                    56       Senior Vice President — Real Estate and New Business Development
Fred Quandt                                                      36       Senior Vice President — Merchandising
David Pritchett                                                  41       Senior Vice President — Retail Operations
Kiprian Miles                                                    44       Vice President — Chief Information Officer
Jeff Sheets                                                      46       Vice President — Research and Development
Matthew Corey                                                    39       Vice President — Marketing
David Lowe                                                       45       Vice President — Brands and Golf Instruction
Charles Shaw (1)(2)                                              72       Chairman of the Board
Roberto Buaron (2)                                               59       Director
James Grover (3)                                                 34       Director
Noel Wilens (1)(2)                                               43       Director
Thomas G. Hardy (3)                                              60       Director
James Long                                                       63       Director
Lawrence Mondry                                                  45       Director
Marvin E. Lesser (3)                                             64       Nominee for Director


(1)    Member of our compensation committee.

(2)    Member of our nominating committee.

(3)    Member or nominee for membership of our audit committee.
      James D. Thompson has served as our Chief Executive Officer, President and a director since October 2002. Prior to that, Mr. Thompson
served as our Senior Vice President from September 2000 until October 2002. From August 1999 to September 2000, Mr. Thompson served as
our Vice President — Merchandising, and from January 1999 to August 1999 he served as our 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 July 1993 until joining CompUSA in 1995,
Mr. Thompson served as Vice President — Merchandising for Mr. Bulky Gifts and Treats, a shopping mall-based candy store. From January
1986 to July 1993, he served as national merchant and in other management positions for Highland Superstores, Inc.
      Virginia Bunte joined us in 1995 and has served as our Treasurer and Chief Financial Officer since January 2003 and as a Senior Vice
President since February 2006. From 1995 to 2003, Ms. Bunte served in various positions with us including Assistant Controller, Controller
and Vice President — Finance.
      Kenneth Brugh joined us in 1981 and became our Senior Vice President — Real Estate and New Business Development in February
2006. Between November 2004 and February 2006, Mr. Brugh was our Vice President — Retail and Real Estate. Prior to that, from October
2002 until November 2004,

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Mr. Brugh served as our Vice President — Operations. From 1981 to 2002, Mr. Brugh served in several positions with us including vice
president, general manager and sales associate.
      Fred Quandt joined us in 1995 and became Senior Vice President — Merchandising in February 2006. Prior to that, from October 2002
to February 2006, he served as our Vice President — Merchandising. From 1995 until October 2002, Mr. Quandt served as Director of
Merchandising and Divisional Merchandise Manager and in various other merchandising positions.
      David Pritchett joined us in 2006 as our Senior Vice President — Retail Operations. From 2001 to 2005, Mr. Pritchett served as the
Senior Vice President of Store Operations at Galyans Trading Co., Inc. Prior to that, from March 1996 to May 2001, he was Director of Store
Operations at Galyans.
      Kiprian Miles joined us in October 2002 as our Vice President — 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.
       Jeff Sheets has served as our Vice President — Research and Development since April 2002. From June 1999 until April 2002,
Mr. Sheets was responsible for product development at Wilson Sporting Goods. Mr. Sheets served as Director of Research and Development
for Spalding/ Ben Hogan from July 1995 until February 1999 and for Founders Club from May 1991 until July 1995. Mr. Sheets initially began
his career in the golf industry in October 1988 working on the PGA Tour as a fitting specialist and equipment technician for Brunswick Golf
(now Royal Precision) and Founders Club until he moved into research and development.
       Matthew Corey joined us in November 2004 as our Vice President — Marketing. Prior to joining us, Mr. Corey served as Vice
President — Marketing and eCommerce for The Bombay Company from April 2002 until November 2004, senior manager of marketing and
operations, business development strategy and partnerships for The Home Depot, Inc. from October 1999 until February 2002 and served as
analyst and manager of marketing and advertising for BellSouth Corporation from May 1997 until October 1999.
      David Lowe joined us in September 2004 and has been Vice President — Brands and Golf Instruction since May 2005. Mr. Lowe is
responsible for proprietary brand development and management along with product strategy. From April 1997 to June 2004, Mr. Lowe was
with Spalding Sports, most recently serving as Marketing Director for the Ben Hogan brand. From October 1985 to April 1997, Mr. Lowe held
several management positions at Golfer’s Warehouse, a regional golf specialty retailer in the U.S. northeast.
       Charles Shaw became a director in October 2002. Mr. Shaw has been a Managing Director at First Atlantic Capital, Ltd. (―First Atlantic
Capital‖) since 2001. From 1997 to December 2000, Mr. Shaw was a senior advisor to First Atlantic Capital. 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 many Fortune
500 companies and their international equivalents, Mr. Shaw served on McKinsey’s board for eighteen years and held 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 in October 2002. Mr. Buaron has been the Chairman and Chief Executive Officer of First Atlantic
Capital since he founded the firm in 1989. From 1986 to 1989, Mr. Buaron was a senior partner with Overseas Partners Inc., a New York
middle market private equity firm. 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.

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       James Grover became a director in October 2002. Mr. Grover has been a principal at First Atlantic Capital since May 2004, and prior to
that served as a Vice President with First Atlantic Capital from August 2000 until May 2004 and as an associate with First Atlantic Capital
from July 1998 until August 2000. Prior to joining First Atlantic Capital in 1998, Mr. Grover was an associate and business analyst at New
York Consulting Partners, Inc.
       Noel Wilens became a director in October of 2002. Mr. Wilens has been a Managing Director of First Atlantic Capital since May 2004.
From May 2001 until May 2004, he was a principal at First Atlantic Capital. From October 1995 until May 2001, Mr. Wilens was a general
partner 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. Mr. Wilens was also a principal of The Invus Group, Ltd., a private equity firm specializing in
food industry acquisitions on behalf of European investors, from June 1987 until October 1995.
      Thomas G. Hardy became a director in October 2002. Mr. Hardy has served as an Operating Partner for an affiliate of First Atlantic
Capital since August 2004. Mr. Hardy has been the Chairman of the Board of Trustees of the American University of Paris since May 2003 and
a member of the Advisory Board of Main Street Resources, a private equity fund specializing in small and medium sized management buy-outs
since May 2002. In 1985, Mr. Hardy was one of the founders of Trans Resources, Inc, a multinational manufacturer and distributor of
chemicals and fertilizers, serving as its President and Chief Operating Officer from 1993 to 2000. From 1969 to 1984, Mr. Hardy was a
management consultant with McKinsey & Company Inc, serving as a partner from 1976 to 1984.
      James Long became a director in October 2002. Mr. Long has been a Senior Advisor to First Atlantic Capital since January 1, 2005 and
has been a Managing Director at First Atlantic Capital since 1991. Prior to joining First Atlantic Capital, Mr. Long was a managing director at
Kleinwort Benson North America. 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.
      Lawrence Mondry became a director in May 2005. Mr. Mondry was named Chief Executive Officer of CompUSA in December 2003.
He had served as President of CompUSA Stores and Chief Operating Officer since March 2000. From December 1993 to March 2000, he
served as Executive Vice President — Merchandising and, from 1990 to December 1993, as Senior Vice President and General Merchandise
Manager. Prior to joining the CompUSA, from 1983 to 1990 Mr. Mondry was employed by Highland Superstores, Inc., where he served as
Vice President and National Merchandise Manager from 1988 to 1990.
      Marvin E. Lesser is nominated for membership of our board of directors effective immediately following the closing of this offering.
Mr. Lesser co-founded Sigma Partners, L.P., a private investment partnership, in 1993 and has been the Managing Partner there since then.
Since 2000, Mr. Lesser has been President of Alpina Management, L.L.C., the investment advisor to St. Moritz 2000 Fund, Ltd., a private
investment fund for non-U.S. persons, as well as a director of St. Moritz 2000 Fund, Ltd. Since 1993, Mr. Lesser has served as a director of
USG Corporation and, since 2001 as a director of Pioneer Companies, Inc. From 1989 to 1994, Mr. Lesser was a Managing Partner of Cillufo
Associates, L.P. and, from 1986 to 1988, was a Senior Vice-President of Bessemer Securities Corporation. From 1983 to 1986 and since 1992,
Mr. Lesser has also been a private consultant, periodically providing financial, compensation-related and organizational consulting services.
From 1971 to 1983, Mr. Lesser worked at McKinsey & Company, Inc., where he became the Director of Finance in 1973 and a Senior Partner
in 1981.

Corporate Governance
       After the completion of this offering, we will be a ―controlled company‖ under the Nasdaq corporate governance rules. A ―controlled
company‖ is a company of which more than 50% of the voting power is held by an individual, group or another company. Based on a voting
rights and stockholders’ agreement among Atlantic Equity Partners III L.P. (―Atlantic Equity Partners‖), and Carl Paul and

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Franklin Paul, following this offering Atlantic Equity Partners will hold more than 50% of our voting power. See ―Certain Relationships and
Related Party Transactions — Voting Rights and Stockholders’ Agreement.‖ We intend to rely on the ―controlled company‖ exemption which
eliminates the requirements that (1) a majority of our board of directors consist of independent directors, and (2) we establish a nominating
committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purpose
and responsibilities of the compensation committee.
       The ―controlled company‖ exemption does not modify the independence requirements for our audit committee. Accordingly, within one
year after the closing of this offering our audit committee will satisfy the independence requirements of the SEC and Nasdaq corporate
governance rules. None of our directors are employees, other than our Chief Executive Officer, James D. Thompson.
       In the event that we cease to qualify as a ―controlled company‖ in the future, we will be required to have a majority of independent
directors on our board of directors and to have our compensation and nominating committees be composed entirely of independent directors
within one year of the date that we lose our status as a ―controlled company‖.

Executive Officers and Directors
        Our current board of directors consists of eight directors, all of whom were appointed by Atlantic Equity Partners. Currently, all of our
directors hold office until the next annual meeting of our stockholders, or until the director’s successor has been duly elected. Upon the closing
of this offering, existing rights of our stockholders to nominate directors will be terminated. We have entered into a new management rights
agreement granting certain nominating rights to Atlantic Equity Partners. See ―Certain Relationships and Related Party Transactions —
Stockholders’ Agreement — Board Composition‖ and ―Certain Relationships and Related Party Transactions — Management Rights
Agreement.‖
      Following the closing of this offering, our board of directors will have nine members, six of whom will be affiliated with First Atlantic
Capital, Ltd. Assuming that we remain a ―controlled company,‖ we expect to add two additional independent directors to our board of directors
within twelve months after the closing of this offering.
        Upon the closing of this offering, we will amend and restate our current certificate of incorporation and file such amended and restated
certificate of incorporation with the State of Delaware. Our amended and restated certificate of incorporation and amended and restated bylaws
will provide that we may have up to 13 directors subject to an automatic reduction to nine directors if we cease to be a ―controlled company.‖
Directors may be removed with or without cause by the holders of at least 50% of our outstanding shares of common stock. Our board of
directors may appoint additional directors up to the maximum number permitted under our certificate of incorporation. Vacancies or newly
created directorships on our board of directors may be filled by a vote of a majority of the directors then in office. Any director elected to fill a
vacancy on the board will hold office for the remainder of the full term of the director for whom the vacancy was created or occurred and until
such director’s successor has been duly elected and qualified.
      Our executive officers are appointed and serve at the discretion of our board of directors. Our executive officers serve until their
successors have been appointed or until they are removed by a majority vote of the board of directors.

Committees of the Board of Directors
       Our board of directors has established three standing committees: an audit committee and a compensation and nominating committee.
       Audit Committee. Under Nasdaq corporate governance rules, we are required to maintain an audit committee consisting of at least three
directors, each of whom is financially literate and at least one of whom has accounting or related financial management expertise. Our audit
committee members are required to meet independence standards set forth in rules of the SEC and Nasdaq.

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       Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee which include:

         •          retaining and terminating our independent auditor;

         •          discussing the scope and results of the audit with the independent auditor, and reviewing with management and the
                    independent accountant our interim and year-end operating results;

         •          reviewing the adequacy of our internal accounting controls and audit procedures; and

         •          approving (or, as permitted, pre-approving) all audit and non-audit services to be performed by the independent auditor.
       Our audit committee consists of our directors, James Grover and Thomas Hardy. Following the closing of this offering, we intend to
appoint Marvin E. Lesser as a member of our board of directors and our audit committee. Mr. Lesser is an independent director under the rules
of the SEC and Nasdaq and is our audit committee ―financial expert‖ as such term is defined in Item 401(h) of Regulation S-K. Consistent
with the rules of the SEC and Nasdaq, we will appoint a second independent director to our audit committee within 90 days of the closing of
this offering and a third independent director to our audit committee within twelve months of the closing of this offering. Messrs. Grover and
Hardy will cease to be members of our audit committee as such additional independent directors are appointed.
       Compensation Committee. Our compensation committee consists of our directors, Charles Shaw and Noel Wilens. Our board of
directors has adopted a charter setting forth the responsibilities of the committee, which include:

         •          determining the compensation of our Chief Executive Officer based on the achievement of corporate objectives;

         •          reviewing and recommending approval of compensation of our executive officers;

         •          administering our equity incentive plans; and

         •          reviewing and making recommendations to our board of directors with respect to incentive compensation and equity plans.
      Nominating Committee. Our nominating committee consists of our directors, Roberto Buaron, Charles Shaw and Noel Wilens. Our
board of directors has adopted a charter setting forth the responsibilities of the committee, which include:

         •          developing and recommending criteria for selecting new directors and evaluating and recommending nominees to our board
                    of directors;

         •          supervising the selection and composition of committees of the board of directors;

         •          evaluating the performance of our board of directors and of individual directors; and

         •          identifying and recommending to the board of directors individuals qualified to become executive officers.
     No executive officer currently serves, or in the past has served, on the compensation committee or the board of directors of any other
company of which any of the members of our compensation committee or any of our directors is an executive officer.

Code of Ethics and Code of Business Conduct and Ethics
      We have adopted a Code of Ethics for Senior Executives and Financial Officers. The Code of Ethics for Senior Executives and Financial
Officers is applicable to our Chief Executive Officer, Chief Financial Officer, Controller and other persons performing similar functions. We
have also adopted a Code of Business Conduct and Ethics which is applicable to all of our directors, officers and employees.

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Director Compensation
       Other than Thomas G. Hardy, who is an operating partner of an affiliate of First Atlantic Capital, directors who are our employees or
who are affiliated with First Atlantic Capital receive no compensation for service on the board. Each of our directors who is not an officer and
who is affiliated with First Atlantic Capital receives reimbursement of reasonable and necessary costs and expenses incurred due to attendance
at board meetings or for other travel undertaken on our behalf. Our outside director, who is not an officer and is not affiliated with First
Atlantic Capital, receives a fee of $5,000 for each regular and special meeting of the board that he attends, in addition to reimbursement of
reasonable and necessary costs and expenses incurred.

Executive Compensation
       The following table sets forth summary information regarding compensation awarded to, earned by or accrued for services rendered to
us in all capacities by our Chief Executive Officer and our four other most highly compensated executive officers for fiscal years 2003, 2004
and 2005. Our Chief Executive Officer and such other executive officers are collectively referred to as the ―named executive officers.‖

                                                  Summary Executive Compensation Table
                                                                                                                                  Long-Term
                                                                                                                                 Compensation
                                                                             Annual Compensation
                                                                                                                                  Securities
                                                                                                        Other Annual              Underlying
Name and Principal Position                            Year        Salary            Bonus             Compensation (1)           Options (2)

James D. Thompson (3)                                 2005      $ 325,000         $ 243,750        $                 2,100                  —
    President and Chief                               2004        314,615                —                           3,637                  —
    Executive Officer                                 2003        297,000                —                           3,561             175,453
Virginia Bunte (4)                                    2005      $ 181,500         $ 136,125        $                 5,445                  —
    Senior Vice President — Chief                     2004        181,092                —                           5,407                  —
    Financial Officer and Treasurer                   2003        161,580                —                           5,585              39,477
Kenneth Brugh (5)                                     2005      $ 200,000         $ 92,000         $                    —                   —
    Vice President — Real Estate                      2004        200,000                —                              —                   —
    and New Business Development                      2003        200,000                —                              —               39,477
Matthew Corey (6)                                     2005      $ 195,000         $ 78,000         $                 2,925                  —
    Vice President — Marketing                        2004         24,643            51,967                             —               39,477
                                                      2003             —                 —                              —                   —
Fred Quandt (7)                                       2005      $ 180,000         $ 82,800         $                 4,050                  —
    Senior Vice President —                           2004        164,238                —                           3,624                  —
    Merchandising                                     2003        125,000                —                           3,168              39,477


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

(2)   Represents grants of options to purchase shares of our common stock under the Golfsmith International Holdings, Inc. 2002 Incentive
      Stock Plan.

(3)   Mr. Thompson became our President and Chief Executive Officer in October 2002.

(4)   Ms. Bunte became our Senior Vice President — Chief Financial Officer and Treasurer in February 2006. Prior to that, Ms. Bunte was our
      Vice President — Chief Financial Officer.

(5)   Mr. Brugh became our Senior Vice President — Real Estate and New Business Development in February 2006. Prior to that, Mr. Brugh
      was our Vice President — Retail and Real Estate.

(6)   Mr. Corey became our Vice President — Marketing in November 2004.

(7)   Mr. Quandt became our Senior Vice President — Merchandising in February 2006. Prior to that, Mr. Quandt was our Vice President —
      Merchandising.

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Stock Options
      We did not grant any stock options to our named executive officers during fiscal 2005 or to date in fiscal 2006. To date, we have not
granted any stock appreciation rights.
       The following table sets forth information concerning the number of unexercised options held by our named executive officers as of
December 31, 2005. All options were granted under our 2002 Incentive Stock Plan described below. All options listed below remain
outstanding as of December 31, 2005. In accordance with each individual optionee’s vesting schedule, no options were exercisable as of
December 31, 2005. All options vest 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. The value of unexercised in-the-money options is based on the midpoint of the
estimated initial public offering range set forth on the cover of this prospectus.

                                     Aggregated Option Exercises and Fiscal Year-End Option Values
                                                                         Number of Securities                        Value of Unexercised
                                                                       Underlying Unexercised                           in-the-Money
                                   Shares                            Options at December 31, 2005                Options at December 31, 2005
                                  Acquired         Value
                                     on
Name                                              Realized       Exercisable            Unexercisable         Exercisable                Unexercisable
                                  Exercise

James D. Thompson                       —               —                   —                 175,453                  —             $      1,431,802
Virginia Bunte                          —               —                   —                  39,477                  —                      322,156
Kenneth Brugh                           —               —                   —                  39,477                  —                      322,156
Matthew Corey                           —               —                   —                  39,477                  —                      245,657
Fred Quandt                             —               —                   —                  39,477                  —                      322,156
       Prior to the closing of this offering, we plan to modify certain of the above-referenced options such that a portion of them will become
exercisable. After giving effect to such modification, the number of exercisable and unexercisable options and their corresponding values are as
follows:
                                                                      Number of Securities
                                                                          Underlying                                  Value of Unexercised
                                                                     Unexercised Options at                         in-the-Money Options at
                                                                       December 31, 2005                               December 31, 2005

Name                                                          Exercisable            Unexercisable            Exercisable            Unexercisable

James D. Thompson                                                 105,272                     70,181      $       859,083        $            572,719
Virginia Bunte                                                     23,686                     15,791              193,292                     128,864
Kenneth Brugh                                                      23,686                     15,791              193,292                     128,864
Matthew Corey                                                      15,791                     23,686               98,263                     147,394
Fred Quandt                                                        23,686                     15,791              193,292                     128,864

Employment Agreements
      We have entered into employment agreements with James D. Thompson, our President and Chief Executive Officer, and Virginia Bunte,
our Senior Vice-President — Chief Financial Officer and Treasurer. In addition, we have entered into employment agreements with Carl Paul
and Franklin Paul.
       Under Mr. Thompson’s amended and restated employment agreement entered into in May 2006, Mr. Thompson is our President and
Chief Executive Officer with the powers normally and customarily associated with a president and chief executive officer in a company of
similar size and operating in a similar industry. The term of Mr. Thompson’s employment agreement is three years from the date of this
offering, with automatic successive one-year extensions unless terminated by either party. Mr. Thompson’s base salary is $375,000 for fiscal
2006, with a possible annual bonus calculated based upon attainment of financial targets for that fiscal year. Pursuant to his employment
agreement, Mr. Thompson’s annual salary following this offering will be $375,000 and is subject to review by the board of directors or any
duly authorized committee of the board of directors. Mr. Thompson reports to our board of directors. Mr. Thompson is eligible to participate in
our employee benefit plans including the 401(k) retirement savings plan, the disability plan, the health plan, the 2002 Incentive Stock Plan and
the 2006 Incentive

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Compensation Plan both described below and reimbursement for reasonable dues for one country-club membership. Mr. Thompson receives
stock options in our company at the discretion of our board of directors and subject to the terms and conditions of our 2002 Incentive Stock
Plan and the 2006 Incentive Compensation Plan. With respect to Mr. Thompson’s acts or failure to act during his employment, he will be
entitled to indemnification from us and to liability insurance coverage, if any, on the same basis as our other officers. The board of directors
will have the right to terminate Mr. Thompson’s employment at any time with or without cause. If Mr. Thompson is terminated without cause,
or he resigns for good reason, as those terms are defined in the employment agreement, he will be entitled to receive his earned but unpaid base
salary and earned but unpaid bonus for any completed year, plus 200% of his current total annual base salary, the earned pro rata bonus for the
year of termination, and payment by us of his and his dependents’ healthcare continuation coverage premiums for two years following his
termination, or, if earlier, until he and/or his dependents are eligible for coverage under another substantially equivalent plan, and his options
under the 2002 Incentive Stock Plan will continue to vest following termination. This obligation will remain in effect even if Mr. Thompson
accepts other employment. Mr. Thompson will have the right to terminate his employment with us at any time with or without good reason.
Should Mr. Thompson’s employment be terminated for cause, or if he resigns without good reason, he will have the right to receive his earned
but unpaid salary up to the date of termination and earned but unpaid bonus for any completed year. The board of directors will also have the
right to terminate Mr. Thompson’s employment on or after the date he has a disability, as such term is defined in the employment agreement. If
Mr. Thompson’s employment terminates due to his disability or death, he will be entitled to receive his base salary through the end of the
month of termination, earned pro rata bonus for the year of termination, earned but unpaid bonus for any completed year, payment by us of his
and/or his dependents’ healthcare continuation coverage premiums for one year following his termination, or, if earlier, until he and/or his
dependents are eligible for coverage under another substantially equivalent plan, and continued vesting of his options under the 2002 Incentive
Stock Plan. While employed by us and thereafter until the end of the restricted period, as such term is defined in the employment agreement,
Mr. Thompson may not be employed by or operate a competing business, as such term is defined in the employment agreement, and Mr.
Thompson may not solicit certain of our officers, employees and independent contractors, within the meaning of the employment agreement.
       Under Ms. Bunte’s amended and restated employment agreement entered into in May 2006, Ms. Bunte is our Senior Vice President —
Chief Financial Officer and Treasurer with the powers normally and customarily associated with such positions in a company of similar size
and operating in a similar industry. The initial term of Ms. Bunte’s employment agreement is one year from the date of this offering, with
automatic successive one-year extensions unless terminated by either party. Ms. Bunte’s base salary is $207,000 for fiscal 2006, with a possible
annual bonus based upon attainment of financial targets for that fiscal year. Pursuant to her employment agreement, Ms. Bunte’s annual salary
following this offering will be $207,000 and is subject to review by the board of directors, or any duly authorized committee of the board of
directors. Ms. Bunte reports to our Chief Executive Officer. Ms. Bunte is eligible to participate in our employee benefit plans including the
401(k) retirement savings plan, the disability plan, the health plan and the 2002 Incentive Stock Plan and the 2006 Incentive Compensation
Plan both described below. Ms. Bunte receives stock options at the discretion of our board of directors and subject to the terms and conditions
of our 2002 Incentive Stock Plan and the 2006 Incentive Compensation Plan. With respect to Ms. Bunte’s acts or failure to act during her
employment, she will be entitled to indemnification from us and to liability insurance coverage, if any, on the same basis as our other officers.
The board of directors will have the right to terminate Ms. Bunte’s employment at any time with or without cause. If Ms. Bunte is terminated
without cause, or she resigns for good reason, as those terms are defined in the employment agreement, she will be entitled to receive her
earned but unpaid base salary and earned but unpaid bonus for any completed year, plus 200% of her current total annual base salary, the
earned pro rata bonus for the year of termination, and payment by us of her and her dependents’ healthcare continuation coverage premiums for
two years following her termination, or, if earlier, until she is eligible for coverage under another substantially equivalent plan, and her options
under the 2002 Incentive Stock Plan will continue to vest following termination. This obligation will remain in effect even if Ms. Bunte accepts
other

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employment. Ms. Bunte will have the right to terminate her employment with us at any time with or without good reason. Should Ms. Bunte’s
employment be terminated for cause, or if she resigns without good reason, she will have the right to receive her earned but unpaid salary up to
the date of termination and earned but unpaid bonus for any completed year. The board of directors will also have the right to terminate
Ms. Bunte’s employment on or after the date she has a disability, as such term is defined in the employment agreement. If Ms. Bunte’s
employment is terminated due to disability or death, she will be entitled to receive her base salary through the end of the month of termination,
earned pro rata bonus for the year of termination, earned but unpaid bonus for any completed year, payment by us of her and/or her dependents’
healthcare premiums for one year following her termination, or, if earlier, until she and/or her dependents are eligible for coverage under
another substantially equivalent plan, and continued vesting of her options under the 2002 Incentive Stock Plan. While employed by us and
thereafter until the end of the restricted period, as such term is defined in the employment agreement, Ms. Bunte may not be employed by or
operate a competing business, as such term is defined in the employment agreement, and Ms. Bunte may not solicit certain of our officers,
employees and independent contractors, within the meaning of the employment agreement.
       Under the employment agreements for Carl Paul, who was one of our directors until March 2006 and is currently a stockholder, and
Frank Paul, one of our stockholders, entered into in October 2002, each currently receives a base salary of $26,000 per year, with no provision
for bonus payments. The initial term of each of the agreements was one year, with automatic successive one-year extensions unless terminated
by either party. 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. Each will be eligible to participate in certain specified employee benefit plans. With respect to either Carl
Paul or Frank Paul’s acts or failure to act during his employment, each will be entitled to indemnification from us and to liability insurance
coverage, if any, on the same basis as our other employees or agents. The board of directors may terminate the employment of Carl Paul or
Frank Paul, without liability, 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. While each is employed by us and thereafter until the end of the restricted period, as such term is defined in the employment
agreement, neither Carl nor Franklin Paul may be employed by or operate a competing business, as such term is defined in their respective
employment agreements.

Employee Benefit and Stock Plans

     2006 Incentive Compensation Plan
       Prior to the closing of this offering, we intend to adopt a 2006 Incentive Compensation Plan (the ―2006 Plan‖) to become effective
immediately prior to this offering. The 2006 Plan is intended to further our success by increasing the ownership interest of certain of our
employees, directors and consultants in our company and to enhance our ability to attract and retain employees, directors and consultants. This
is a summary of the 2006 Plan. You should read the text of the 2006 Plan filed as an exhibit to the registration statement of which this
prospectus is part for a full statement of the terms and provisions of the 2006 Plan.
       We may issue up to 1,800,000 shares of common stock under the 2006 Plan, subject to adjustment if particular capital changes affect the
common stock, upon the exercise or settlement of stock options, stock appreciation rights (―SARs‖), restricted stock awards, restricted stock
units, performance unit awards, performance share awards, cash-based awards and other stock-based awards granted under the 2006 Plan. The
shares of common stock that may be issued under the 2006 Plan may be either authorized and unissued shares or previously issued shares held
as treasury stock. As of the closing of this offering, no options or other awards will have been granted under the 2006 Plan.
      A stock option is the right to purchase a specified number of shares of common stock in the future at a specified exercise price and
subject to the other terms and conditions specified in the option

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agreement and the 2006 Plan. Any stock options granted under the 2006 Plan are either ―incentive stock options,‖ which may be eligible for
special tax treatment under the Internal Revenue Code of 1986, or options other than incentive stock options (referred to as ―nonqualified stock
options‖), as determined by the Compensation Committee and stated in the option agreement. The exercise price of each option granted under
the 2006 Plan is equal to or greater than the fair market value of our common stock at the time of grant, as determined by the Compensation
Committee (except for any options granted under the 2006 Plan in substitution or exchange for options or awards of another company involved
in a corporate transaction with us or a subsidiary, which will have an exercise price that is intended to preserve the economic value of the award
that is replaced). The exercise price of any stock options granted under the 2006 Plan may be paid in cash, shares of our common stock already
owned by the option holder or any other method that may be approved by the Compensation Committee, such as a cashless broker-assisted
exercise that complies with law.
       SARs may be granted under the 2006 Plan alone or together with specific stock options granted under the 2006 Plan. SARs are awards
that, upon their exercise, give a participant the right to receive from the company an amount equal to (1) the number of shares for which the
SAR is exercised, multiplied by (2) the excess of the fair market value of a share of the common stock on the exercise date over the grant price
of the SAR. The grant price of each SAR granted under the 2006 Plan is equal to or greater than the fair market value of our common stock at
the time of grant, as determined by the Compensation Committee (except for any SARs granted under the 2006 Plan in substitution or
exchange for awards of another company involved in a corporate transaction with us or a subsidiary, which will have a grant price that is
intended to preserve the economic value of the award that is replaced). A SAR may be settled in cash, shares or a combination of cash and
shares, as determined by the Compensation Committee. A SAR granted with an option will be exercisable and terminate when the related
option is exercisable and terminates. Such an option will no longer be exercisable to the extent that the holder exercises the related SAR.
Likewise, a SAR will not be exercisable to the extent that the related option is exercised.
        Restricted stock awards are shares of common stock that are awarded to a participant subject to the satisfaction of the terms and
conditions established by the Compensation Committee. Until such time as the applicable restrictions lapse, shares of restricted stock are
subject to forfeiture and may not be sold, assigned, pledged or otherwise disposed of by the participant who holds those shares. Restricted stock
units are denominated in units of shares of common stock, except that no shares are actually issued to the participant on the grant date. When a
restricted stock unit award vests, the participant is entitled to receive shares of common stock, a cash payment based on the value of shares of
common stock or a combination of shares and cash.
       Performance units, performance shares and cash-based awards granted to a participant are amounts credited to a bookkeeping account
established for the participant. A performance unit has an initial value that is established by the Compensation Committee at the time of its
grant. A performance share has an initial value equal to the fair market value of a share of the common stock on the date of grant. Each
cash-based award has a value that is established by the Compensation Committee at the time of its grant. Whether a performance unit,
performance share or cash-based award actually will result in a payment to a participant will depend upon the extent to which performance
goals or other conditions established by the Compensation Committee are satisfied. After a performance unit, performance share or cash-based
award has vested, the participant will be entitled to receive a payout of cash, shares of common stock or a combination thereof, as determined
by the Compensation Committee.
      Other stock-based awards are valued in whole or in part by reference to, or otherwise based on, shares of common stock. The form of
any other stock-based awards will be determined by the Compensation Committee, and may include a grant or sale of unrestricted shares of
common stock. Other stock-based awards may be paid in shares of common stock or cash, according to the award agreement.
      The Compensation Committee may provide for the payment of dividend equivalents with respect to shares of common stock subject to
an award, such as restricted stock units, that have not actually been issued under that award.

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        The Compensation Committee will administer the 2006 Plan. The Board of Directors may, subject to any legal limitations, exercise any
powers or duties of the Compensation Committee concerning the 2006 Option Plan. The Compensation Committee will select eligible
employees, directors and/or consultants of us and our subsidiaries or affiliates to receive options or other awards under the 2006 Plan and will
determine the number of shares of common stock covered by those options or other awards, the terms under which options or other awards may
be exercised (however, options generally may not be exercised later than 10 years from the grant date of an option) or may be settled or paid,
and the other terms and conditions of options and other awards under the 2006 Plan in accordance with the provisions of the 2006 Plan. The
Compensation Committee is authorized to interpret the 2006 Plan and awards and to accelerate the vesting or exercisability of awards subject
to the limitations of the 2006 Plan. Holders of options, SARs, unvested restricted stock and other awards may not transfer those awards, unless
they die or, except in the case of incentive stock options, the Compensation Committee determines otherwise.
       If we undergo a change of control, as defined in the 2006 Plan, subject to any contrary law or rule, or the terms of any award agreement
in effect before the change of control, (a) the Compensation Committee may, in its discretion, accelerate the vesting, exercisability and
payment, as applicable, of outstanding options, SARs and other awards; (b) if the surviving or successor entity, or its parent or subsidiary, or
any other corporate party to the change of control transaction, does not assume or replace outstanding options, SARs and other awards in a
manner that preserves their existing compensation element, or we undergo a liquidation, or a participant’s employment is terminated after the
change of control transaction without ―cause‖ or by the participant with ―good reason,‖ as those terms are defined in the 2006 Plan, all
outstanding options, SARs and other awards not so assumed or replaced, or outstanding at the time of a liquidation (or, in the case of such a
participant’s termination of employment, all of that participant’s outstanding options, SARs and other awards) immediately become fully
vested and, if applicable, exercisable or payable; and (c) the Compensation Committee, in its discretion, may adjust outstanding awards by
substituting stock or other securities of any successor or another party to the change of control transaction, or cash out outstanding options,
SARs and other awards, in any such case, generally based on the consideration received by our shareholders in the transaction.
       Subject to particular limitations specified in the 2006 Plan, the Board of Directors may amend or terminate the 2006 Plan, and the
Compensation Committee may amend awards outstanding under the 2006 Plan. The 2006 Plan will continue in effect until all shares of the
common stock available under the 2006 Plan are delivered and all restrictions on those shares have lapsed, unless the 2006 Plan is terminated
earlier by the Board of Directors. No awards may be granted under the 2006 Plan on or after the tenth anniversary of the date of this offering.


     2002 Incentive Stock Plan
       In 2002, we adopted our 2002 Incentive Stock Plan (the ―2002 Plan‖). Under the 2002 Plan, certain employees, members of our board of
directors and third party consultants may be granted options to purchase shares of our common stock, stock appreciation rights and restricted
stock grants. The exercise price of the options granted was equal to the value of our common stock on the grant date. Options are exercisable
and vest in accordance with each option agreement. As of April 28, 2006, options to purchase 870,237 shares of our common stock were
outstanding under this plan. Following the adoption of our 2006 Plan, we do not intend to grant any more options under our 2002 Plan,
although options previously granted under the 2002 Plan will remain outstanding and subject to its terms.
       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. In addition, our board of directors may, upon a change in control, cancel the options, stock grants or
stock appreciation rights, but only after providing the optionees or grantees with a reasonable period to exercise his or her options or stock
appreciation rights or take appropriate action to receive stock subject to any stock grants. 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.

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     Management Incentive Plan
     Since 2004, we have had a Management Incentive Plan. Under this plan, we agree to pay specific 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. We plan to offer this plan for 2006 as well.


     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.


     Severance Pay Plan
      In August 2004, we established a plan to provide severance benefits to our employees should their employment with us be terminated
without cause and unrelated to a sale of a division or subsidiary (unless he or she had no reasonable opportunity to continue being employed by
such division or subsidiary after such sale), or as otherwise determined by the committee administering the plan. Under the terms of the plan,
an employee is entitled to an amount which is calculated based upon his or her:

         •          current position (Senior Vice President, Vice President, director or manager, or other full time employee);

         •          current salary; and

         •          length of service with us.
       The plan is administered by a severance pay plan committee appointed by our Chief Executive Officer. This committee determines
eligibility for severance benefits, including determination of employment status and length of service. The committee may also amend the
terms of the severance plan or terminate it at any time.

Limitations of Liability and Indemnification Matters
       Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities,
including reimbursements for expenses incurred arising under the Securities Act.
        Our amended and restated certificate of incorporation, to become effective upon the closing of this offering, includes a provision
eliminating personal liability of our directors for monetary damages for breach of fiduciary duty as a director, to the fullest extent permitted by
the Delaware General Corporation Law as it now exists or as it may be amended. However, these provisions do not eliminate or limit the
liability of any of our directors:

         •          for any breach of their duty of loyalty to us or our stockholders;

         •          for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

         •          for unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided under Section 174 of the
                    Delaware General Corporation Law; or

         •          for any transaction from which the director derived improper personal benefit.
       Any amendment to or repeal of these provisions will not adversely affect any right or protection of our directors in respect of any act or
failure to act occurring prior to any amendment or repeal or adoption of an inconsistent provision. If the Delaware General Corporation Law is
amended to provide further limitation on the personal liability of directors of corporations, then the personal liability of our directors will be
further limited to the greatest extent permitted by the Delaware General Corporation Law.

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       Our amended and restated bylaws authorize us to indemnify our directors and officers and we must advance expenses, including
attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
       In addition, prior to the completion of this offering we intend to enter into separate indemnification agreements with each of our
directors and executive officers.
     There is currently no pending litigation or proceeding involving any of our directors, officers, employees or agents in which
indemnification by us is sought, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

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                                CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Merger Agreement
       In September 2002, we entered into an agreement and plan of merger with Golfsmith International, Inc. (―Golfsmith‖) and our
wholly-owned subsidiary BGA Acquisition Corporation. Pursuant to the merger agreement, BGA Acquisition Corporation merged with and
into Golfsmith, with Golfsmith remaining as the surviving corporation. We were formed by Atlantic Equity Partners III, L.P. (―Atlantic Equity
Partners‖), a limited partnership managed by First Atlantic Capital, Ltd. (―First Atlantic Capital‖), a private equity investment firm. We were
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 contributed $50.0 million in return for approximately 79.7% of our common stock on a fully diluted basis. Our
stockholders prior to the merger, including members of our management, received in the merger in the aggregate 20.3% of our common stock
on a fully diluted basis.
       The merger agreement provided for both pre- and post-closing adjustments of the per share merger consideration based on the difference
between expected and actual amounts of assets and liabilities, as detailed in a statement of working capital of Golfsmith. 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 an escrow account on June 20, 2003.
       Pursuant to the merger agreement, we agreed to indemnify and hold harmless the selling stockholders and optionholders of Golfsmith
from and against any and all losses incurred by them in connection with an inaccuracy in any representation or warranty given by us, any
breach of any covenant or with respect to the operation or control of the business of Golfsmith following the closing date. In addition, the
selling stockholders agreed to indemnify and hold us harmless up to $6.25 million from and against any and all losses in connection with any
inaccuracy in any representation or warranty given by them, any breach of any covenant or fraud by Carl Paul, Franklin Paul and the then Chief
Financial Officer of Golfsmith.
      Concurrently with the closing of the merger, we entered into an escrow agreement whereby $6.25 million of the merger consideration
was placed into an escrow account to cover amounts owed by the selling stockholders to us as post-closing payments or in connection with our
indemnification by the selling stockholders. On July 24, 2003, the selling stockholders paid approximately $1.1 million to us in the escrow
account for the repayment of certain obligations owed by them. In accordance with the escrow agreement, on April 15, 2004, the remaining
approximately $5.1 million held in the escrow account was disbursed to the selling stockholders.

Management Consulting Agreement
       In connection with our acquisition by Atlantic Equity Partners in October 2002, we entered into a management consulting agreement
with First Atlantic Capital, pursuant to which First Atlantic Capital agreed to advise us on management matters. In particular, First Atlantic
Capital agreed to provide advisory services related to proposed financial transactions, acquisitions and other senior management matters related
to the business, administration and policies of both companies upon the terms and subject to the conditions set forth in the management
consulting agreement. As consideration for its management consulting services, we agreed to pay First Atlantic Capital an annual fee of up to
$0.6 million, payable in advance, in equal monthly installments on the first day of each month, commencing in October 2002 and ending in
October 2012. We also agreed to reimburse First Atlantic Capital for all out-of -pocket expenses and other disbursements incurred by it or its
directors, officers, employees or agents in furtherance of its obligations under the agreement. Under the management consulting agreement, we
paid First Atlantic Capital fees and expenses of $0.2 million in both the first quarter of fiscal 2006 and fiscal 2005, $0.7 million in fiscal 2005,
$0.6 million in fiscal 2004 and $0.8 million in fiscal 2003.

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       In addition, as consideration for the services provided in connection with the transactions contemplated by the merger agreement, we
paid First Atlantic Capital a closing fee of $1.3 million and reimbursed First Atlantic Capital for all out-of-pocket expenses and other
disbursements incurred by it or any of its directors, officers, employees or agents. Under the management consulting agreement, First Atlantic
Capital may receive additional fees from us, including in connection with future acquisitions, dispositions or debt or equity financings. Such
additional fees will not exceed an amount equal to: (1) in the case of a transaction involving less than $50.0 million in total enterprise value,
2% of such total enterprise value, (2) in the case of a transaction involving $50.0 million or more but less than $100.0 million in total enterprise
value, $1.0 million, and (3) in the case of a transaction involving $100.0 million or more in total enterprise value, 1% of such total enterprise
value. With respect to a transaction involving a sale of our business, First Atlantic Capital will be paid a fee equal to 1% of the total enterprise
value of our company.
      Under the management consulting agreement, we agreed to indemnify and hold First Atlantic Capital and its directors, officers,
employees, agents and affiliates harmless from and against any and all claims of any kind related to its performance of its duties under the
management consulting agreement, other than those of the foregoing that result from First Atlantic Capital’s gross negligence or willful
misconduct.
       The management consulting agreement terminates on October 15, 2012, but is automatically extended annually unless notice to the
contrary is given by either party. The agreement will automatically terminate if Atlantic Equity Partners and its affiliates collectively own less
than 50% of our outstanding shares of common stock. In addition, the agreement will terminate upon an initial public offering of our common
stock if the underwriters require that it be terminated.
       We and First Atlantic Capital have agreed to terminate the management consulting agreement upon the closing of this offering, and we
will pay First Atlantic Capital a termination fee of $3.0 million. First Atlantic Capital will receive no other fees from us in connection with this
offering or in connection with the management consulting agreement. We have agreed to reimburse First Atlantic Capital for expenses incurred
in connection with meetings between representatives of First Atlantic Capital and us in connection with First Atlantic Capital’s investment
in us for so long as First Atlantic Capital holds at least 20% of our outstanding shares of common stock.

Stockholders Agreement
      Concurrently with the closing of the merger, we entered into a stockholders agreement with Atlantic Equity Partners and certain
members of our management owning our equity securities, including James Thompson, Virginia Bunte, Ken Brugh, Fred Quandt, Carl Paul,
Franklin Paul (the ―Management Stockholders‖) and the remainder of our stockholders following the merger.


     Registration Rights
       Under the stockholders agreement, Atlantic Equity Partners is entitled to require us to file a registration statement for the sale of our
common stock held by them. There is no limitation on the number of such registrations that First Atlantic Capital may request, and we do not
have the ability to delay the filing or effectiveness of any such registration statements.
       In the event that Atlantic Equity Partners requests us to register its shares for sale to the public, the other Management Stockholders are
entitled to request that we include their shares in the offering. In the event that the managing underwriter for such an offering advises us that
marketing restrictions require a limitation on the number of shares to be included in the offering, the shares to be included will consist of, first,
the shares that First Atlantic Capital requested us to register, and second, the shares that the Management Stockholders requested us to register.
       In the event that we register our shares for sale to the public, both Atlantic Equity Partners and the Management Stockholders are
entitled to request that we include their shares in the offering. In the

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event that the managing underwriter for such an offering advises us that marketing restrictions require a limitation on the number of shares to
be included in the offering, the shares to be included will consist of, first, the shares that we request to register, second, the shares that Atlantic
Equity Partners requested us to register, and third, the shares that the Management Stockholders requested us to register.
       In addition, Atlantic Equity Partners or Carl or Franklin Paul, may request that we register their shares on a Form S-3, including for a
shelf-registration. Such request may be made no more than once every six months and must be in respect of shares with an aggregate market
value of not less than $1.0 million. The stockholders agreement does not contain any provision permitting us to suspend the effectiveness of
any shelf registration statement.
      Carl and Franklin Paul have entered into a voting rights and stockholders’ agreement with Atlantic Equity Partners pursuant to which
they have agreed, among other things, not to request the registration of their shares on Form S-3 and not to transfer their shares except at the
time of, and in the same proportion as, a transfer of shares by Atlantic Equity Partners. See footnote (1) to the table under ―Principal
Stockholders‖ for a description of the voting rights and stockholders’ agreement.
       We are required to bear all costs associated with the foregoing registrations, other than underwriting discounts and commissions.
      The registration rights described above are subject to the provisions of the lock-up agreements signed by each of Atlantic Equity
Partners, Carl Paul and Franklin Paul.


     Provisions Regarding our Shares
       Pursuant to the stockholders agreement, the Management Shareholders and Atlantic Equity Partners were subject to certain right of first
refusal and co-sale provisions. In addition, all stockholders were required to consent to a sale of our company following approval by our board
of directors and Atlantic Equity Partners. Furthermore, under the stockholders agreement, Atlantic Equity Partners and Carl Paul and Franklin
Paul have the right to participate in the issuance and sale by us of new shares of our common stock or equity securities. These preemptive rights
do not apply to this offering. Following the closing of this offering, all of the foregoing provisions regarding our shares will terminate.


     Board Composition
       Pursuant to the stockholders agreement, each stockholder agreed to vote their shares in favor of certain board nominees. For so long as
Carl Paul, Franklin Paul and their families hold more than 50% of their shares of our common stock issued to them in October 2002, they are
entitled to nominate either Carl Paul, Franklin Paul or another member of their family to our board of directors. For so long as Atlantic Equity
Partners holds more than 25% of the voting capital stock of our company, it is entitled to nominate all of our other directors. These nomination
and voting rights will terminate upon the closing of this offering, although each director appointed pursuant to these rights will continue to
serve until our next general annual stockholder meeting, subject to such director’s earlier death, resignation or removal.

Management Rights Agreement
       We and Atlantic Equity Partners have entered into a management rights agreement effective immediately prior to the closing of this
offering.
       In the event that we are not, or we cease to be, a ―controlled company‖ because Atlantic Equity Partners does not beneficially own, on its
own or as part of a group, more than 50% of our outstanding common stock, and we are required by Nasdaq National Market regulations to
have a majority of independent directors on our board of directors, to the extent necessary, the board of directors will simultaneously be
reduced or increased, as the case may be, in size to nine directors. This reduction or increase would be effective immediately following the first
annual or special meeting of our stockholders at which directors are to be elected (a ―Director Election‖) or effective immediately upon board
action by

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written consent. The board shall remain at this size until the first Director Election after the date on which Atlantic Equity Partners holds less
than 10% of our outstanding common stock.
       For so long as Atlantic Equity Partners continues to hold more than 25% of our outstanding common stock, it shall retain the right to
designate three nominees for election to our board of directors, subject to compliance with the Nasdaq National Market regulations. If Atlantic
Equity Partners continues to hold (1) less than 25% but at least 15% of our outstanding common stock, it will retain the right to designate two
director nominees, and (2) less than 15% but at least 10% of our outstanding common stock, it will retain the right to designate one director
nominee, and in each case, Atlantic Equity Partners will cause such number of directors nominated by Atlantic Equity Partners to resign as
would be necessary to make the number of remaining directors correspond with Atlantic Equity Partners’ designation rights unless our Board
decides that any such directors should continue to serve on our board of directors. Once Atlantic Equity Partners holds less than 10% of our
outstanding common stock, it shall have no right to designate directors. Pursuant to the management rights agreement, for so long as Atlantic
Equity Partners owns any shares of our common stock, Atlantic Equity Partners shall have the right to nominate a non-voting observer to attend
board or committee meetings of us and our subsidiaries, subject to such observer signing a confidentiality undertaking with us.
       To the extent permitted by applicable law, Atlantic Equity Partners will have the right to include in any committee of our board of
directors, or the board of directors or any committee of the board of directors of any of our subsidiaries, a number of directors equal to or
greater than the proportion of directors nominated by Atlantic Equity Partners to our board of directors at that time.

Consulting Agreements
      In June 2005, we entered into a consulting agreement with Lawrence N. Mondry, one of our directors. Under the agreement,
Mr. Mondry agreed to make himself available to us to provide 10 days of management consulting services relating to our retail operations and
organization during each calendar year of the consulting agreement. We paid Mr. Mondry an aggregate of $33,000 in fiscal 2005 for services
provided to us under this agreement. The consulting agreement with Mr. Mondry was terminated prior to the closing of this offering.
       On April 5, 2006, we entered into a consulting agreement with Thomas Hardy, one of our directors, that will terminate on December 31,
2006. Pursuant to the terms of the consulting agreement, Mr. Hardy will provide us with management consulting services related to our retail
operations and organization. We will pay Mr. Hardy $25,000 upon completion of the consulting services described.

Agreement to Provide Health Benefits to Our Founders
       In connection with our acquisition by Atlantic Equity Partners, 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.

Stock Option Grants
       See ―Management — Stock Options‖ for a description of certain stock option grants to our executive officers.

Employment Agreements
       We have entered into employment agreements with James D. Thompson, our President and Chief Executive Officer, and Virginia Bunte,
our Senior Vice President — Chief Financial Officer and Treasurer. In addition, we have entered into employment agreements with each of
Carl and Franklin Paul, our

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founders and stockholders of our company, to provide advisory services. See ―Management — Employment Agreements‖ for a description of
these agreements.

Indemnification Agreements and Liability Insurance
       We have entered into indemnification agreements with each of our directors and executive officers and intend to purchase directors’ and
officers’ liability insurance, appropriate for a public company, prior to the completion of this offering. The indemnification agreements and our
amended certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware
law. See ―Management — Limitations of Liability and Indemnification Matters.‖

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                                                         PRINCIPAL STOCKHOLDERS
       The following table sets forth information regarding the beneficial ownership of our common stock as of April 28, 2006 by:

         •          each of our 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 our outstanding common stock.
       Beneficial ownership is determined under the rules of the SEC. These rules deem common stock subject to options, warrants or rights
currently exercisable, or exercisable within 60 days, to be outstanding for purposes of computing the percentage ownership of the person
holding the options, warrants or rights or of a group of which the person is a member, but they do not deem such stock to be outstanding for
purposes of computing the percentage ownership of any other person or group. 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 ―Certain Relationships and
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 Holdings, Inc., 11000 N. IH-35, Austin, Texas 78753-3195. As of April 28, 2006,
9,472,676 shares of our common stock were issued and outstanding.
                                                        Before Offering                    After Offering                       Percent of
                                                                                                                            Class Beneficially
                                                    Shares                            Shares                                Owned Assuming
                                                  Beneficially        Percent of    Beneficially        Percent of          Exercise of Over-
Beneficial Owner                                    Owned               Class         Owned               Class             Allotment Option

Atlantic Equity Partners III, L.P. (1)                9,433,086            99.6 %     9,433,086              61.0 %                              57.6 %
Carl Paul (2)                                         1,498,668            15.8       1,533,210               9.9                                 9.3
Franklin Paul (2)                                     1,498,668            15.8       1,533,210               9.9                                 9.3
Roberto Buaron (3)                                    9,433,086            99.6       9,433,086                —                                   —
James D. Thompson (4)                                        —               —           65,685                 *                                   *
Virginia Bunte (5)                                           —               —            5,510                —                                   —
Kenneth Brugh (6)                                            —               —           56,189                 *                                   *
Matthew Corey                                                —               —               —                 —                                   —
Fred Quandt (7)                                              —               —            5,345                 *                                   *
Kiprian Miles                                                —               —               —                 —                                   —
Jeff Sheets (8)                                              —               —            4,413                 *                                   *
David Lowe                                                   —               —               —                 —                                   —
Charles Shaw (9)                                             —               —               —                 —                                   —
James Grover (10)                                            —               —               —                 —                                   —
Thomas G. Hardy (11)                                     39,057               *          39,057                 *                                   *
James Long (12)                                              —               —               —                 —                                   —
Noel Wilens (13)                                             —               —               —                 —                                   —
Lawrence Mondry (14)                                     21,931               *          21,931                 *                                   *
All directors and executive officers as a
  group (15 persons)                                  9,472,143           100.0 %     9,665,759              61.8 %                        58.4 %
                                                                                                                      Footnotes on following page

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  *     Represents less than 1%.



 (1)    The pre- and post-offering shares consist of 7,934,418 shares owned by Atlantic Equity Partners III, L.P. and 1,498,668 shares owned
        by Carl and Franklin Paul that are subject to a stockholders’ agreement (the ―old stockholders’ agreement‖) pursuant to which Carl and
        Franklin Paul have agreed to vote such shares in favor of nominees to our board of directors proposed by Atlantic Equity Partners III,
        L.P. These nomination rights will terminate upon the closing of this offering. In addition, Atlantic Equity Partners III, L.P., and Carl
        and Franklin Paul have entered into a voting and stockholders’ agreement (the ―new stockholders’ agreement‖) pursuant to which Carl
        and Franklin Paul have agreed to vote their 1,498,668 shares in the same manner and percentage as Atlantic Equity Partners III, L.P. in
        accordance with instructions given by Atlantic Equity Partners III, L.P. prior to any stockholder meeting or consent. In addition, the
        new stockholders’ agreement provides that Carl and Franklin Paul will not transfer the shares that are subject to the agreement except to
        persons related to them or controlled by them. In the event that Atlantic Equity Partners III, L.P. transfers any of its shares, whether by
        means of a registered offering, a private sale or a sale under Rule 144 of the Securities Act, Carl and Franklin Paul will be permitted to
        transfer a proportion of their holdings that is equal to the proportion of Atlantic Equity Partners III, L.P.’s holdings that is transferred.
        Carl and Franklin Paul will be permitted to include such proportional amount of their shares in the transfer by Atlantic Equity
        Partners III, L.P., if such transfer by Atlantic Equity Partners III, L.P. is a private sale. The new stockholders’ agreement terminates,
        among other things, on the earlier of (1) the date on which we first file a Form 10-K or Form 10-Q or a registration statement under
        the Securities Act based on which, Atlantic Equity Partners III, L.P. holds a number of shares of common stock that is less than 20.0%
        of our outstanding shares of common stock and (2) May 2008. As a result of these agreements, Atlantic Equity Partners III, L.P. may be
        deemed to be the beneficial owner of the shares held by Carl and Franklin Paul. Atlantic Equity Partners III, L.P. disclaims beneficial
        ownership of these shares. Atlantic Equity Partners III, L.P.’s address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
        York,
        New York 10022. As described in footnote 3 below, Roberto Buaron, one of our directors, has
        voting and investment power over the shares of our common stock of owned by Atlantic Equity Partners III, L.P.




 (2)    The pre- and post-offering shares consist of 979,979 shares owned by Carl Paul and 518,689 shares owned by Franklin Paul. The
        post-offering shares include equity units held by each of Carl and Franklin Paul, exercisable immediately upon the closing of this
        offering, which entitle each holder thereof, upon the holder’s election, to receive 17,271 shares of common stock. The pre- and
        post-offering share amounts do not include 7,934,418 shares owned by Atlantic Equity Partners III, L.P. that are subject to the old
        stockholders’ agreement described in footnote (1) pursuant to which Atlantic Equity Partners III, L.P. has agreed to vote such shares in
        favor of one nominee to our board of directors selected by Carl and Franklin Paul. These nomination rights will terminate upon the
        closing of this offering. In addition, Atlantic Equity Partners III, L.P. and Carl and Franklin Paul have entered into the new
        stockholders’ agreement described in footnote (1). As a result of these agreements, Carl and Franklin Paul may be deemed to be the
        beneficial owners of the shares held by Atlantic Equity Partners III, L.P. Each of Carl and Franklin Paul disclaims beneficial ownership
        of the shares owned by Atlantic Equity Partners III, L.P. The address of each of Carl and Franklin Paul is c/o Golfsmith International
        Holdings, Inc., 11000 N. IH-35, Austin, Texas 78753-3195.




 (3)    The pre- and post-offering shares include 7,934,418 shares owned by Atlantic Equity Partners III, L.P. Mr. Buaron is the sole member
        of Buaron Capital Corporation III, LLC. Buaron Capital Corporation III, LLC 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 our common stock. Mr. Buaron, as the sole member of Buaron
        Capital Corporation III, LLC has voting and investment power over, and may be deemed to beneficially own, the shares of

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          our common stock owned by Atlantic Equity Partners III, L.P. The pre- and post-offering share amounts also include 1,498,668 shares
          owned by Carl and Franklin Paul which Atlantic Equity Partners III, L.P. may be deemed to beneficially own by virtue of the
          stockholders’ agreements described in footnote (1). Mr. Buaron disclaims beneficial ownership of the shares owned by Carl and
          Franklin Paul and, except to the extent of his pecuniary interest therein, the shares held by Atlantic Equity Partners III, L.P.
          Mr. Buaron’s address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022.




 (4)      The post-offering shares beneficially owned include equity units held by Mr. Thompson, exercisable immediately upon the closing of
          this offering, which entitle the holder thereof, upon the holder’s election, to receive 65,685 shares of common stock.




 (5)      The post-offering shares beneficially owned include equity units held by Ms. Bunte, exercisable immediately upon the closing of this
          offering, which entitle the holder thereof, upon the holder’s election, to receive 5,510 shares of common stock.




 (6)      The post-offering shares beneficially owned include equity units held by Mr. Brugh, exercisable immediately upon the closing of this
          offering, which entitle the holder thereof, upon the holder’s election, to receive 56,189 shares of common stock.




 (7)      The post-offering shares beneficially owned include equity units held by Mr. Quandt, exercisable immediately upon the closing of this
          offering, which entitle the holder thereof, upon the holder’s election, to receive 5,345 shares of common stock.




 (8)      The post-offering shares beneficially owned include equity units held by Mr. Sheets, exercisable immediately upon the closing of this
          offering, which entitle the holder thereof, upon the holder’s election, to receive 4,413 shares of common stock.



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

   (11)        Mr. Hardy’s address is 935 Park Avenue, New York, New York 10028.

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

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

   (14)        Mr. Mondry’s address is 14951 N. Dallas Parkway, Dallas, Texas 75254.

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                                                    DESCRIPTION OF CAPITAL STOCK

General
       Upon the closing of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.001 per
share, and 10,000,000 shares of undesignated preferred stock, par value $0.001 per share. Immediately following the completion of this
offering, an aggregate of 15,472,676 shares of common stock will be issued and outstanding and no shares of preferred stock will be issued and
outstanding. As of April 28, 2006 there were six record holders of our common stock.

Common Stock
       Voting. The holders of our common stock are entitled to one vote for each outstanding share of common stock owned by that
stockholder on every matter properly submitted to the stockholders for their vote. Stockholders are not entitled to vote cumulatively for the
election of directors.
       Dividend Rights. Subject to the dividend rights of the holders of any outstanding series of preferred stock, holders of our common stock
are entitled to receive ratably such dividends and other distributions of cash or any other right or property as may be declared by our board of
directors out of our assets or funds legally available for such dividends or distributions.
       Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, holders of our
common stock are entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of liabilities. If
we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation
preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to
the holders of our common stock.

Preferred Stock
       Our amended and restated certificate of incorporation authorizes our board of directors, subject to limitations prescribed by law, to issue
up to 10,000,000 shares of preferred stock in one or more series without further stockholder approval. The board will have discretion to
determine the rights, preferences, privileges and restrictions of, including, without limitation, voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences of, and to fix the number of shares of, each series of our preferred stock.

Anti-Takeover Effects of Delaware Law and Our Amended and Restated Certificate of Incorporation and By-Laws
       Effect of Delaware Anti-Takeover Statute. Upon the completion of this offering, we will be subject to Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:

          •         prior to that date, the board of directors of the corporation approved either the business combination or the transaction that
                    resulted in the stockholder becoming an interested stockholder;

          •         upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested
                    stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
                    excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors
                    and also officers and by excluding employee stock plans in which employee participants do not have the right to determine
                    confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

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         •          on or subsequent to that date, the business combination is approved by the board of directors of the corporation and
                    authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66   2



                    / 3 % of the outstanding voting stock that is not owned by the interested stockholder.
       Section 203 of the Delaware General Corporation Law defines ―business combination‖ to include: (1) any merger or consolidation
involving the corporation and the interested stockholder; (2) any sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (3) subject to certain exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (4) any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
(5) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an ―interested stockholder‖ as any entity or person beneficially owning 15% or more of
the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
        Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws summarized below may be
deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to
be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders.
       Special Meetings of Stockholders. Our amended and restated certificate of incorporation and amended and restated bylaws provide that a
special meeting of stockholders may be called only by the Chairman of the Board or our board of directors upon a request by holders of at least
25% in voting power of all the outstanding shares entitled to vote at that meeting. The business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting pursuant to the notice of the meeting given by us.
        Notice Procedures. Our amended and restated bylaws establish an advance notice procedure with regard to all stockholder proposals to
be brought before meetings of our stockholders, including proposals relating to the nomination of candidates for election as directors or to any
other business brought before meetings of our stockholders. These procedures require that notice of such stockholder proposals for an annual
meeting must be delivered to our Secretary or mailed and received at our principal executive office not earlier than 120 calendar days and not
later than the close of business on the 90th calendar day prior to the first anniversary of the preceding year’s annual meeting. The notice of such
stockholder proposal for a special meeting of stockholders must be delivered to our Secretary or mailed and received at our principal executive
offices not earlier than 120 calendar days and not later than the close of business on the 90th calendar day prior to the meeting. The notice must
contain certain information specified in the bylaws.
      Supermajority Voting. Our amended and restated certificate of incorporation requires the approval of the holders of at least 75% of our
combined voting power to effect certain amendments to our amended and restated certificate of incorporation. Our amended and restated
bylaws may be amended by either a majority of the board of directors or the holders of 75% of our voting stock.
      No Stockholder Action by Written Consent. Our amended and restated certificate of incorporation and amended and restated bylaws
provide that an action required or permitted to be taken at any annual or special meeting of our stockholders may only be taken at a duly called
annual or special meeting of stockholders. This provision prevents stockholders from initiating or effecting any action by written consent, and
thereby taking actions opposed by the board. Notwithstanding the foregoing, for so long as Atlantic Equity Partners or its affiliates, together
with any group, as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, own at least 40% of our outstanding shares
of common stock, our stockholders will be permitted to take action by written consent.

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        The foregoing proposed provisions of our amended and restated certificate of incorporation and our amended and restated bylaws could
discourage potential acquisition proposals and could delay or prevent a change in control. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or threatened change of control. These provisions are designed to reduce our
vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence,
they also may inhibit fluctuations in the market price of our common stock that could result from actual or rumored takeover attempts. Such
provisions also may have the effect of preventing changes in our management.

The Nasdaq National Market
       We have applied to have and expect our common stock to be listed on the Nasdaq National Market under the symbol ―GOLF.‖

Transfer Agent and Registrar
       We have appointed National City Bank as the transfer agent and registrar for our common stock.

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                                    SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
       Prior to this offering, there has been no public market for our common stock. In addition to the shares that are being sold in this offering,
a number of our shares will be available for sale in the public markets after this offering subject to certain legal or contractual restrictions on
resale. Sales of our shares in the public market after the restrictions, if any, lapse, or the perception that those sales may occur, could adversely
affect the prevailing market price at such time and our ability to raise equity capital in the future.

Sale of Restricted Shares
       Following the closing of this offering, we will have outstanding an aggregate of 15,472,676 shares of common stock. Of these shares, the
6,000,000 shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the
Securities Act, unless the shares are held by any of our ―affiliates‖ as such term is defined in Rule 144 of the Securities Act. All remaining
shares held by our stockholders were issued and sold by us in private transactions and are eligible for public sale only if registered under the
Securities Act or if the stockholder qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which
rules are described below.
       As a result of the lock-up agreements described below and the provisions of Rule 144, Rule 144(k) and Rule 701 under the
Securities Act, the 9,472,676 outstanding shares of our common stock not being sold in this offering and 331,569 shares of common stock
issuable immediately following the closing of this offering upon the conversion of certain equity units will be available for sale in the public
market as follows:


         •          approximately 240,000 shares will be eligible for sale on the date of this prospectus; and




         •          approximately 9.6 million shares will be eligible for sale beginning 180 days after the date of this prospectus upon the
                    expiration of the lock-up agreements as described below, of which approximately 9.5 million will be subject to volume
                    limitations under Rule 144.

Lock-up Agreements
       Our officers, directors and the holders of substantially all of our outstanding common stock have signed lock-up agreements under which
they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or
exercisable or exchangeable for shares of our common stock for 180 days after the date of this prospectus. We have also agreed that we will not
to issue, sell or offer to sell any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common
stock for a period of 180 days after the date of this prospectus, other than (i) the shares of common stock sold in this offering, (ii) shares of
common stock or stock options issued under our incentive stock plans and the filing of a registration statement on Form S-8 with respect to
such plans and (iii) up to approximately 1.6 million shares of common stock issued in connection with mergers, joint ventures or acquisitions
provided that the holders of such shares agree to be bound by a lock-up agreement for the remainder of the lock-up period. Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. may, in their sole discretion, at any time and without prior notice or
announcement, release all or any portion of shares subject to the lock-up agreements.
        The 180-day restricted period described above will be extended if during the last 17 days of the 180-day restricted period we issue an
earnings release or material news or a material event relating to us occurs; or prior to the expiration of the 180-day restricted period, we
announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period. In either case, the
restrictions described above will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release,
the announcement of the material news or the occurrence of a material event, unless such extension is waived in writing by Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.

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       The transfer restrictions in the lock-up agreements by our officers, directors and certain other stockholders described above are subject to
the following exceptions:

         •          transactions relating to shares of common stock or other securities acquired in open market transactions, unless such
                    transaction would result in the filing of any reports pursuant to Section 16 of the Securities Exchange Act of 1934;

         •          the exercise of stock options granted pursuant to any of our equity incentive plans, provided that the transfer restrictions
                    shall apply to any shares of common stock issued upon such exercise;

         •          the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under
                    the Securities Exchange Act of 1934, as amended, provided that no sales shall be made pursuant to such a plan prior to the
                    expiration of the 180-day lock-up period;

         •          bona fide gifts (which shall include, in the case of an individual, a gift occurring at death by will or intestacy, and transfers
                    during lifetime to a trust or other entity for bona fide estate planning or tax purposes); and

         •          distributions to limited partners or shareholders or transfers to controlled or controlling entities or entities under common
                    control, provided that in the case of any transfer or distribution pursuant to this or the immediately preceding bullet point,
                    each donee, distributee or other transferee shall enter into a similar lock-up agreement.
        In addition, the lock-up agreements signed by our founders, Carl and Franklin Paul, and by our officers who also hold certain equity
units (including our chief executive officer, chief financial officer, two senior vice presidents and a vice president) permit each of them to sell
40% of the shares of common stock underlying those equity units (representing approximately 68,700 shares of common stock in the
aggregate) to pay the taxes resulting from those units becoming convertible into shares of common stock upon the closing of this offering.
Furthermore, 10,965 shares held by Thomas G. Hardy, one of our directors, are not subject to any lock-up agreement.

Rule 144
      In general, under Rule 144 of the Securities Act, a person deemed to be our ―affiliate‖ or a person holding restricted shares, who
beneficially owns shares that were not acquired from us or any of our ―affiliates‖ within the previous year, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of either:


         •          1% of the then outstanding shares of our common stock, which is expected to equal approximately 154,726 shares
                    immediately after this offering, or



         •          the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks
                    preceding the filing with the SEC of a notice on Form 144 with respect to such sale.
       Sales under Rule 144 of the Securities Act are also subject to prescribed requirements relating to the manner of sale, notice and
availability of current public information about us.

Rule 144(k)
       Under Rule 144(k), a person who is not deemed to have been one of our ―affiliates‖ at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years, generally including the holding period of any prior owner
other than an ―affiliate,‖ is entitled to sell such shares without complying with the manner of sale, notice filing, volume limitation or notice
provisions of Rule 144.

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Rule 701
       In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchase shares from us in connection
with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell those shares
90 days after the effective date of this offering in reliance on Rule 144, without having to comply with certain restrictions, including the
holding period, contained in Rule 144.
        The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, along with the shares acquired upon exercise of those options, including
exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual
restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than ―affiliates,‖ as defined in
Rule 144, subject only to the manner of sale provisions of Rule 144. Securities issued in reliance on Rule 701 may be sold by ―affiliates‖ under
Rule 144 without compliance with its one year minimum holding period requirement.

Options
        As of April 28, 2006, options to purchase a total of 870,237 shares of common stock were outstanding. Immediately following the
closing of this offering, we expect that options to purchase approximately 500,000 shares of our common stock will be vested and exercisable.
We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock issued or
reserved for issuance under our 2002 Incentive Stock Plan and 2006 Incentive Compensation Plan. The first such registration statement is
expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly,
shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting
restrictions with us or the lock-up restrictions described above or are subject to the volume limitations described above applicable to our
affiliates under Rule 144.

Registration Rights
       After this offering, subject to the lock-up agreement described above, Atlantic Equity Partners may request that we register some or all
of the 7,934,418 shares that it holds for sale to the public and Atlantic Equity Partners, and certain other stockholders have the right to include
their shares in public offerings we undertake in the future. Under these circumstances, if the registration is effected, these shares will become
freely tradable without restriction under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on
the trading price of our common stock. See ―Certain Relationships and Related Party Transactions — Shareholders Agreement.‖

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                                                U.S. FEDERAL TAX CONSIDERATIONS
                                           FOR NON-U.S. HOLDERS OF OUR COMMON STOCK
        The following is a general description of the material U.S. federal income tax consequences that may be relevant to ―non-U.S. holders,‖
as defined below, with respect to the acquisition, ownership and disposition of our common stock. This description addresses only the
U.S. federal income tax considerations of ―non-U.S. holders‖ that are initial purchasers of our common stock pursuant to the offering and that
will hold our common stock as capital assets. For purposes of this description, a ―non-U.S. holder‖ is a beneficial owner of our common stock
(other than an entity or arrangement classified as a partnership for U.S. federal income tax purposes) that, for U.S. federal income tax purposes,
is not:

         •          a citizen or resident of the United States;

         •          a corporation, or an entity classified as a corporation for U.S. federal income tax purposes, 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 U.S. federal income tax regardless of its source; or

         •          a trust if such trust validly elects to be treated as a United States person for U.S. federal income tax purposes or if (a) a court
                    within the United States is able to exercise primary supervision over its administration and (b) one or more United States
                    persons have the authority to control all of the substantial decisions of the trust.
       If a partnership (or any other entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds our common
stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership.
Such a partner or partnership should consult its tax advisor as to its tax consequences.
       This description does not address tax considerations applicable to holders that are United States persons or that may be subject to special
tax rules, including:

         •          financial institutions or insurance companies;

         •          real estate investment trusts, regulated investment companies or grantor trusts;

         •          dealers or traders in securities or currencies;

         •          tax-exempt entities;

         •          certain former citizens or residents of the United States;

         •          persons that received our common stock as compensation for the performance of services;

         •          persons that will hold our common stock as part of a ―hedging‖ or ―conversion‖ transaction or as a position in a ―straddle‖
                    for U.S. federal income tax purposes;

         •          persons that have a ―functional currency‖ other than the U.S. dollar; or

         •          holders that own or are deemed to own 10% or more, by voting power or value, of our stock.
      Moreover, except as set forth below, this description does not address the U.S. federal estate and gift or alternative minimum tax
consequences of the acquisition, ownership and disposition of our common stock.
       This description is based on the Internal Revenue Code of 1986, as amended (the ―Code‖), existing, proposed and temporary
U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as in effect and available on the date hereof. All
of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below.

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     You should consult your tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring,
owning or disposing of our common stock.

Distributions on Our Common Stock
       We have not declared or paid distributions on our common stock since the merger transaction on October 15, 2002, and we do not intend
to pay any distributions on our common stock in the foreseeable future. (See ―Dividend Policy.‖) The gross amount of any distribution of cash
or property, other than certain distributions, if any, of our common stock distributed pro rata to all our common stockholders, that we make to
you with respect to our common stock will constitute dividends to the extent such distributions are paid out of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and
profits as determined under U.S. federal income tax principles, the excess will be treated as a tax-free return of your adjusted basis in our
common stock and thereafter as capital gain.
       Generally, but subject to the discussions below under ―Status as United States Real Property Holding Corporation‖ and ―Backup
Withholding Tax and Information Reporting Requirements,‖ if you are a non-U.S. holder, distributions of cash or property (other than certain
distributions, if any, of our common stock distributed pro rata to all our common stockholders) paid to you will be subject to withholding of
U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable U.S. income tax treaty. In order to obtain the
benefit of any applicable U.S. income tax treaty, you must provide a properly executed Internal Revenue Service form ( e.g. , Form W-8BEN).
Such form generally would contain your name and address and a certification that you are eligible for the benefits of such treaty.
       Except as may be otherwise provided in an applicable U.S. income tax treaty, if you are a non-U.S. holder and conduct a trade or
business within the United States, you generally will be taxed at ordinary U.S. federal income tax rates (on a net income basis) on dividends
that are effectively connected with the conduct of such trade or business, and such dividends will not be subject to the withholding described
above. If you are a foreign corporation, you may also be subject to a 30% ―branch profits tax‖ unless you qualify for a lower rate under an
applicable U.S. income tax treaty. To claim an exemption from withholding because the income is effectively connected with a U.S. trade or
business, you must provide a properly executed Form W-8ECI (or such successor form as the Internal Revenue Service designates) prior to
the payment of dividends.

Sale or Other Disposition of Our Common Stock
        Generally, but subject to the discussions below under ―Status as United States Real Property Holding Corporation‖ and ―Backup
Withholding Tax and Information Reporting Requirements,‖ if you are a non-U.S. holder, you will not be subject to U.S. federal income or
withholding tax on any gain realized on the sale or other disposition of our common stock unless (1) such gain is effectively connected with
your conduct of a trade or business in the United States or (2) if you are an individual, you are present in the United States for 183 days or more
in the taxable year of such sale or other disposition and certain other conditions are met.

Status as United States Real Property Holding Corporation
       If you are a non-U.S. holder, under certain circumstances, gain recognized on the sale or exchange of, and certain distributions in excess
of basis with respect to, our common stock would be subject to U.S. federal income tax, notwithstanding your lack of other connections with
the United States, if we are or have been a ―United States real property holding corporation‖ for U.S. federal income tax purposes at any time
during the five-year period ending on the date of such sale or exchange (or distribution). We believe that we will not be classified as a United
States real property holding corporation as of the date of this offering and do not expect to become a United States real property holding
corporation. If we are or become a United States real property holding corporation, so long as our common

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stock is considered regularly traded on an established securities market under the applicable Code provisions, only a non-U.S. holder who,
actually or constructively, holds or held (at any time during the shorter of the five-year period preceding the date of the sale or exchange (or
distribution) or the non-U.S. holder’s holding period) more than 5% of our common stock will be subject to U.S. federal income tax on the
sale or exchange of (or certain distributions in excess of basis with respect to) our common stock.

U.S. Federal Estate Tax
       Our common stock held by an individual at death, regardless of whether such individual is a citizen, resident or domiciliary of the United
States, will be included in the individual’s gross estate for U.S. federal estate tax purposes, subject to an applicable estate tax or other treaty,
and therefore may be subject to U.S. federal estate tax.

Backup Withholding Tax and Information Reporting Requirements
       U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certain noncorporate holders
of stock. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, common
stock made within the United States, or by a U.S. payor or U.S. middleman, to a holder of common stock, other than an exempt recipient,
including a corporation, a payee that is not a United States person that provides an appropriate certification and certain other persons. A payor
will be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of,
common stock within the United States, or by a U.S. payor or U.S. middleman, to a holder, other than an exempt recipient, if such holder fails
to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup
withholding tax requirements. The backup withholding tax rate currently is 28%.
       If you are not a United States person, under current U.S. Treasury Regulations, backup withholding will not apply to distributions on our
common stock to you, provided that we have received valid certifications meeting the requirements of the Code and neither we nor the payor
has actual knowledge or reason to know that you are a United States person for purposes of such backup withholding tax requirements.
        If provided by a beneficial owner, the certification must give the name and address of such owner, state that such owner is not a United
States person, or, in the case of an individual, that such person is neither a citizen nor resident of the United States, and must be signed by the
owner under penalties of perjury. If provided by a financial institution, other than a financial institution that is a qualified intermediary, the
certification must state that the financial institution has received from the beneficial owner the certificate set forth in the preceding sentence, set
forth the information contained in such certificate (and include a copy of such certificate), and be signed by an authorized representative of the
financial institution under penalties of perjury. Generally, the furnishing of the names of the beneficial owners of our common stock that are
not United States persons and a copy of such beneficial owner’s certificate by a financial institution will not be required where the financial
institution is a qualified intermediary.
       In the case of such payments made within the United States to a foreign simple trust, a foreign grantor trust or a foreign partnership,
other than payments to a foreign simple trust, a foreign grantor trust or a foreign partnership that qualifies as a ―withholding foreign trust‖ or a
―withholding foreign partnership‖ within the meaning of such U.S. Treasury Regulations and payments to a foreign simple trust, a foreign
grantor trust or a foreign partnership that are effectively connected with the conduct of a trade or business in the United States, the beneficiaries
of the foreign simple trust, the persons treated as the owners of the foreign grantor trust or the partners of the foreign partnership, as the case
may be, will be required to provide the certification discussed above, and the trust or partnership, as the case may be, will need to provide an
appropriate intermediary certification form, in order to establish an exemption from

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backup withholding tax and information reporting requirements. Moreover, a payor may rely on a certification provided by a payee that is not a
United States person only if such payor does not have actual knowledge or a reason to know that any information or certification stated in such
certificate is incorrect.
      Backup withholding tax is not an additional tax. Any amounts withheld under the backup withholding tax rules from a payment to a
non-U.S. holder can be refunded or credited against the non-U.S. holder’s U.S. federal income tax liability, if any, provided that the required
information is furnished to the Internal Revenue Service in a timely manner.
       The foregoing description of U.S. federal income and other tax consequences is not intended to constitute a complete analysis of all tax
consequences relating to the acquisition, ownership and disposition of our common stock. You should consult your own tax advisor concerning
the tax consequences of your particular situation.

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                                                                UNDERWRITING
      Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Lazard Capital Markets LLC are acting as
representatives of the underwriters. Subject to the terms and conditions described in a purchase agreement among us and the underwriters, we
have agreed to sell to the underwriters, and each of the underwriters severally have agreed to purchase from us, the number of shares listed
opposite their names below.
                                                                                                                                       Number
Underwriter                                                                                                                            of Shares

Merrill Lynch, Pierce, Fenner & Smith
  Incorporated
J.P. Morgan Securities Inc.
Lazard Capital Markets LLC

      Total


      Subject to the terms and conditions set forth in the purchase agreement, the underwriters have agreed, severally and not jointly, to
purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase
agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
     We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those liabilities.
       The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of
legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt
by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.

Commissions and Discounts
       The underwriters have advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price
on the cover page of this prospectus and to dealers at that price less a concession not in excess of $        per share. The underwriters may
allow, and the dealers may reallow, a discount not in excess of $         per share to other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
       The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes
either no exercise or full exercise by the underwriters of their overallotment option.
                                                                                   Per Share           Without Option              With Option

Public offering price                                                             $                   $                            $
Underwriting discount                                                             $                   $                            $
Proceeds, before expenses, to Golfsmith International Holdings, Inc.              $                   $                            $
       The expenses of the offering, not including the underwriting discount, are estimated at $3.0 million and are payable by us.

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Overallotment Option
       We have granted to the underwriters an option to purchase up to 900,000 additional shares at the public offering price less the
underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any
overallotments. If the underwriters exercise this option, each underwriter will be obligated, subject to conditions contained in the purchase
agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

Reserved Shares
       At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5.0% of the shares offered by this
prospectus for sale to some of our directors, officers, employees, distributors, dealers, business associates and related persons. If these persons
purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally
confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms
as the other shares offered by this prospectus.

No Sales of Similar Securities
       We and our executive officers, directors and existing stockholders have agreed, with exceptions, not to sell or transfer any common
stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch and J.P. Morgan Securities Inc.
Specifically, we and these other individuals have agreed not to directly or indirectly:

         •          offer, pledge, sell or contract to sell any common stock;

         •          sell any option or contract to purchase any common stock;

         •          purchase any option or contract to sell any common stock;

         •          grant any option, right or warrant for the sale of any common stock;

         •          lend or otherwise dispose of or transfer any common stock;

         •          request or demand that we file a registration statement related to the common stock; or

         •          enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any
                    common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or
                    otherwise.
       This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with
common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person
executing the agreement later acquires the power of disposition. In the event that either (x) during the last 17 days of the 180-day period
referred to above, we issue an earnings release or material news or a material event relating to the Company occurs or (y) prior to the expiration
of the 180-day restricted period, we announce that we will release earnings results or become aware that material news or a material event will
occur during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions described above shall continue to
apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or
material event. The lock-up agreements are subject to a number of exceptions as described above under ―Shares of Common Stock Eligible for
Future Sale.‖

Quotation on the Nasdaq National Market
    We expect the shares to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol
―GOLF.‖

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        Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through
negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the
initial public offering price are:

         •          the valuation multiples of publicly traded companies that the representative believes to be comparable to us,

         •          our financial information,

         •          the history of, and the prospects for, our company and the industry in which we compete,

         •          an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues,

         •          the present state of our development, and

         •          the above factors in relation to market values and various valuation measures of other companies engaged in activities
                    similar to ours.
      An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public
market at or above the initial public offering price. The underwriters do not expect to sell more than 5% of the shares in the aggregate to
accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids
       Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and
purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as
bids or purchases to peg, fix or maintain that price.
       In connection with the offering, the underwriters may purchase and sell our common stock in the open market. These transactions may
include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the
sale by the underwriters of a greater number of shares than they are required to purchase in the offering. ―Covered‖ short sales are sales made
in an amount not greater than the underwriters’ option to purchase additional shares in the offering. The underwriters may close out any
covered short position by either exercising their over-allotment option or purchasing shares in the open market. In determining the source of
shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in
the open market as compared to the price at which they may purchase shares through the overallotment option. ―Naked‖ short sales are sales in
excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common
stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of
various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.
       The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in
stabilizing or short covering transactions.
       Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or
maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result,
the price of our common stock may be higher than the price that might otherwise exist in the open market.

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       Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any
representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued
without notice.

Selling Restrictions
       In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ―Relevant
Member State‖), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the
―Relevant Implementation Date‖), no offer of shares of our common stock to the public in that Relevant Member State may be made prior to
the publication of a prospectus in relation to shares of our common stock which has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive, except that, with effect from and including the Relevant Implementation Date,
an offer of shares of our common stock may be made to the public in that Relevant Member State at any time:

         •          to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated,
                    whose corporate purpose is solely to invest in securities;

         •          to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a
                    total balance sheet of more than € 43,000,000, and (3) an annual net turnover of more than € 50,000,000 as shown in its last
                    annual or consolidated accounts; or

         •          in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the
                    Prospectus Directive.
       For the purposes of this provision, the expression ―offer of shares to the public‖ in relation to any shares of our common stock in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the
shares of our common stock to be offered so as to enable an investor to decide to purchase or subscribe the shares of our common stock, as the
same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, and
the expression ―Prospectus Directive‖ means Directive 2003/71/ EC and includes any relevant implementing measure in each Relevant
Member State.
       Each underwriter has agreed that (a) it has not made and will not make an offer of the shares to the public in the United Kingdom prior
to the publication of a prospectus in relation to the shares of our common stock and the offer that has been approved by the Financial Services
Authority (―FSA‖) or, where appropriate, approved in another member state and notified to the FSA, all in accordance with the Prospectus
Directive, except that it may make an offer of the shares to persons who fall within the definition of ―qualified investor‖ as that term is defined
in section 86(1) of the Financial Services and Markets Act 2000 (―FSMA‖) or otherwise in circumstances which do not result in an offer of
transferable securities to the public in the United Kingdom within the meaning of the FSMA; (b) it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within
the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which
section 21(1) of the FSMA does not apply; and (c) it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.
       No prospectus (including any amendment, supplement or replacement thereto) has been prepared in connection with the offering of the
shares that has been approved by the Autorité des marchés financiers or by the competent authority of another state that is a contracting party to
the Agreement on

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the European Economic Area that has been recognized in France; no shares have been offered or sold and will be offered or sold, directly or
indirectly, to the public in France with the exception only to qualified investors (investisseurs qualifiés) and/or to a limited circle of investors
(cercle restreint d’investisseurs) acting for their own account as defined in article L. 411-2 of the French Code Monétaire et Financier and
applicable regulations thereunder; none of this prospectus or any other materials related to the offering or information contained therein relating
to the shares has been released, issued or distributed to the public in France with the exception only to qualified investors (investisseurs
qualifiés) and/or to a limited circle of investors (cercle restreint d’investisseurs) as mentioned above; and the direct or indirect resale to the
public in France of any shares acquired by any qualified investors (investisseurs qualifiés) and/or any investors belonging to a limited circle of
investors (cercle restreint d’investisseurs) may be made only as provided by articles L. 412-1 and L. 621-8 of the French Code Monétaire et
Financier and applicable regulations thereunder.
       The shares may not and will not be publicly offered, distributed or redistributed in Switzerland and neither this prospectus nor any other
solicitation for investments in the shares may be communicated or distributed in Switzerland in any way that could constitute a public offering
within the meaning of Articles 1156 or 652a of the Swiss Code of Obligations or of Article 2 of the Federal Act on Investment Funds of
18 March 1994. This prospectus may not be copied, reproduced, distributed or passed on to others without the underwriters’ prior written
consent. This prospectus is not a prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations and may not
comply with the information standards required thereunder. The issuer will not apply for a listing of the shares on any Swiss stock exchange or
other Swiss regulated market and this prospectus may not comply with the information required under the relevant listing rules. The shares
have not and will not be registered with the Swiss Federal Banking Commission and have not and will not be authorized under the Federal Act
on Investment Funds of 18 March 1994. The investor protection afforded to acquirors of investment fund certificates by the Federal Act on
Investment Funds of 18 March 1994 does not extend to acquirors of the shares.
       The shares will not be offered, sold or delivered and copies of this prospectus or any other document relating to the shares will not be
distributed in Italy other than to professional investors (investitori professionali), as defined in Article 31, paragraph 2 of Regulation No. 11522
of July 1, 1998 (―Regulation No. 11522‖), and less than 200 individuals resident in Italy which have been individually identified, in accordance
with Italian securities, tax and exchange control and all other applicable laws and regulations, provided however, that any such offer, sale or
delivery of the shares or distribution of copies of this prospectus or any other document relating to the shares in Italy is:

         •          made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in
                    accordance with Legislative Decree No. 385 of September 1, 1993 (the ―Banking Act‖), Decree No. 58 of February 24,
                    1998, Regulation No. 11522, as amended, and any other applicable laws and regulations; and

         •          in compliance with any other applicable notification requirement or limitation which may be imposed upon the offer of the
                    shares stock in Italy by CONSOB.

Electronic Distribution
       In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as
e-mail. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. will be facilitating electronic
distributions for this offering to certain of their electronic subscription customers. Merrill Lynch, Pierce, Fenner & Smith Incorporated and
J.P. Morgan Securities Inc. intend to allocate a limited number of shares for sale to their online brokerage customers. An electronic prospectus
is available on the Internet sites maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. Other than
the prospectus in electronic format, the information on the Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
Internet sites is not part of this prospectus.

                                                                        107
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Other Relationships
      Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions.
      In connection with the retirement of our 8.375% senior secured notes due October 15, 2009, we intend to engage Lazard Frères & Co.
LLC to act as our financial advisor. In connection with its services, we intend to pay Lazard Frères & Co. LLC an advisory fee of $300,000
upon the completion of the refinancing and to indemnify them against certain liabilities or to contribute to payments they may be required to
make in respect of those liabilities.


                                                             LEGAL MATTERS
       The validity of the shares of common stock being offered by this prospectus and other legal matters concerning this offering will be
passed upon for us by White & Case LLP, New York, New York. Various legal matters related to the sale of the common stock issued in this
offering will be passed upon for the underwriters by Shearman & Sterling LLP, New York, New York.


                                                                   EXPERTS
       The consolidated financial statements of Golfsmith International Holdings, Inc. as of December 31, 2005 and the January 1, 2004, and
for the three fiscal years in the period ended December 31, 2005, included in this prospectus have been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their reports appearing herein and elsewhere in the registration statement, and are
included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

                                                                       108
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                                         WHERE YOU CAN FIND ADDITIONAL INFORMATION
       We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by
this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration
statement. This prospectus omits information contained in the registration statement as permitted by the rules and regulations of the SEC. For
further information with respect to us and the common stock offered by this prospectus, reference is made to the registration statement.
Statements herein concerning the contents of any contract or other document are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed with the SEC as an exhibit to the registration statement, each such statement being
qualified by and subject to such reference in all respects. With respect to each such document filed with the SEC as an exhibit to the
registration statement, reference is made to the exhibit for a more complete description of the matter involved.
       As a result of the offering hereunder, we will become subject to the informational requirements of the Securities Exchange Act of 1934,
as amended, and in accordance with such laws, will file reports and other information with the SEC. Reports, registration statements, proxy
statements, and other information filed by us with the SEC can be inspected and copied at the public reference facilities maintained by the SEC
at 100 F. Street, N.E., Washington, D.C. 20549. Information regarding the operation of the public reference facilities may be obtained by
calling 1-800-SEC-0330. The SEC maintains a web site that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov .
        We intend to furnish holders of our common stock with annual reports containing, among other information, audited financial statements
certified by an independent registered public accounting firm and quarterly reports containing unaudited condensed financial information for
the first three quarters of each fiscal year. We intend to furnish other reports as we may determine or as may be required by law.

                                                                        109
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                                               Index to Consolidated Financial Statements
                                                                                                                                Page

 Report of Independent Registered Public Accounting Firm                                                                           F-2
 Consolidated Balance Sheets at December 31, 2005 and January 1, 2005                                                              F-3
 Consolidated Statements of Operations for the fiscal year ended December 31, 2005, the fiscal year ended January 1, 2005 and
 the fiscal year ended January 3, 2004                                                                                             F-5
 Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the fiscal year ended December 31, 2005,
 the fiscal year ended January 1, 2005 and the fiscal year ended January 3, 2004                                                   F-6
 Consolidated Statements of Cash Flows for the fiscal year ended December 31, 2005, the fiscal year ended January 1, 2005
 and the fiscal year ended January 3, 2004                                                                                        F-7
 Notes to Consolidated Financial Statements                                                                                       F-8
 Consolidated Balance Sheets at April 1, 2006 (unaudited) and December 31, 2005                                                  F-32
 Consolidated Statements of Operations for the three months ended April 1, 2006 and April 2, 2005 (unaudited)                    F-34
 Consolidated Statements of Cash Flows for the three months ended April 1, 2006 and April 2, 2005 (unaudited)                    F-35
 Notes to Consolidated Financial Statements (unaudited)                                                                          F-37

                                                                    F-1
Table of Contents




                             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Golfsmith International Holdings, Inc.
       We have audited the accompanying consolidated balance sheets of Golfsmith International Holdings, Inc. as of December 31, 2005 and
January 1, 2005 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the
years ended December 31, 2005, January 1, 2005 and January 3, 2004. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
       We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
       In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Golfsmith International Holdings, Inc. at December 31, 2005 and January 1, 2005 and the consolidated results of their operations and their cash
flows for the years ended December 31, 2005, January 1, 2005 and January 3, 2004, in conformity with U.S. generally accepted accounting
principles.




                                                           /s/ ERNST & YOUNG LLP

Austin, Texas
March 10, 2006
except for Note 21, as to which the
date is May 25, 2006

                                                                        F-2
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                                         GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                                CONSOLIDATED BALANCE SHEETS
                                                                                              December 31,            January 1,
                                                                                                  2005                  2005

                                                                                                                      (as restated)
                                                               ASSETS
Current assets:
    Cash and cash equivalents                                                             $         4,207,497     $         8,574,966
    Receivables, net of allowances of $146,964 at December 31, 2005 and $161,838 at
      January 1, 2005                                                                              1,646,454                  854,555
    Inventories                                                                                   71,472,061               54,197,532
    Prepaid and other current assets                                                               6,638,109                6,405,525

Total current assets                                                                              83,964,121               70,032,578
Property and equipment:
    Land and buildings                                                                            21,256,771               21,133,430
    Equipment, furniture, fixtures                                                                19,004,608               15,174,320
    Leasehold improvements and construction in progress                                           20,866,839               15,247,612

                                                                                                   61,128,218              51,555,362
     Less: accumulated depreciation and amortization                                              (14,558,256 )           (10,647,641 )

Net property and equipment                                                                        46,569,962               40,907,721
Goodwill                                                                                          41,634,525               41,634,525
Tradenames                                                                                        11,158,000               11,158,000
Trademarks                                                                                        14,156,127               14,483,175
Customer database, net of accumulated amortization of $1,227,490 at December 31, 2005
 and $849,801 at January 1, 2005                                                                    2,171,715               2,549,404
Debt issuance costs, net of accumulated amortization of $3,126,103 at December 31, 2005
 and $2,062,104 at January 1, 2005                                                                  4,731,612               5,795,611
Other long-term assets                                                                                450,208                 368,285

Total assets                                                                              $      204,836,270      $      186,929,299


                                                                   F-3
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                                             GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                                     CONSOLIDATED BALANCE SHEETS
                                                                                                  December 31,           January 1,
                                                                                                      2005                 2005

                                                                                                                         (as restated)
                                             LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
    Accounts payable                                                                          $       42,000,236     $        31,006,493
    Accrued expenses and other current liabilities                                                    19,163,459              18,717,115
    Lines of credit                                                                                           —                       —
Total current liabilities                                                                             61,163,695              49,723,608
Long-term debt, less current maturities                                                               82,450,000              79,808,033
Deferred rent liabilities                                                                              4,095,442               3,084,367

Total liabilities                                                                                    147,709,137            132,616,008
Stockholders’ Equity:
    Common stock –$.001 par value; 40,000,000 shares authorized; 9,472,143 shares
       issued and outstanding at December 31, 2005 and January 1, 2005                                      9,473                    9,473
          Restricted stock units –$.001 par value; 331,569 shares issued and outstanding at
            December 31, 2005 and January 1, 2005                                                            331                     331
    Additional capital                                                                                60,301,153              60,301,153
    Other comprehensive income                                                                           135,815                 279,607
    Accumulated deficit                                                                               (3,319,639 )            (6,277,273 )

Total stockholders’ equity                                                                            57,127,133              54,313,291
Total liabilities and stockholders’ equity                                                    $      204,836,270     $      186,929,299


                                                            See accompanying notes.

                                                                       F-4
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                                         GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                             Fiscal Year
                                                                               Ended                Fiscal Year             Fiscal Year
                                                                            December 31,              Ended                   Ended
                                                                                2005              January 1, 2005         January 3, 2004

Net revenues                                                            $     323,794,225     $       296,202,149     $       257,744,780
Cost of products sold                                                         208,044,286             195,014,579             171,083,110

Gross profit                                                                  115,749,939             101,187,570              86,661,670
Selling, general and administrative                                            99,310,158              90,763,231              73,400,271
Store pre-opening expenses                                                      1,764,685                 742,880                 599,603
Total operating expenses                                                      101,074,843              91,506,111              73,999,874

Operating income                                                               14,675,096               9,681,459              12,661,796
Interest expense                                                              (11,744,232 )           (11,240,550 )           (11,156,792 )
Interest income                                                                    73,263                  63,939                  39,776
Other income                                                                      469,841               1,178,790                 210,707
Other expense                                                                    (116,331 )               (16,530 )               (46,270 )

Income (loss) from operations before income taxes                               3,357,637                (332,892 )             1,709,217
Income tax expense                                                               (400,003 )            (4,422,724 )              (644,953 )
Net income (loss)                                                       $       2,957,634     $        (4,755,616 )   $         1,064,264

Basic and diluted net income (loss) per share of common stock           $            0.30     $             (0.49 )   $              0.11
Basic weighted average common shares outstanding                                9,803,712               9,803,712               9,441,148
Diluted weighted average common shares outstanding                              9,943,443               9,803,712               9,441,148

                                                         See accompanying notes.

                                                                  F-5
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                               AND COMPREHENSIVE INCOME
                                                    Restricted Stock
                             Common Stock                Units                                         Other
                                                                                   Additional       Comprehensive         Accumulated           Stockholders’
                                                                  Amoun
                           Shares       Amount     Shares                           Capital             Income              Deficit                Equity
                                                                    t

Balance at
  December 28, 2002        8,806,881    $ 8,807     368,122      $ 368         $    56,001,784      $      48,148     $     (2,585,921 )    $     53,473,186
Issuance of common
  stock                      628,709         629            —          —             4,299,369                   —                      —           4,299,998
Conversion of restricted
  stock                       36,553          37    (36,553 )          (37 )                    —                —                      —                   —
Comprehensive loss:
  Translation
    adjustments,
    cumulative
    translation gain of
    $186,877 at
    January 3, 2004                 —         —             —          —                        —         138,729                   —                 138,729
  Net income                        —         —             —          —                        —              —             1,064,264              1,064,264
    Total comprehensive
      income                        —         —             —          —                        —                —                      —           1,202,993

Balance at January 3,
 2004                      9,472,143    $ 9,473     331,569      $ 331         $    60,301,153      $     186,877     $     (1,521,657 )    $     58,976,177


Comprehensive loss:
 Translation
   adjustments,
   cumulative
   translation gain of
   $279,607 at
   January 1, 2005                  —         —             —          —                        —          92,730                   —                  92,730
 Net loss                           —         —             —          —                        —              —            (4,755,616 )           (4,755,616 )
   Total comprehensive
     loss                           —         —             —          —                        —                —                      —          (4,662,886 )

Balance at January 1,
 2005                      9,472,143    $ 9,473     331,569      $ 331         $    60,301,153      $     279,607     $     (6,277,273 )    $     54,313,291


Comprehensive loss:
 Translation
   adjustments,
   cumulative
   translation gain of
   $135,815 at
   December 31, 2005                —         —             —          —                        —        (143,792 )                 —                (143,792 )
 Net income                         —         —             —          —                        —              —             2,957,634              2,957,634
   Total comprehensive
     income                         —         —             —          —                        —                —                      —           2,813,842

Balance at
 December 31, 2005         9,472,143    $ 9,473     331,569      $ 331         $    60,301,153      $     135,815     $     (3,319,639 )    $     57,127,133



                                                        See accompanying notes.

                                                                       F-6
Table of Contents


                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                Fiscal Year           Fiscal Year           Fiscal Year
                                                                                  Ended                 Ended                 Ended
                                                                               December 31,           January 1,            January 3,
                                                                                   2005                  2005                  2004

                                                                                                      (as restated)         (as restated)
Operating Activities
Net income (loss)                                                          $        2,957,634     $      (4,755,616 )   $       1,064,264
Adjustments to reconcile net income (loss) to net cash provided by
 operating activities:
    Depreciation                                                                    5,489,782             5,261,001             4,850,711
    Amortization of intangible assets                                                 377,689               377,690               377,689
    Amortization of debt issue costs and debt discount                              3,705,966             3,300,169             3,011,179
    Non-cash loss on write-off of property and equipment                            1,480,601               476,713                    —
    Net loss (gain) on sale of real estate and other assets                          (370,613 )          (1,064,045 )               3,069
    Changes in operating assets and liabilities:
        Accounts receivable                                                         (791,899 )              525,737            (1,109,008 )
        Inventories                                                              (17,274,529 )           (2,982,474 )         (14,196,793 )
        Prepaid and other current assets                                            (232,584 )           (3,037,537 )             379,638
        Deferred income taxes                                                             —               4,162,096               179,970
        Other assets                                                                 (81,923 )             (321,352 )             (56,333 )
        Accounts payable                                                          10,993,743              9,425,215             5,931,850
        Accrued expenses and other current liabilities                               433,246              1,952,201             2,632,298
        Deferred rent                                                              1,011,075              2,000,856               570,187
Net cash provided by operating activities                                           7,698,188            15,320,654             3,638,721
Investing Activities
Purchase of property, plant and equipment                                        (12,655,232 )           (8,567,480 )          (5,759,429 )
Proceeds from sale of real estate and other assets                                   731,463              2,105,000                18,046
Purchase of assets and other                                                              —                      —               (956,676 )
Purchase of business, net of cash received                                                —                      —             (8,585,560 )

Net cash used in investing activities                                            (11,923,769 )           (6,462,480 )         (15,283,619 )
Financing Activities
Principal payments on lines of credit                                            (47,198,103 )          (33,524,025 )         (27,178,727 )
Proceeds from lines of credit                                                     47,198,103             32,106,986            28,595,766
Proceeds from issuance of common stock                                                    —                      —              4,299,998
Debt issuance costs                                                                       —                      —                (82,410 )
Other                                                                                 (2,244 )               (6,607 )             (23,264 )

Net cash provided by (used in) financing activities                                    (2,244 )          (1,423,646 )           5,611,363
Effect of exchange rate changes on cash                                              (139,644 )              89,894               134,506

Change in cash and cash equivalents                                               (4,367,469 )            7,524,422            (5,899,029 )
Cash and cash equivalents, beginning of period                                     8,574,966              1,050,544             6,949,573

Cash and cash equivalents, end of period                                   $        4,207,497     $       8,574,966     $       1,050,544

Supplemental cash flow information:
Interest payments                                                          $        8,031,328     $       7,968,535     $       7,130,032
Tax payments                                                                          724,766               304,180               699,198
Amortization of discount on senior secured notes                                    2,641,967             2,325,564             2,102,424

                                                          See accompanying notes.

                                                                     F-7
Table of Contents




                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                     December 31, 2005


1.    Nature of Business and Summary of Significant Accounting Policies

     Description of Business
       Golfsmith International Holdings, Inc. (―Holdings‖ or the ―Company‖) is a multi-channel, specialty retailer of golf and tennis equipment
and related apparel and accessories and is a designer and marketer of golf equipment. The Company offers golf equipment from top national
brands as well as its own proprietary brands and also offers clubmaking capabilities. The Company markets its products through 52 superstores
as well as through its direct-to -consumer channels, which include its clubmaking and consumer 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, the late
Harvey Penick.


     Basis of Presentation
       The accompanying consolidated financial statements include the accounts of Golfsmith International Holdings, Inc. (―Holdings‖) and its
wholly owned subsidiary Golfsmith International, Inc. (―Golfsmith‖). Holdings has no operations nor does it have any assets or liabilities other
than its investment in its wholly owned subsidiary. 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.


     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 goodwill and other indefinite lived intangible assets, depreciation and amortization, allowance for doubtful
accounts, income taxes, allowance for obsolete inventory and allowance for sales returns.


     Correction of an Error
       Certain adjustments have been made to the prior year financial statements related to the correction of an error in applying generally
accepted accounting principles. An adjustment of $6.2 million was made to the consolidated balance sheet as of January 1, 2005 to decrease
both cash and cash equivalents and accounts payable in connection with outstanding checks written but not presented for payment prior to the
balance sheet date. Adjustments of $1.8 million and $4.5 million were made to the consolidated balance sheets as of January 3, 2004 and
December 28, 2002, respectively, to decrease both cash and cash equivalents and accounts payable in connection with outstanding checks
written but not presented for payment prior to the balance sheet date. The adjustments are the result of the Company funding the related cash
accounts at the time the outstanding checks are presented for payment, which has historically been after the date on which the reporting period
ends, instead of the date on which the checks are written. All adjustments have been appropriately recorded in the consolidated statements of
cash flows. The adjustments do not affect previously reported net income, retained earnings or earnings per share amounts in any period
presented. The adjustments increased cash flow from operations by $2.6 million for fiscal year 2003 and decreased cash flow from operations
by $4.3 million, both from previously reported amounts.

                                                                      F-8
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005




     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.


     Accounts Receivable
       Accounts receivable consists primarily of amounts due from credit card merchants who process the Company’s credit card sales and
remit the proceeds to the Company. Allowances are made based on historical data for estimatable unrecoverable amounts.


     Inventories
       Inventories consist primarily of finished goods (i.e., golf and tennis equipment and accessories) and are stated at the lower of cost
(weighted average) or market. Inbound freight charges, import fees and vendor discounts 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. Inventory values are reduced
for anticipated physical inventory losses, such as theft, that have occurred since the last physical inventory date on a location-by-location basis,
as well as anticipated amounts of carrying value over the amount expected to be realized from the ultimate sale or other disposal of the
inventory.


     Concentration of Foreign Suppliers
      A significant portion of sales of the Company’s proprietary products are from products supplied by manufacturers located outside of the
United States, primarily in Asia. 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 of the
U.S.


     Property and Equipment
       Property and equipment are stated at cost net of accumulated depreciation and amortization. Depreciation and amortization are computed
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 in accordance with
AICPA Statement of Position 98–1 , Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. 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 accounts for the impairment or disposal of long-lived assets in accordance with Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Long-Lived Assets, which requires
long-lived assets, such as property and equipment, to be evaluated for impairment whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected
to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset.
When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the
determination is made. Included in selling, general and administrative

                                                                         F-9
Table of Contents



                                             GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                    December 31, 2005

expenses for fiscal 2005 is a $1.5 million non-cash loss on the write-off of property and equipment. The losses were primarily due to the
remodeling of stores and the modification of one store to a smaller store layout, which resulted in certain assets having little or no future
economic value. Included in selling, general and administrative expenses for fiscal 2004 is a $477,000 non-cash loss on the write-off of
property and equipment. The loss was primarily due to one store relocation and two anticipated retail store relocations, which resulted in
certain assets having little or no future economic value.
      Long-lived assets to be disposed of by sale are adjusted to fair value less cost to sell and are reclassified to a current asset in the period in
which the established ―held for sale‖ criteria of SFAS No. 144 are met.
      Long-lived assets 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.


     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 lease obligation net of estimated sublease rental income, 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.


     Operating Leases
       The Company leases stores under operating leases. Store lease agreements often include rent holidays, rent escalation clauses and
contingent rent provisions for percentage of sales in excess of specified levels. Most of the Company’s lease agreements include renewal
periods at the Company’s option. The Company recognizes rent holiday periods and scheduled rent increases on a straight-line basis over the
lease term beginning with the date the Company takes possession of the leased space. The Company records tenant improvement allowances
and rent holidays as deferred rent liabilities on the consolidated balance sheets and amortizes the deferred rent over the terms of the lease to
rent expense on the consolidated statements of operations. The Company records rent liabilities on the consolidated balance sheets for
contingent percentage of sales lease provisions when the Company determines that it is probable that the specified levels will be reached during
the fiscal year. The Company records direct costs incurred to effect a lease in other long-term assets and amortizes these costs on a straight-line
basis over the lease term beginning with the date the Company takes possession of the leased space.
    The Company has entered into certain sublease agreements with third parties to sublease retail space previously occupied by the
Company. Sublease income is recorded on a straight-line basis over the term of the sublease as a reduction of rent expense.

                                                                         F-10
Table of Contents



                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005




     Foreign Currency Translation
       In accordance with SFAS 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 currency denominated transactions are included in ―Other income‖ or ―Other expense‖ 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 relates primarily to the Company’s arrangements with a select number
of national brand credit card companies and is minimized due to the large number of customer transactions and short settlement terms with the
credit card companies.
       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 discussed in Note 5. Fair value for such instruments is based on estimates using present value or other valuation techniques.


     Revenue Recognition
       The Company recognizes revenue when all of the following criteria are met: 1) there is persuasive evidence that an arrangement exists,
2) delivery of goods has occurred, 3) the sales price is fixed or determinable, and 4) collectibility is reasonably assured.
       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 generally
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 Company has no further obligations once the product is shipped, and (4) 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.

                                                                       F-11
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

      The Company sells gift cards to its customers in their retail stores, through their Web site and through their Austin, Texas call center.
The Company’s gift cards have an expiration date of two years, except in states or jurisdictions where prohibited by law. The Company does
not deduct non-usage fees from outstanding gift card values.
       The Company recognizes revenue from gift cards when (1) the gift card is redeemed by the customer or (2) the likelihood of the gift card
being redeemed by the customer is remote (gift card breakage), and the Company determines that there is no legal obligation to remit the value
of the unredeemed gift cards to the relevant jurisdictions. Gift card breakage is based on the redemption recognition method. Estimated
breakage is calculated and recognized as revenue over a 48-month period following the gift card sale, in amounts based on the historical
redemption patterns of used gift cards. During fiscal 2005, the Company concluded that it had accumulated sufficient historical gift card
information to accurately calculate estimated breakage. Amounts in excess of the total estimated breakage, if any, will be recognized as
revenue at the end of the 48 months following the gift card sale, at which time the Company deems the likelihood of any further redemptions to
be remote, and provided that such amounts are not required to be remitted to the relevant jurisdictions. Gift card breakage income is included in
net revenue in the consolidated statements of operations. During the fourth quarter of fiscal 2005, the Company recognized $0.9 million in net
revenues related to the initial recognition of gift card breakage.
       For all merchandise sales, the Company reserves for sales returns in the period of sale through estimates based on historical experience.


     Sales Incentives
       The Company offers sales incentives that entitle its customers to receive a reduction in the price of a product or service. Sales incentives
that entitle a customer to receive a reduction in the price of a product or service by submitting a claim for a refund or rebate are recognized as a
reduction to revenue at the time the products are sold. Sales incentives that entitle a customer to free product are recognized as a cost of
products sold.


     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.


     Vendor Rebates and Promotions
       The Company receives income from certain merchandise suppliers in the form of rebates and promotions. Agreements are made with
individual suppliers and income is earned as buying levels are met and/or cooperative advertising is placed.
      Rebate income is recorded as a reduction of the cost of inventory purchased from the respective supplier and is recognized as cost of
goods sold when the related merchandise is sold. Vendor rebate income received and recorded as a reduction of cost of products sold was
$0.7 million for the year ended December 31, 2005, $1.0 million for the year ended January 1, 2005 and $0.8 million for the year ended
January 3, 2004.
      Cooperative promotional income received for reimbursements of incremental direct costs are recorded as a reduction of selling, general
and administrative expenses. Any promotional income received that does not pertain to incremental direct costs is recorded as a reduction of
inventory purchased and is

                                                                       F-12
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

recognized as cost of goods sold when the related merchandise is sold. Cooperative promotional income received and recorded as a reduction
of selling, general and administrative expenses was approximately $2.6 million for the fiscal year ended December 31, 2005, $2.0 million for
the fiscal year ended January 1, 2005 and $1.2 million for the fiscal year ended January 3, 2004. Cooperative promotional income received and
recorded as a reduction of cost of goods sold was approximately $2.0 million for the fiscal year ended December 31, 2005. There were no
cooperative promotional income amounts recorded as a reduction of cost of goods sold in either the fiscal year ended January 1, 2005 or the
fiscal year ended January 3, 2004.
      The uncollected amounts of vendor rebate and promotional income remaining in prepaid and other current assets in the accompanying
consolidated balance sheets as of December 31, 2005 and January 1, 2005 was approximately $1.7 million and $1.2 million, respectively.


     Income Taxes
        The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in income tax rates is recognized in the statement of operations in the period that includes the
enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such
assets will not be realized.


     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 had $0.5 million and $0.3 million in catalog costs capitalized at December 31, 2005 and January 1, 2005,
respectively. Advertising costs are expensed as incurred. Advertising costs, net of cooperative advertising income, totaled approximately
$16.8 million for the fiscal year ended December 31, 2005, $15.9 million for the fiscal year ended January 1, 2005 and $14.4 million for the
fiscal year ended January 3, 2004. These amounts include amortization of catalog costs of approximately $8.9 million for the fiscal year ended
December 31, 2005, $10.5 million for the fiscal year ended January 1, 2005 and $8.6 million for the fiscal year ended January 3, 2004.


     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 years ended December 31, 2005, January 1, 2005 and January 3, 2004 totaled approximately $1.1 million,
$1.0 million and $0.9 million, respectively.


     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 SFAS No. 142, Goodwill and Other Intangible Assets. In accordance with
SFAS No. 142, the Company assesses the carrying value of its goodwill and other intangible assets with indefinite lives for indications of
impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill or intangible asset
may be impaired.

                                                                       F-13
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

       The goodwill impairment test is a two-step process. The first step of the impairment analysis compares the fair value of the company or
reporting unit to the net book value of the company or reporting unit. The Company allocates goodwill to one enterprise-level reporting unit for
impairment testing. In determining fair value, the Company utilizes a blended approach and calculates fair value based on discounted cash flow
analysis and revenue and earnings multiples based on industry comparables. Step two of the analysis compares the implied fair value of
goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to
that excess. The Company performs its annual test for goodwill impairment on the first day of the fourth fiscal quarter of each year.
       The Company tests for possible impairment of intangible assets whenever events or changes in circumstances indicate that the carrying
amount of the asset is not recoverable based on management’s 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 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.
       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 SFAS No. 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 SFAS No. 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.


     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.

                                                                       F-14
Table of Contents



                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                  December 31, 2005




     Stock-Based Compensation
       The Company accounts for its stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. The following table illustrates the effect on net income, if the Company had applied
the fair value recognition provisions of 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.
                                                                                  Fiscal Year             Fiscal Year             Fiscal Year
                                                                                    Ended                   Ended                   Ended
                                                                                 December 31,             January 1,              January 3,
                                                                                     2005                    2005                    2004

Net Income (loss) as reported                                                $        2,957,634       $      (4,755,616 )     $       1,064,264
Total stock-based compensation cost, net of related tax effects included
 in the determination of net income (loss) as reported                                          —                       —                       —
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                                                                                (226,531 )              (156,012 )               (97,585 )
Pro forma net income (loss)                                                  $        2,731,103       $      (4,911,628 )     $         966,679

Earnings per share:
    Basic and diluted — as reported                                          $              0.30      $            (0.49 )    $             0.11
    Basic and diluted — pro forma                                            $              0.28      $            (0.50 )    $             0.10
In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. See Recently Issued Accounting Standards below
for additional information.


     Segments
       The Company applies SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. The Company has one
operating segment consisting of recreational sporting goods products. The Company’s chief operating decision maker is considered to be the
Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at
the operating segment level.


     Fiscal Year
      The Company’s fiscal year ends on the Saturday closest to December 31. Fiscal year 2003 consisted of 53 weeks. Fiscal 2004 and fiscal
2005 each consisted of 52 weeks.


     Recently Issued Accounting Standards
       In December 2004, the FASB issued SFAS No. 123 (revised 2004), ―Share-Based Payment‖, (SFAS 123R). SFAS 123R addresses the
accounting for share-based payments to employees, including grants of employee stock options. Under the new standard, companies will no
longer be able to account for share-based compensation transactions using the intrinsic value method in accordance with APB Opinion No. 25.
Instead, companies will be required to account for such transactions using a fair-value method and

                                                                      F-15
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

recognize the expense in the consolidated statement of income. The Company expects to use the Black-Scholes option pricing model to
determine the fair value of the Company’s stock-based awards. SFAS 123R requires companies to use either the modified-prospective or
modified-retrospective transition method. The Company intends to use the modified-prospective transition method. Under this method,
compensation cost is recognized for all awards granted, modified or settled after the adoption date as well as for any awards that were granted
prior to the adoption date for which the requisite service has not yet been rendered. SFAS 123R was originally effective for reporting periods
that began after June 15, 2005. In April 2005, the SEC announced the adoption of a new rule allowing companies to implement SFAS 123R at
the beginning of their next fiscal year that begins after June 15, 2005. The Company intends to adopt SFAS 123R at the beginning of the first
quarter of fiscal 2006. The Company expects that the adoption of SFAS 123R will have a significant negative impact on its results of
operations, but will not impact its overall financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because it
will depend on levels of share-based grants in the future.
        In June 2005, the FASB’s Emerging Issues Task Force (EITF) reached a consensus on Issue No. 05-6, Determining the Amortization
Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (EITF No. 05-6). EITF No. 05-6
provides guidance on the amortization period for leasehold improvements in operating leases that are either acquired after the beginning of the
initial lease term or acquired as the result of a business combination. This guidance requires leasehold improvements purchased after the
beginning of the initial lease term to be amortized over the shorter of the assets’ useful life or a term that includes the original lease term plus
any renewals that are reasonably assured at the date the leasehold improvements are purchased. This guidance is effective for reporting periods
beginning after June 29, 2005. The adoption of this statement did not have a material impact on the Company’s net income, cash flows or
financial position.


2.    Business Combinations

     Don Sherwood Golf & Tennis
       On July 24, 2003, the Company acquired all issued and outstanding shares of Don Sherwood Golf & Tennis (―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 $6.3 million. Goodwill is assigned at the reporting unit level and is not deductible for income tax purposes.

                                                                        F-16
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                                             GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                    December 31, 2005

       Contingent consideration of $1.3 million was placed in an escrow account by the Company 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.


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.
The allocation of the purchase price did not have a material impact on the affected accounts. 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
       The following is a summary of the Company’s intangible assets that are subject to amortization:
                                                                                                            Fiscal Year               Fiscal Year
                                                                                                              Ended                     Ended
                                                                                                           December 31,               January 1,
                                                                                                               2005                      2005

Customer database gross carrying amount                                                                $         3,399,205        $       3,399,205
Accumulated amortization                                                                                        (1,227,490 )               (849,801 )

Customer database net carrying amount                                                                  $         2,171,715        $       2,549,404


      Total amortization expense was approximately $378,000 for each of the fiscal years ended December 31, 2005, January 1, 2005 and
January 3, 2004, and is recorded in selling, general and administration costs on the consolidated statement of operations.
       Estimated future annual amortization expense is as follows:
2006                                                                                                                              $         377,689
2007                                                                                                                                        377,689
2008                                                                                                                                        377,689
2009                                                                                                                                        377,689
2010                                                                                                                                        377,689
Thereafter                                                                                                                                  283,270

                                                                                                                                  $       2,171,715


                                                                         F-17
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                  December 31, 2005




5.    Debt
       Long-term debt at December 31, 2005 and January 1, 2005 consisted of the following:
                                                                                                    Fiscal Year                   Fiscal Year
                                                                                                      Ended                         Ended
                                                                                                   December 31,                   January 1,
                                                                                                       2005                          2005

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                                                           (11,300,000 )                 (13,941,967 )
Long-term debt, net of discount                                                               $         82,450,000        $           79,808,033


       As of December 31, 2005, the annual maturities of long-term debt were as follows:
2006                                                                                                                          $               —
2007                                                                                                                                  18,750,000
2008                                                                                                                                   9,375,000
2009                                                                                                                                  65,625,000
2010                                                                                                                                          —
Thereafter                                                                                                                                    —

                                                                                                                              $       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 secured credit facility. The notes are fully and unconditionally
guaranteed, up to an aggregate principal amount at maturity of $93.75 million, by both Holdings and all existing and future Golfsmith domestic
subsidiaries. As of December 31, 2005 and January 1, 2005, the notes were guaranteed, jointly and severally, 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.
       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. The accreted value of
the notes at December 31, 2005 that is recorded on the Company’s consolidated balance sheet is $82.5 million.

                                                                     F-18
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

      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.
As of the end of fiscal 2004 and fiscal 2005, the Company determined that it did not have any excess cash flow, as defined in the indenture, and
thus the Company is not required to offer to repurchase any of the notes.
       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
covenants, including a restriction on capital expenditures. In September 2004, the indenture governing the notes was amended to (i) provide
that Golfsmith and its subsidiaries are not required to obtain leasehold mortgages on leases which are acquired by Golfsmith through an
acquisition or similar transaction or upon any renewal or replacement of a lease, (ii) revise the covenant limiting capital expenditures (as
defined in the indenture) and the definition of capital expenditure basket (as defined in the indenture) to provide that Golfsmith’s capital
expenditure limitations are calculated on a fiscal year, or annual, basis rather than a ―rolling four quarters‖ basis and (iii) clarify that any new
subsidiary of Golfsmith which becomes a restricted subsidiary under the indenture is subject only to the same security provisions of the
indenture as those to which existing restricted subsidiaries are subject. In March 2005, the indenture was further amended by revising the
definition of capital expenditure basket to increase by $5.0 million the limitation on capital expenditures that may be made by Golfsmith or the
guarantors of the notes during any given fiscal year. As of December 31, 2005 and January 1, 2005, Golfsmith was in compliance with the
covenants imposed by the notes.
      The notes are recorded on the December 31, 2005 and January 1, 2005 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.
      The fair value of long-term debt approximated $77.8 million and $85.3 million as of December 31, 2005, and January 1, 2005,
respectively, based on the ask prices quoted from external sources, compared with carrying values of $82.5 million and $79.8 million,
respectively.


     Senior Secured Credit Facility
        On October 15, 2002, concurrent with the acquisition of Golfsmith by Holdings, the Company entered into a new senior secured credit
facility with a third party for up to $10.0 million (subject to required reserve of $500,000) in available revolver funds. Additionally, the senior
secured credit facility allows for up to $1.0 million in authorized letters of credit. In February 2004, the senior secured credit facility was
amended in order to increase the borrowing availability from $10 million to $12.5 million, in

                                                                        F-19
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

each case subject to required reserves of $500,000. Borrowings under the senior secured 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 secured credit facility is fully guaranteed
by Holdings.
       The senior secured 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, (ii) 60% of the net orderly liquidation value of eligible inventory, and (iii) an availability block of $2.5 million.
        The senior secured credit facility contains restrictive covenants which, among other things, limit: (i) additional indebtedness,
(ii) dividends, (iii) capital expenditures, and (iv) acquisitions, mergers, and consolidations. As of December 31, 2005 and January 1, 2005, the
Company was in compliance with all covenants in the senior secured credit facility.
        In March 2005, several financial covenants in the senior secured credit facility were amended in order to (1) increase the limit on capital
expenditures in each fiscal year to the greater of (a) one-third of our EBITDA (as defined in the senior secured credit facility) in the
immediately preceding fiscal year and (b) the sum of: (i) $12.0 million, (ii) the amount, if any, of the excess cash flow offer (as described
above) made and not accepted by the holders of the senior secured notes during the immediately preceding fiscal year, and (iii) any amounts,
up to an aggregate of $1,000,000, previously permitted to be made as capital expenditures that have not previously been made as capital
expenditures, (2) to delete covenants regarding minimum interest coverage ratios and minimum earnings levels for the fiscal period ending on
or about September 30, 2004 and all fiscal periods thereafter, and (3) to amend the definition of borrowing base in the senior secured credit
facility to include an availability block of $2.5 million, as used to calculate maximum indebtedness under the senior secured credit facility.
       Borrowings under the senior secured 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 secured
credit facility during fiscal 2005 and fiscal 2004 was 6.5% and 5.0%, respectively. 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
secured credit facility was effective. At December 31, 2005 and January 1, 2005, the Company had no borrowings outstanding under the senior
secured credit facility.


6.    Store Closure and Asset Impairments
        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. During fiscal 2005, the Company closed two retail locations due to expiration of lease terms.
There were not any expenses associated with either closed store recorded in accordance with SFAS No. 146, Accounting For Costs Associated
With Exit or Disposal Activities. In both instances in fiscal 2005 where the Company closed a store, a new store was subsequently opened in
fiscal 2005 to serve the same customer base of the closed stores. The Company did not close any stores in fiscal 2004 or fiscal 2003 as a result
of poor operating performance.

                                                                        F-20
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                  December 31, 2005

        The Company calculates and records impairment charges on long-lived assets in accordance with SFAS No. 144, Accounting for the
Impairment of Long-Lived Assets, whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.
These charges have historically been recorded when the Company remodels an existing store or makes the decision to remodel an existing
store, thus rendering certain fixed assets and leasehold improvements impaired.


7.    Commitments and Contingencies

     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 $14.3 million for the fiscal year ended December 31, 2005, $12.8 million for
the fiscal year ended January 1, 2005, and $9.5 million for the fiscal year ended January 3, 2004.
        At December 31, 2005, 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

2006                                                                                                   $      16,903,668        $    1,182,208
2007                                                                                                          17,755,669             1,188,496
2008                                                                                                          16,789,323             1,015,110
2009                                                                                                          15,819,428               818,952
2010                                                                                                          15,492,741               405,734
Thereafter                                                                                                    63,877,650             1,008,961

     Total minimum lease payments                                                                      $     146,638,479

     Total minimum sublease rentals                                                                                             $    5,619,461


       Deferred rent consists of either or both of (1) a step-rent accrual related to the Company’s store leases and (2) a lease incentive
obligation related to tenant incentives received by the Company pursuant to an operating lease agreement. In accordance with SFAS 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 2008 to 2013. Sublease income recorded as a reduction of rent expense was $0.7 million in fiscal 2005,
$0.4 million in fiscal 2004, $0.3 million in fiscal 2003. 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 senior vice president, chief

                                                                      F-21
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                    December 31, 2005

financial officer and treasurer. The Company has also entered into employment agreements with Carl Paul, one of our directors and a
stockholder, and Franklin Paul, one of our stockholders, to provide advisory services.


     Legal Proceedings
       The Company is involved in various legal proceedings arising in the ordinary course of conducting business. The Company believes that
the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on its financial position, liquidity or results of
operations.


8.    Guarantees
       Holdings and all of Golfsmith’s existing domestic subsidiaries fully and unconditionally guarantee, and all of Golfsmith’s future
domestic subsidiaries will guarantee, both the senior secured notes issued by Golfsmith in October 2002 and the senior secured 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 December 31, 2005, there were no amounts outstanding under the
senior secured credit facility and $82.5 million outstanding on the senior secured notes.
       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. Golfsmith has no independent operations nor any assets or liabilities other than its investments in its wholly
owned subsidiaries. Domestic subsidiaries of Golfsmith comprise all of Golfsmith’s assets, liabilities and operations. There are no restrictions
on the transfer of funds between Holdings, Golfsmith and any of Golfsmith’s domestic subsidiaries.
      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. For all 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 December 31, 2005 and January 1, 2005,
respectively:
                                                                                                         Fiscal Year               Fiscal Year
                                                                                                           Ended                     Ended
                                                                                                        December 31,               January 1,
                                                                                                            2005                      2005

Salaries and benefits                                                                               $         2,927,440        $       1,791,931
Interest                                                                                                      2,654,411                2,647,670
Allowance for returns reserve                                                                                   671,742                1,326,394
Gift certificates                                                                                             8,091,210                7,521,148
Taxes                                                                                                         2,704,282                3,169,661
Other                                                                                                         2,114,374                2,260,311

      Total                                                                                         $        19,163,459        $     18,717,115


                                                                      F-22
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005




10.     Other Income and Expense
       Other income was $0.5 million in fiscal 2005, $1.2 million in fiscal 2004 and $0.2 million in fiscal 2003. During fiscal 2005, Golfsmith
sold its trademarks for Lynx ® in Taiwan and Korea to third parties. Golfsmith received proceeds of $0.7 million during fiscal 2005 and will
receive additional proceeds over the next three years of $0.8 million for purchase price consideration. The gain on the sales recorded in fiscal
2005 was $0.3 million and is recorded in other income in the statement of operations. During fiscal 2004, Golfsmith sold its trademarks for
Lynx ® in Europe, Malaysia, Thailand and Singapore to a third party. Golfsmith received proceeds of $2.1 million, net of direct costs
associated with the sale. The gain on the sale was approximately $1.1 million and is recorded in other income in the statement of operations.
        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 $291,000 during the fiscal year ended December 31, 2005, $349,000 during the fiscal year ended
January 1, 2005 and $259,000 during the fiscal year ended January 3, 2004.
       In 2005, the Company established the Annual Management Incentive Plan under which eligible participants may receive a cash bonus if
the Compensation Committee of the Board of Directors creates a bonus pool and determines such participants have achieved pre-determined
individual and corporate goals. During fiscal 2005, the Company recorded expense of $1.7 million under the Annual Management Incentive
Plan. This amount is recorded in selling, general and administrative expenses on the Company’s consolidated statement of operations.


12.     Common Stock

      Golfsmith International Holdings, Inc.
       Holdings has authorized 40.0 million shares of common stock, par value $.001 per share, of which 9,472,143 shares were issued and
outstanding at December 31, 2005 and January 1, 2005.


      Golfsmith International, Inc.
       Prior to the merger on October 15, 2002, Golfsmith had authorized 20.0 million shares of common stock, par value $.01 per share.
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 December 31, 2005 and January 1, 2005. Holdings, the parent of Golfsmith,
holds all of Golfsmith’s outstanding common stock.


      Dividends
        No dividends have been declared or paid by Holdings or Golfsmith since the merger on October 15, 2002.

                                                                      F-23
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005




      Capital Shares Reserved for Issuance
       At December 31, 2005, the Company has reserved the following shares of common stock for issuance:
Stock options                                                                                                                         1,250,109
Restricted stock units                                                                                                                  331,569
Additional authorized common shares                                                                                                  28,946,179

      Total unissued authorized common shares                                                                                        30,527,857




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 331,569 outstanding shares of restricted stock units at December 31, 2005 and January 1, 2005 with a book value
of $2.3 million at each such date.
      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 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‖). The exercise price of the options granted was equal to the value of
Golfsmith’s common stock on the grant date. 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 1,250,109 shares authorized under the 2002 Plan at December 31, 2005,
of which 369,356 are available for future grant.

                                                                       F-24
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                  December 31, 2005

       A summary of the Company’s stock option activity and related information for the 2002 Plan through December 31, 2005 is as follows:
                                                                                                      Range of                     Weighted Average
                                                                          Options                   Exercise Prices                 Exercise Price

Outstanding at December 28, 2002                                                     —       $                      —         $                         —
    Granted                                                                     807,210      $                    6.84        $                       6.84
    Exercised                                                                        —       $                      —         $                         —
    Forfeited                                                                   (49,554 )    $                    6.84        $                       6.84

Outstanding at January 3, 2004                                                  757,656      $                    6.84        $                       6.84

    Granted                                                                  325,168         $                   8.78         $                       8.78
    Exercised                                                                     —          $                     —          $                         —
    Forfeited                                                               (106,564 )       $              6.84–8.78         $                       6.95

Outstanding at January 1, 2005                                                  976,260      $              6.84–8.78         $                       7.47

    Granted                                                                   30,349         $                   8.78         $                       8.78
    Exercised                                                                     —          $                     —          $                         —
    Forfeited                                                               (125,856 )       $              6.84–8.78         $                       8.41

Outstanding at December 31, 2005                                                880,753      $              6.84–8.78         $                       7.38


       Options become exercisable as they vest. At December 31, 2005, 8,418 options were vested and exercisable with a weighted average
exercise price of $8.78. At December 31, 2005, the weighted average remaining contractual life of outstanding options was 7.9 years.


     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:
                                                                                   Fiscal Year                  Fiscal Year              Fiscal Year
                                                                                     Ended                        Ended                    Ended
                                                                                  December 31,                  January 1,               January 3,
                                                                                      2005                         2005                     2004

Risk-free interest rate                                                                           4.5 %                    4.0 %                       4.0 %
Weighted-average expected life of the options (years)                                            7.00                     7.00                        7.00
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                                                              $                    0.94       $             0.94       $                0.73
     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.
       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

                                                                     F-25
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

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.


15.     Earnings Per Share
        Basic earnings per share is computed based on the weighted average number of common shares outstanding, including outstanding
restricted stock awards. Diluted earnings per share is computed based on the weighted average number of common shares outstanding adjusted
by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially
dilutive shares of common stock include outstanding stock options.
       The following table sets forth the computation of basic and diluted net income (loss) per share:
                                                                                                           Year Ended
                                                                               December 31,                January 1,              January 3,
                                                                                   2005                       2005                   2004

Net Income (loss)                                                          $          2,957,634        $     (4,755,616 )      $      1,064,264
Basic:
    Weighted-average shares of common stock outstanding                               9,472,143               9,472,143               9,109,579
    Weighted-average shares of restricted common stock units
       outstanding                                                                      331,569                 331,569                 331,569
    Shares used in computing basic net income (loss) per share                        9,803,712               9,803,712               9,441,148

Effect of dilutive securities:
    Stock options and awards                                                            139,731                      —                       —
    Shares used in computing diluted net income (loss) per share                      9,943,443               9,803,712               9,441,148

Basic and diluted net income (loss) per share                              $                  0.30     $           (0.49 )     $            0.11
        The computation of dilutive shares outstanding excluded options to purchase 0.3 million, 0.3 million and 0.7 million shares as of
December 31, 2005, January 1, 2005, and January 3, 2004, respectively, because such outstanding options’ exercise prices were equal to or
greater than the average market price of our common shares and, therefore, the effect would be antidilutive (i.e., including such options would
result in higher earnings per share).

                                                                      F-26
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                    December 31, 2005




16.     Income Taxes
       Significant components of the income tax provision attributable to continuing operations are as follows:
                                                                                  Fiscal Year                Fiscal Year         Fiscal Year
                                                                                    Ended                      Ended               Ended
                                                                                 December 31,                January 1,          January 3,
                                                                                     2005                       2005                2004

Current:
    Federal                                                                  $            64,943       $                —    $              —
    State                                                                                150,000                   120,650              60,000
    Foreign                                                                              185,060                   139,978             404,983

Total Current                                                                            400,003                   260,628             464,983
Deferred:
    Federal                                                                                     —                3,824,628             165,378
    State                                                                                       —                  337,468              14,592
    Foreign                                                                                     —                       —                   —

Total deferred                                                                                —                  4,162,096             179,970
Income tax provision                                                         $           400,003       $         4,422,724   $         644,953


       The Company’s provision for income taxes differs from the amount computed by applying the statutory rate to income from continuing
operations before taxes as follows:
                                                                               Fiscal Year                 Fiscal Year           Fiscal Year
                                                                                 Ended                       Ended                 Ended
                                                                              December 31,                 January 1,            January 3,
                                                                                  2005                        2005                  2004

Income Tax at U.S. statutory rate                                                                                        )
                                                                                          34.0 %                   (34.0 %                 34.0 %
State taxes, net of federal income tax                                                     4.4 %                    23.9 %                  3.3 %
Foreign income taxes                                                                       5.2 %                    42.0 %                  0.0 %
Permanent differences and other                                                                )
                                                                                          (4.1 %                     2.4 %                     0.4 %
Utilized net operating losses                                                                  )
                                                                                         (34.5 %                    0.0 %                   0.0 %
Change in valuation allowance                                                              6.9 %                1,294.2 %                   0.0 %
Income tax provision                                                                      11.9 %                1,328.5 %                  37.7 %


                                                                      F-27
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                     December 31, 2005

       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
December 31, 2005 and January 1, 2005 are as follows:
                                                                                               At December 31,                At January 1,
                                                                                                    2005                          2005

Deferred tax assets:
    Accrued expenses and other                                                            $                548,087       $             515,906
    Inventory basis                                                                                      1,613,068                   1,078,311
    Federal tax carryforwards                                                                            2,683,497                   2,808,398
    Reserves and allowances                                                                                352,425                     603,733

Total deferred tax assets                                                                                5,197,077                   5,006,348
    Valuation allowance for deferred tax assets                                                          4,540,198                   4,308,362

Net deferred tax assets                                                                                    656,879                     697,986

Deferred tax liabilities:
    Depreciable/amortizable assets                                                                         656,879                     697,986

Total deferred tax liabilities                                                                             656,879                     697,986

Net deferred tax assets                                                                   $                      —       $                     —


       During the fiscal year ended January 1, 2005, the Company recorded a full valuation allowance against its net deferred tax assets. The
valuation allowance will be relieved when the Company expects to realize the benefit of its net deferred tax assets.
       As of December 31, 2005, the Company had federal net operating loss carryforwards of approximately $5.1 million. The net operating
loss carryforwards will begin expiring in 2022 if not utilized. In addition, the Company has foreign tax credits of approximately $0.7 million
that will begin expiring in 2008 if not utilized.

                                                                      F-28
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                                          GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                  December 31, 2005




17.     Foreign and Domestic Operations
       The Company has operated in foreign and domestic regions. Information about these operations is presented below:
                                                                                 Fiscal Year                 Fiscal Year               Fiscal Year
                                                                                   Ended                       Ended                     Ended
                                                                                December 31,                 January 1,                January 3,
                                                                                    2005                        2005                      2004

Net revenues:
    North America                                                           $      318,888,015           $    289,619,500          $    251,910,857
    International                                                                    4,906,210                  6,582,649                 5,833,923
Operating profit:
    North America                                                                   14,124,426                   9,431,519               11,231,351
    International                                                                      550,670                     249,940                1,430,445
Income (loss) from continuing operations before income taxes:
    North America                                                                     2,891,252                   (639,654 )                 288,070
    International                                                                       466,385                    306,762                 1,421,147
Identifiable assets:
    North America                                                                  203,176,199                184,458,674               175,146,048
    International                                                                    1,660,071                  2,470,625                 2,303,100


18.     Valuation and Qualifying Accounts
                                                                                       Amounts
                                                                                      Charged to
                                                           Balance at                 Net Income                 Write-offs              Balance at
                                                           Beginning                  (Loss), Net                 Against                 End of
                                                           of Period                 of Recoveries               Reserves                 Period

Allowance for sales returns:
    Fiscal year ended December 31, 2005                         1,326,394                10,180,021               (10,834,673 )              671,742
    Fiscal year ended January 1, 2005                           1,357,173                10,358,365               (10,389,144 )            1,326,394
    Fiscal year ended January 3, 2004                           1,098,029                 8,111,425                (7,852,281 )            1,357,173
Allowance for doubtful accounts:
    Fiscal year ended December 31, 2005                          161,838                        65,670                 (80,544 )             146,964
    Fiscal year ended January 1, 2005                            176,667                        85,487                (100,316 )             161,838
    Fiscal year ended January 3, 2004                            242,643                       157,717                (223,693 )             176,667

                                                                        F-29
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                                              GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                    December 31, 2005




19.     Consolidated Quarterly Financial Information (Unaudited)
                                                   First                      Second                Third           Fourth               Full
Fiscal 2005                                       Quarter                     Quarter              Quarter          Quarter              Year

Net revenues                              $       63,958,382          $       102,493,511      $   85,521,081   $   71,821,251      $   323,794,225
Gross profit                                      22,762,892                   37,832,621          29,882,762       25,271,664          115,749,939
Income (loss) from continuing
  operations                                      (1,999,612 )                  6,001,687           1,210,595       (2,255,036 )          2,957,634
Net income (loss)                                 (1,999,612 )                  6,001,687           1,210,595       (2,255,036 )          2,957,634
Basic net income (loss) per share of
  common stock                            $             (0.20 )       $                 0.61   $         0.12   $         (0.23 )   $           0.30
Basic weighted average common
  shares outstanding                               9,803,712                    9,803,712           9,803,712        9,803,712            9,803,712
Diluted net income (loss) per share of
  common stock                            $             (0.20 )       $                 0.60   $         0.12   $         (0.23 )   $           0.30
Diluted weighted average common
  shares outstanding                               9,803,712                    9,946,879           9,943,684        9,803,712            9,943,443
                                                    First                     Second                Third           Fourth               Full
Fiscal 2004                                        Quarter                    Quarter              Quarter          Quarter              Year

Net revenues                                  $    65,782,039             $    96,943,734      $   73,895,536   $   59,580,840      $   296,202,149
Gross profit                                       22,975,182                  33,374,179          24,516,783       20,321,426          101,187,570
Income (loss) from continuing
  operations                                         (202,961 )                 2,265,194             535,655       (7,353,504 )         (4,755,616 )
Net income (loss)                                    (202,961 )                 2,265,194             535,655       (7,353,504 )         (4,755,616 )
Basic and diluted net income (loss) per
  share of common stock                       $             (0.02 )       $             0.23   $         0.05   $         (0.75 )   $           (0.49 )
Basic weighted average common
  shares outstanding                                9,803,712                   9,803,712           9,803,712        9,803,712            9,803,712
Diluted weighted average common
  shares outstanding                                9,803,712                   9,835,324           9,956,125        9,803,712            9,803,712


20.     Related Party Transactions
       In October 2002, the Company entered into a management consulting 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 ending in
October 2012. During the fiscal years ended December 31, 2005, January 1, 2005 and January 3, 2004, the Company paid approximately
$681,000, $631,000 and $812,000, respectively, to this majority stockholder under the agreement. These amounts are recognized in the
consolidated statement of operations in the selling, general and

                                                                                 F-30
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                   December 31, 2005

administrative expense line item. As of December 31, 2005 and January 1, 2005, the Company did not have any material amounts payable to
this majority stockholder.
       Nothing in the management consulting agreement shall prohibit the Company’s majority stockholder from receiving from the Company
a fee in connection with their financial advisory and consulting services in connection with future acquisitions, dispositions or debt or equity
financings. 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 million in total enterprise value, 2% of such total enterprise value;

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

         •          in the case of a transaction involving more than $100 million in total enterprise value, 1% of such total enterprise value.
       On May 28, 2003, the Company issued 36,552 shares of its common stock to one of the Company’s directors, for an aggregate purchase
price of $249,999, or $6.84 per share.
      On July 24, 2003, in conjunction with the Company’s acquisition of Sherwood, the Company’s majority stockholder, purchased
626,205 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 Sherwood, a director of the Company purchased 2,504 shares of the Company’s common stock for an aggregate
purchase price of approximately $17,000.
       On June 9, 2005, Holdings entered into a consulting agreement with a director of the Company. The agreement has an initial term of
three years and may be terminated by either party giving thirty days’ prior written notice. Pursuant to the terms of the agreement, the director
will make him or herself available for ten business days per calendar year of the term of the agreement for consulting services to the Company.
The Company will pay the director $2,000 per business day on which consulting services are performed and reimburse the director for
reasonable out-of -pocket expenses. The Company paid approximately $33,000 to this director under this agreement in fiscal 2005. There were
no amounts owed to this director as of December 31, 2005.


21.     Subsequent Events
       On March 14, 2006, Holdings filed a registration statement on Form S-1 with the Securities and Exchange Commission, for the
registration of shares of common stock for sale to the public markets.
       On May 25, 2006, the Company’s Board of Directors approved a 1-for-2.2798 reverse stock split for its issued and outstanding common
stock. The par value of the common stock was maintained at the pre-split amount of $0.001 per share. All references to common stock, stock
options to purchase common stock and per share amounts in the accompanying consolidated financial statements have been restated to reflect
the reverse stock split on a retroactive basis.

                                                                        F-31
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                                          GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                                 CONSOLIDATED BALANCE SHEETS
                                                                                               April 1,             December 31,
                                                                                                2006                    2005

                                                                                              (unaudited)
                                                                 ASSETS
Current assets:
    Cash and cash equivalents                                                             $       3,664,380     $        4,207,497
    Receivables, net of allowances of $154,656 at April 1, 2006 and $146,964 at
      December 31, 2005                                                                           2,226,607              1,646,454
    Inventories                                                                                  81,534,562             71,472,061
    Prepaid and other current assets                                                              8,381,071              6,638,109

Total current assets                                                                             95,806,620             83,964,121
Property and equipment:
    Land and buildings                                                                           21,256,771             21,256,771
    Equipment, furniture, fixtures and autos                                                     19,760,082             19,004,608
    Leasehold improvements and construction in progress                                          22,948,485             20,866,839

                                                                                                 63,965,338             61,128,218
     Less: accumulated depreciation                                                             (16,094,311 )          (14,558,256 )
Net property and equipment                                                                       47,871,027             46,569,962
Goodwill                                                                                         41,634,525             41,634,525
Tradename                                                                                        11,158,000             11,158,000
Trademarks                                                                                       14,156,127             14,156,127
Customer database, net of accumulated amortization of $1,321,913 at April 1, 2006 and
 $1,227,490 at December 31, 2005                                                                  2,077,292              2,171,715
Debt issuance costs, net of accumulated amortization of $3,407,188 at April 1, 2006 and
 $3,126,103 at December 31, 2005                                                                  4,450,528              4,731,612
Other long-term assets                                                                              462,032                450,208

Total assets                                                                              $     217,616,151     $     204,836,270


                                                          See accompanying notes.

                                                                    F-32
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                                             GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                                     CONSOLIDATED BALANCE SHEETS
                                                                                                    April 1,            December 31,
                                                                                                     2006                   2005

                                                                                                   (unaudited)
                                             LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
    Accounts payable                                                                           $     54,628,420     $       42,000,236
    Accrued expenses and other current liabilities                                                   13,726,099             19,163,459
    Line of credit                                                                                    5,509,001                     —

Total current liabilities                                                                            73,863,520             61,163,695
Long-term debt                                                                                       83,158,164             82,450,000
Deferred rent                                                                                         4,315,589              4,095,442
Total liabilities                                                                                   161,337,273           147,709,137
Stockholders’ equity:
    Common stock –$.001 par value; 40,000,000 shares authorized; 9,472,143 shares issued
       and outstanding at April 1, 2006 and December 31, 2005, respectively                                9,473                 9,473
    Restricted common stock units –$.001 par value; 331,569 shares issued and outstanding at
       April 1, 2006 and December 31, 2005, respectively                                                    331                    331
    Additional capital                                                                               60,301,153             60,301,153
    Other comprehensive income                                                                          156,954                135,815
    Accumulated deficit                                                                              (4,189,033 )           (3,319,639 )

Total stockholders’ equity                                                                           56,278,878            57,127,133
Total liabilities and stockholders’ equity                                                     $    217,616,151     $     204,836,270


                                                          See accompanying notes.

                                                                   F-33
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                                        GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                        CONSOLIDATED STATEMENT OF OPERATIONS
                                                      (unaudited)
                                                                                           Three Months Ended

                                                                                     April 1,               April 2,
                                                                                      2006                   2005

Net revenues                                                                     $   74,810,296        $        63,958,382
Cost of products sold                                                                49,007,939                 41,195,490

Gross profit                                                                         25,802,357                 22,762,892
Selling, general and administrative                                                  23,702,479                 21,399,935
Store pre-opening expenses                                                              199,749                    516,757
Total operating expenses                                                             23,902,228                 21,916,692

Operating income                                                                      1,900,129                    846,200
Interest expense                                                                     (3,059,426 )               (2,862,102 )
Interest income                                                                          10,783                     17,440
Other income                                                                            322,064                     22,598
Other expense                                                                           (42,944 )                  (23,748 )

Loss before income taxes                                                               (869,394 )               (1,999,612 )
Income tax benefit (expense)                                                                 —                          —
Net loss                                                                         $     (869,394 )      $        (1,999,612 )

Basic and diluted net loss per share of common stock                             $        (0.09 )      $             (0.20 )
Basic and diluted weighted average common shares outstanding                          9,803,712                  9,803,712

                                                       See accompanying notes.

                                                                F-34
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                            CONSOLIDATED STATEMENT OF CASH FLOWS
                                                          (unaudited)
                                                                                                      Three Months Ended

                                                                                           April 1,                    April 2,
                                                                                            2006                        2005

                                                                                                                     (as restated)
Operating Activities
Net loss                                                                               $      (869,394 )         $          (1,999,612 )
Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation                                                                        1,528,596                       1,230,587
         Amortization of intangible assets                                                      94,423                          94,422
    Amortization of debt issue costs and debt discount                                         989,248                         881,304
    Gain on sale of assets                                                                          —                          (11,500 )
         Changes in operating assets and liabilities:
            Accounts receivable                                                               (580,153 )                      (819,581 )
            Inventories                                                                    (10,062,501 )                   (17,885,274 )
            Prepaid and other current assets                                                (1,742,962 )                       251,968
            Other assets                                                                       (11,824 )                       (22,807 )
            Accounts payable — trade                                                        12,628,184                      14,647,805
            Accounts payable — bank                                                                 —                          282,552
            Accrued expenses and other current liabilities                                  (5,437,360 )                    (4,234,366 )
            Deferred rent                                                                      220,147                         507,293

Net cash used in operating activities                                                       (3,243,596 )                    (7,077,209 )
Investing Activities
Capital expenditures                                                                        (2,834,256 )                    (1,479,312 )
Proceeds from sale of assets                                                                        —                           11,500

Net cash used in investing activities                                                       (2,834,256 )                    (1,467,812 )
Financing Activities
Principal payments on lines of credit                                                      (17,674,471 )                    (3,257,468 )
Proceeds from lines of credit                                                               23,183,472                       3,257,468
Other                                                                                               —                           (2,244 )

Net cash provided by (used in) financing activities                                          5,509,001                          (2,244 )
Effect of exchange rate changes on cash                                                         25,734                         (27,701 )
Change in cash and cash equivalents                                                           (543,117 )                    (8,574,966 )
Cash and cash equivalents, beginning of period                                               4,207,497                       8,574,966
Cash and cash equivalents, end of period                                               $     3,664,380           $                   —


                                                             See accompanying notes.

                                                                       F-35
Table of Contents


                                         GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                 CONSOLIDATED STATEMENT OF CASH FLOWS — (Continued)
                                                    (Unaudited)
                                                                                                Three Months Ended

                                                                                     April 1,                    April 2,
                                                                                      2006                        2005

                                                                                                               (as restated)
Supplemental cash flow information:
    Interest payments                                                            $    3,997,843           $          3,941,836
    Tax payments                                                                         55,357                        117,425
    Amortization of discount on senior secured notes                                    708,164                        624,048

                                                       See accompanying notes.

                                                                F-36
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                  April 1, 2006

1. Nature of Business and Basis of Presentation
 Description of Business
        Golfsmith International Holdings, Inc. (―Holdings‖ or the ―Company‖), is a multi-channel, specialty retailer of golf and tennis
equipment and related apparel and accessories and is a designer and marketer of golf equipment. The Company offers golf equipment from top
national brands as well as its own proprietary brands and also offers clubmaking capabilities. As of April 1, 2006, the company marketed its
products through 52 superstores as well as through its direct-to-consumer channels, which include its clubmaking and consumer 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, the late Harvey Penick.

 Basis of Presentation
       The accompanying consolidated financial statements include the accounts of Golfsmith International Holdings, Inc. (―Holdings‖) and its
wholly owned subsidiary Golfsmith International, Inc. (―Golfsmith‖). Holdings has no operations nor does it have any assets or liabilities other
than its investment in its wholly owned subsidiary. 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 U.S. generally accepted
accounting principles. 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 consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements
and notes thereto for the year ended December 31, 2005, included in this prospectus filed with the Securities and Exchange Commission on
March 31, 2006. The results of operations for the three month period ended April 1, 2006 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 December 31, 2005 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 fiscal year ended
December 31, 2005 included in this prospectus.

 Correction of an error
       Certain adjustments have been made to the prior year financial statements related to the correction of an error in applying generally
accepted accounting principles. An adjustment of $7.9 million was made to the consolidated balance sheet as of April 2, 2005 to decrease both
cash and cash equivalents and accounts payable in connection with outstanding checks written but not presented for payment prior to the
financial statement date. The adjustment is the result of the Company funding the related cash accounts at the time the outstanding checks are
presented for payment, which has historically been after the date on which the reporting period ends, instead of the date on which the checks
are written. The adjustment has been appropriately recorded in the consolidated statements of cash flows for the three months ended April 2,
2005, as restated. The adjustment does not affect previously reported net income,

                                                                      F-37
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                  April 1, 2006

retained earnings or earnings per share in any period presented. The adjustments increased cash flow used in operations by $1.7 million for the
three months ended April 2, 2005, from previously reported amounts.

 Revenue Subject to Seasonal Variations
      The Company’s business is seasonal. The Company’s sales leading up to and during the warm weather golf season and the Christmas
holiday gift-giving season have historically contributed a higher percentage of the Company’s annual net revenues and annual net operating
income than other periods in its fiscal year.

 Fiscal Year
      The Company’s fiscal year ends on the Saturday closest to December 31. The three-month periods ended April 1, 2006 and April 2,
2005 both consist of thirteen weeks.

2. Stock-Based Compensation
       The Company has one stock-based compensation plan, the 2002 Incentive Stock Plan, which is described below. Prior to fiscal 2006, the
Company accounted for the plan under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations, as permitted by Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, (SFAS 123).
Compensation costs related to stock options granted at fair value under the plan were not recognized in the consolidated statements of
operations.
       In December 2004, FASB issued SFAS 123 (revised 2004), Share-Based Payment, (SFAS 123R). Under the new standard, companies
are no longer able to account for share-based compensation transactions using the intrinsic value method in accordance with APB Opinion
No. 25. Instead, companies are required to account for such transactions using a fair-value method and recognize the expense in the
consolidated statements of operations.
       Effective January 1, 2006, the Company adopted SFAS 123R using the prospective-transition method. Under this transition method,
stock compensation cost recognized beginning January 1, 2006 includes compensation cost for all share-based payments granted on or
subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Previously issued
share-based payments prior to January 1, 2006 are not affected and do not require recognition of expense in the consolidated statement of
operations, unless such existing awards are modified subsequent to January 1, 2006. No share-based awards have been granted or modified
during the three-months ended April 1, 2006. As such, the adoption of SFAS 123R did not have any impact on the Company’s consolidated
financial statements during the three-months ended April 1, 2006.

 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‖). The exercise price of the options granted was equal to the value of the
Company’s common stock on the grant date. 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.

                                                                       F-38
Table of Contents



                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                      April 1, 2006

      There were no stock options granted from the 2002 Plan during the fiscal quarter ended April 1, 2006. Also, there were no modifications
made to any stock grants during the period.

    Accounting for Stock Compensation
       Prior to fiscal 2006, the Company accounted for stock-based compensation by using the minimum value method to present pro forma
stock-based compensation in the notes to the consolidated financial statements, as allowed under SFAS 123. Under SFAS 123R, the Company
was classified as a non-public entity on January 1, 2006 (date of adoption) and thus used the prospective method of transition. Any newly
issued share-based awards, or modifications to existing share-based awards, will result in a measurement date under SFAS 123R. As such, the
Company will be required to calculate and record the appropriate amount of compensation expense over the estimated service period in their
consolidated statement of operations based on the fair value of the related awards at the time of issuance or modification. This will require the
Company to utilize an appropriate option-pricing model, such as the Black-Scholes model, with specific estimates regarding risk-free rate of
return, dividend yields, expected life of the award and estimated forfeitures of awards during the service period. Any resulting compensation
expense will be required to be reported in the Company’s consolidated statement of operations as a component of operating income.
       A summary of the Company’s stock option activity with respect to the fiscal quarter ended April 1, 2006 follows:
                                                                                 Weighted Average                     Weighted Average
                                                            Options               Exercise Price                   Remaining Contractual Life

Outstanding at December 31, 2005.                            880,753         $                      7.38
    Granted                                                       —          $                        —
    Exercised                                                     —          $                        —
    Forfeited                                                 (9,859 )       $                      8.00

Outstanding at April 1, 2006.                                870,894         $                      7.38                                        7.54

Vested and exercisable at April 1, 2006                        8,418         $                      8.78                                        9.62

    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 331,569 outstanding shares of restricted stock units at April 1, 2006 and December 31, 2005 with a book value of
$2.3 million at each such date.
      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, including
the completion of an initial public offering, upon which the restrictions will lapse earlier.
       There have been no grants of restricted stock units since October 2002. There have been no modifications made to any restricted stock
units since the grant date.

                                                                          F-39
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                  April 1, 2006


3. Intangible Assets
       The following is a summary of the Company’s intangible assets that are subject to amortization:
                                                                                                          April 1,               December 31,
                                                                                                           2006                      2005

Customer database gross carrying amount                                                               $     3,399,205        $         3,399,205
Customer database accumulated amortization                                                                 (1,321,913 )               (1,227,490 )
Customer database net carrying amount                                                                 $     2,077,292        $         2,171,715


      Amortization expense related to finite-lived intangible assets was approximately $94,000 for each of the three months ended April 1,
2006 and April 2, 2005 and is recorded in selling, general, and administration expenses on the consolidated statements of operations.

4. Debt
 Senior Secured Notes
        On October 15, 2002, Golfsmith completed an offering of $93.75 million aggregate principal amount at maturity of 8.375% senior
secured 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.
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 covenants, including
a restriction on capital expenditures. As of April 1, 2006, the Company believes it was in compliance with the covenants imposed by the
indenture governing the notes.
       The notes are fully and unconditionally guaranteed, up to an aggregate principal amount at maturity of $93.75 million, by both Holdings
and all existing and future Golfsmith domestic subsidiaries. As of April 1, 2006 and December 31, 2005, the notes were guaranteed, jointly and
severally, by all Golfsmith subsidiaries.
      The accreted value of the notes recorded on the Company’s consolidated balance sheets was $83.2 million and $82.5 million at April 1,
2006 and December 31, 2005, respectively.

 Senior Secured Credit Facility
       Golfsmith has a revolving senior secured credit facility with $12.5 million availability, subject to a required reserve of $500,000.
Borrowings under the senior secured credit facility are secured by substantially all of Golfsmith’s 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. Available amounts under the senior secured credit 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 credit 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, and minus $2.5 million, which is an availability block used to calculate
the borrowing base. At April 1, 2006, the Company had $5.5 million outstanding under the senior secured credit facility.
        The senior secured credit facility contains restrictive covenants which, among other things, limit: (i) additional indebtedness;
(ii) dividends; (iii) capital expenditures; and (iv) acquisitions, mergers, and consolidations. As of April 1, 2006, the Company believes it was in
compliance with the covenants in the senior secured credit facility.

                                                                       F-40
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                 April 1, 2006


5. Guarantees
       Holdings and all of Golfsmith’s existing domestic subsidiaries fully and unconditionally guarantee, and all of Golfsmith’s future
domestic subsidiaries will guarantee, both the senior secured notes issued by Golfsmith in October 2002 and the senior secured 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 April 1, 2006, there were $5.5 million in borrowings outstanding
under the senior secured credit facility and $83.2 million aggregate principal amount outstanding under the senior secured notes.
      Holdings has no operations nor any assets or liabilities other than its investment in its wholly owned subsidiary Golfsmith. Golfsmith has
no independent operations nor any assets or liabilities other than its investments in its wholly owned subsidiaries. Domestic subsidiaries of
Golfsmith comprise all of Golfsmith’s assets, liabilities and operations. There are no restrictions on the transfer of funds between Holdings,
Golfsmith and any of Golfsmith’s domestic subsidiaries.
      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 1, 2006 and April 2,
2005, respectively, no material amounts have been accrued or paid relating to product warranties.

6. Accrued Expenses and Other Current Liabilities
      The Company’s accrued expenses and other current liabilities are comprised of the following at April 1, 2006 and December 31, 2005,
respectively:
                                                                                                       April 1,               December 31,
                                                                                                        2006                      2005

Salaries and benefits                                                                             $      2,347,141        $         2,927,440
Interest                                                                                                   722,435                  2,654,411
Allowance for returns reserve                                                                              599,048                    671,742
Gift certificates                                                                                        6,559,469                  8,091,210
Taxes                                                                                                    1,949,280                  2,704,282
Other                                                                                                    1,548,726                  2,114,374
      Total                                                                                       $     13,726,099        $        19,163,459



7. Comprehensive Income
      The Company’s comprehensive income is composed of net income and translation adjustments. There were no significant differences
between net income (loss) and comprehensive income (loss) during any of the periods presented.

8. Earnings Per Share
        Basic earnings per share is computed based on the weighted average number of common shares outstanding, including outstanding
restricted stock awards. Diluted earnings per share is computed based on the weighted average number of common shares outstanding adjusted
by the number of additional

                                                                     F-41
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                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                  April 1, 2006

shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of common stock
include outstanding stock options.
       The following table sets forth the computation of basic and diluted net loss per share:
                                                                                                                 Three Months Ended

                                                                                                      April 1,                        April 2,
                                                                                                       2006                            2005

Net loss                                                                                         $         (869,394 )           $        (1,999,612 )
Basic:
    Weighted-average shares of common stock outstanding                                                   9,472,143                       9,472,143
    Weighted-average shares of restricted common stock units outstanding                                    331,569                         331,569
    Shares used in computing basic net loss per share                                                     9,803,712                       9,803,712

Effect of dilutive securities:
    Stock options and awards                                                                                     —                               —
    Shares used in computing diluted net loss per share                                                   9,803,712                       9,803,712

Basic and diluted net loss per share                                                             $                (0.09 )       $                 (0.20 )
       The computation of dilutive shares outstanding excluded options to purchase 0.3 million shares as of April 2, 2005 because such
outstanding options’ exercise prices were equal to or greater than the fair market value of our common shares and, therefore, the effect would
be antidilutive (i.e., including such options would result in higher earnings per share).

9. Commitments and Contingencies
 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.
      At April 1, 2006, future minimum payments due 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
                                                                                                                                    Obligations

2006.                                                                                                                       $            12,984,684
2007.                                                                                                                                    17,761,141
2008.                                                                                                                                    16,790,235
2009.                                                                                                                                    15,819,428
2010.                                                                                                                                    15,492,741
Thereafter                                                                                                                               63,877,650

     Total minimum lease payments                                                                                           $          142,725,879


                                                                       F-42
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                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                                                                  April 1, 2006


 Legal Proceedings
       The Company is involved in various legal proceedings arising in the ordinary course of conducting business. The Company believes that
the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on its financial position, liquidity or results of
operations.

10. Subsequent Events
       On May 25, 2006, the Company’s Board of Directors approved a 1-for-2.2798 reverse stock split for its issued and outstanding common
stock. The par value of the common stock was maintained at the pre-split amount of $0.001 per share. All references to common stock, stock
options to purchase common stock and per share amounts in the accompanying consolidated financial statements have been restated to reflect
the reverse stock split on a retroactive basis.

                                                                      F-43
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Through and including                 , 2006 (the 25 th day after the date of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.


                                                             6,000,000 Shares




                                                                Common Stock

                                                                   PROSPECTUS


                                                    Merrill Lynch & Co.
                                                         JPMorgan
                                                   Lazard Capital Markets
                                                                               , 2006
Table of Contents


                                                                      PART II
                                            INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.       Other Expenses of Issuance and Distribution.
       The following table sets forth all expenses, other than underwriting discounts and commissions, payable by the registrant in connection
with the sale of the common stock being registered. All amounts shown are estimates except for the registration fee and the NASD filing fee.
                                                                                                                                       Amount to
                                                                                                                                        be Paid

SEC registration fee                                                                                                               $          12,300
NASD filing fee                                                                                                                               13,000
Nasdaq National Market fee                                                                                                                    95,000
Blue sky qualification fees and expenses                                                                                                      10,000
Printing and engraving expenses                                                                                                              400,000
Legal fees and expenses                                                                                                                    1,500,000
Accounting fees and expenses                                                                                                                 750,000
Transfer agent and registrar fees                                                                                                             15,000
Miscellaneous fees and expenses                                                                                                              204,700

       Total                                                                                                                       $       3,000,000




Item 14.       Indemnification of Officers and Directors.
        Section 145 of the Delaware General Corporation Law permits indemnification of officers, directors, and other corporate agents under
certain circumstances and subject to certain limitations. The registrant’s amended and restated certificate of incorporation and amended and
restated bylaws provide that the registrant shall indemnify its directors, officers, employees and agents to the fullest extent permitted by the
Delaware General Corporation Law. In addition, the registrant has entered into separate indemnification agreements with its directors and
executive officers which require the registrant, among other things, to indemnify them against certain liabilities which may arise by reason of
their status or service (other than liabilities arising from acts or omissions not in good faith or from willful misconduct).
       These indemnification provisions and the indemnification agreements entered into between the registrant and its executive officers and
directors may be sufficiently broad to permit indemnification of the registrant’s executive officers and directors for liabilities, including
reimbursement of expenses incurred, arising under the Securities Act.
       The underwriting agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the underwriters of
the registrant and its executive officers and directors for certain liabilities, including liabilities arising under the Securities Act, or otherwise.


Item 15.       Recent Sales of Unregistered Securities.
       The following is a summary of transactions during the preceding three fiscal years involving sales of our securities that were not
registered under the Securities Act.


           •        On May 28, 2003, pursuant to the exemption from registration provided by Section 4(2) under the Securities Act of 1933,
                    the Registrant issued 36,553 shares of its common stock to Thomas G. Hardy, one of its directors, for an aggregate purchase
                    price of $249,999, or $6.84 per share.




           •        On June 16, 2003, pursuant to the exemption from registration provided by Section 4(2) under the Securities Act of 1933,
                    the Registrant issued options to purchase an aggregate of

                                                                         II-1
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                807,210 shares of its common stock at an exercise price of $6.84 per share to members of its management under its 2002
                Incentive Stock Plan.


           •          On July 24, 2003, pursuant to the exemption from registration provided by Section 4(2) under the Securities Act of 1933,
                      the Registrant issued 626,205 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 $6.84 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, pursuant to the exemption from registration provided by Section 4(2) under the Securities Act of 1933,
                      the Registrant issued 2,504 shares of its common stock to Thomas G. Hardy, one of its directors, for an aggregate purchase
                      price of $17,131, or $6.84 per share.




           •          On April 28, 2006, pursuant to the exemption from registration provided by Rule 701 under the Securities Act of 1933, the
                      Registrant issued 533 shares of its common stock to an employee for an aggregate purchase price of $4,681, or $8.78 per
                      share.

       No underwriter or underwriting discount or commission was involved in any of the transactions set forth in this Item 15.


Item 16.       Exhibits and Financial Statement Schedules.
       (a) Exhibits.
         Exhibit
         Number                                                                  Description of Documents

               1 .1             Form of Purchase Agreement
               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 International
                                Holding, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
               3 .2             Form of Second Amended and Restated Certificate of Incorporation of Golfsmith International Holdings, Inc. to
                                be effective upon the closing of this offering
               3 .3             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 .4             Form of Amended and Restated Bylaws of Golfsmith International Holdings, Inc. to be effective upon the closing
                                of this offering
               4 .1             Specimen Common Stock Certificate
               4 .2             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 International
                                Holding, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
               4 .3             First Supplemental Indenture, dated as of September 15, 2004, among Golfsmith International, Inc., the
                                guarantors named and defined therein and U.S. Bank Trust National Association, as trustee (filed as Exhibit 4.2 to
                                Golfsmith International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on September 17,
                                2004, and incorporated herein by reference)
               4 .4             Second Supplemental Indenture, dated as of March 21, 2005, among Golfsmith International, Inc., the guarantors
                                named and defined therein and U.S. Bank Trust National Association, as trustee. (filed as Exhibit 4.3 to
                                Golfsmith International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on March 24, 2005,
                                and incorporated herein by reference)
               5 .1             Opinion of White & Case LLP

                                                                          II-2
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          Exhibit
          Number                                                    Description of Documents

              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 International
                     Holding, Inc.’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 International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117)
                     and incorporated herein by reference)
             10 .2   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
                     International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by
                     reference)
             10 .3   Termination Agreement, dated as of May 23, 2006, terminating the Management Consulting Agreement, dated
                     as of October 15, 2002, among Golfsmith International Holdings, Inc., Golfsmith International, Inc. and First
                     Atlantic Capital, Ltd.
             10 .4   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 International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117)
                     and incorporated herein by reference)
             10 .5   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 (No. 333-101117) and incorporated herein by reference)
             10 .6   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 (No. 333-101117) and incorporated herein by reference)
             10 .7   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, (No. 333-101117) and incorporated herein by reference)
             10 .8   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, (No. 333-101117) and incorporated herein by reference)
             10 .9   Amendment No. 5 to Credit Agreement, dated as of July 21, 2004, by and among Golfsmith International, L.P.,
                     Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit Parties
                     to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                     Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.1 to
                     Golfsmith International Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2004 (No.
                     333-101117) and incorporated herein by reference)

                                                             II-3
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          Exhibit
          Number                                                     Description of Documents

             10 .10   Amendment No. 6 to Credit Agreement, dated as of October 4, 2004, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.7 to
                      Golfsmith International Holdings, Inc.’s Current Report on Form 8-K filed on October 8, 2004 (No.
                      333-101117) and incorporated herein by reference)
             10 .11   Amendment No. 7 to Credit Agreement, dated as of November 5, 2004, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.8 to
                      Golfsmith International Holdings, Inc.’s Current Report on Form 8-K filed on November 12, 2004 (No.
                      333-101117) and incorporated herein by reference)
             10 .12   Amendment No. 8 to Credit Agreement, dated as of March 29, 2005, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.29 to
                      Golfsmith International Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005,
                      (No. 333-101117) and incorporated herein by reference)
             10 .13   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 International
                      Holdings, Inc.’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 Carl F.
                      Paul (filed as Exhibit 10.7 to Golfsmith International Holdings, Inc.’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 Franklin
                      Paul (filed as Exhibit 10.8 to Golfsmith International Holdings, Inc.’s Registration Statement on Form S-4
                      (No. 333-101117) and incorporated herein by reference)
             10 .16   Indemnification Agreement, dated as of October 15, 2002, by Golfsmith International, Inc. in favor of Barbara
                      Paul (filed as Exhibit 10.9 to Golfsmith International Holdings, Inc.’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 International Holdings, Inc.’s Registration Statement on Form S-4
                      (No. 333-101117) and incorporated herein by reference)
             10 .18   Letter Agreement amending the Carl F. Paul Employment Agreement, dated as of March 29, 2005, by and
                      between Golfsmith International, Inc. and Carl F. Paul (filed as Exhibit 10.31 to Golfsmith International
                      Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005 (No. 333-101117) and
                      incorporated herein by reference)
             10 .19   Employment Agreement, dated as of October 15, 2002, between Golfsmith International, Inc. and Franklin C.
                      Paul (filed as Exhibit 10.13 to Golfsmith International Holdings, Inc.’s Registration Statement on Form S-4
                      (No. 333-101117) and incorporated herein by reference)
             10 .20   Letter Agreement amending the Franklin C. Paul Employment Agreement, dated as of March 29, 2005, by and
                      between Golfsmith International, Inc. and Franklin C. Paul (filed as Exhibit 10.30 to Golfsmith International
                      Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005 (No. 333-101117) and
                      incorporated herein by reference)
             10 .21   Employment Agreement, dated as of May 30, 2006, between Golfsmith International, Inc. and James D.
                      Thompson
             10 .22   Employment Agreement, dated as of May 30, 2006, between Golfsmith International, Inc. and Virginia Bunte

                                                              II-4
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          Exhibit
          Number                                                             Description of Documents

             10 .23           Consulting Agreement, dated as of June 9, 2005, between Mr. Larry Mondry and Golfsmith International
                              Holdings, Inc. (filed as Exhibit 10.1 to Golfsmith International Holdings, Inc.’s Current Report on Form 8-K
                              (No. 333-101117) filed on June 14, 2005, and incorporated herein by reference)
             10 .24           Termination Agreement, dated as of May 22, 2006, terminating the Consulting Agreement, dated as of June 9,
                              2005, between Mr. Larry Mondry and Golfsmith International Holdings, Inc.
             10 .25           Settlement Agreement and General Release, dated as of September 30, 2004, between James C. Loden and
                              Golfsmith International, L.P. (filed as Exhibit 10.1 to Golfsmith International Holdings, Inc.’s Current Report on
                              Form 8-K filed on October 8, 2004 (No. 333-101117) and incorporated herein by reference)
             10 .26           2002 Incentive Stock Plan (filed as Exhibit 10.18 to Golfsmith International Holdings, Inc.’s Registration
                              Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
             10 .27           2006 Incentive Compensation Plan
             10 .28           Golfsmith International Holdings, Inc. Annual Management Incentive Plan (filed as Exhibit 10.1 to Golfsmith
                              International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on August 30, 2005, and
                              incorporated herein by reference)
             10 .29           Form Individual Notice of Award (filed as Exhibit 10.2 to Golfsmith International Holdings, Inc.’s Current
                              Report on Form 8-K (No. 333-101117) filed on August 30, 2005, and incorporated herein by reference)
             10 .30           Golfsmith International, Inc. Severance Benefit Plan (filed as Exhibit 10.17 to Golfsmith International Holdings,
                              Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
             10 .31           Golfsmith 2004 Management Incentive Plan (filed as Exhibit 10.23 to Golfsmith International Holdings, Inc.’s
                              Registration Statement on Form S-1 (No. 333-117210) and incorporated herein by reference)
             10 .32           Golfsmith International Holdings, Inc. Severance Pay Plan (filed as Exhibit 10.2 to Golfsmith International
                              Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2004, (No. 333-101117) and
                              incorporated herein by reference)
             10 .33           Form of Indemnification Agreement by Golfsmith International Holdings, Inc. in favor of its directors, its
                              officers and certain senior management
             10 .34           Management Rights Agreement, dated as of May 23, 2006, among Golfsmith International Holdings, Inc. and
                              Atlantic Equity Partners III, L.P.
             10 .35           Commitment Letter, dated May 31, 2006, between Golfsmith International Holdings, Inc. and General Electric
                              Capital Corporation
             21 .1            Subsidiaries of Golfsmith International Holdings, Inc. (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 (No. 333-10117) and incorporated
                              herein by reference)
             23 .1            Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
             23 .2            Consent of White & Case LLP (included in Exhibit 5.1)
             24 .1            Power of Attorney (included in signature page)*
             99 .1            Consent of Marvin E. Lesser, dated as of May 15, 2006*


*       Previously filed.
       (b)     Financial Statement Schedules.
       All other schedules have been omitted because they are either inapplicable or the required information has been given in the consolidated
financial statements or the notes thereto.

                                                                      II-5
Table of Contents




Item 17.       Undertakings.
       Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
       The undersigned registrant hereby undertakes:

                  (1) To provide to the underwriter, at the closing specified in the underwriting agreement, certificates in such denominations and
           registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

                 (2) That 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
           Registrant pursuant to Rule 424(b)(1) 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.

                  (3) That 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 this
           offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

                                                                         II-6
Table of Contents


                                                                 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, hereunto duly authorized, in the City of New York, State of New York, on the 1st day of June 2006.



                                                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.


                                                    By: /s/ Virginia Bunte

                                                     Virginia Bunte
                                                     Senior Vice President, Chief Financial Officer and Treasurer


      Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
and on the dates indicated:
                               Name                                                              Title                                   Date


*                                                                       Chairman of the Board of Directors                        June 1, 2006

Charles Shaw

*                                                                       Chief Executive Officer, President and Director           June 1, 2006
                                                                        (Principal Executive Officer)
James D. Thompson

/s/ Virginia Bunte                                                      Senior Vice President, Chief Financial Officer and        June 1, 2006
                                                                        Treasurer
Virginia Bunte                                                          (Principal Accounting and Financial Officer)

*                                                                       Director                                                  June 1, 2006

Roberto Buaron

*                                                                       Director                                                  June 1, 2006

James Grover

*                                                                       Director                                                  June 1, 2006

Noel Wilens

*                                                                       Director                                                  June 1, 2006

Thomas G. Hardy

*                                                                       Director                                                  June 1, 2006

James Long

*                                                                       Director                                                  June 1, 2006

Lawrence Mondry

* By:         /s/ Virginia Bunte

              Virginia Bunte
              As Attorney-In-Fact

                                                                        II-7
Table of Contents


                                                  INDEX TO EXHIBITS
          Exhibit
          Number                                                   Description of Documents

              1 .1   Form of Purchase Agreement
              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 International
                     Holdings, Inc.’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 International
                     Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
              3 .2   Form of Second Amended and Restated Certificate of Incorporation of Golfsmith International Holdings, Inc. to
                     be effective upon the closing of this offering
              3 .3   Bylaws of Golfsmith International, Inc. (filed as Exhibit 3.2 to Golfsmith International Holdings, Inc.’s
                     Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
              3 .4   Form of Amended and Restated Bylaws of Golfsmith International Holdings, Inc. to be effective upon the
                     closing of this offering
              4 .1   Specimen Common Stock Certificate
              4 .2   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 International
                     Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
              4 .3   First Supplemental Indenture, dated as of September 15, 2004, among Golfsmith International, Inc., the
                     guarantors named and defined therein and U.S. Bank Trust National Association, as trustee (filed as Exhibit 4.2
                     to Golfsmith International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on
                     September 17, 2004, and incorporated herein by reference)
              4 .4   Second Supplemental Indenture, dated as of March 21, 2005, among Golfsmith International, Inc., the
                     guarantors named and defined therein and U.S. Bank Trust National Association, as trustee. (filed as Exhibit 4.3
                     to Golfsmith International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on March 24,
                     2005, and incorporated herein by reference)
              5 .1   Opinion of White & Case 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 International
                     Holdings, Inc.’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 International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117)
                     and incorporated herein by reference)
             10 .2   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
                     International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by
                     reference)
             10 .3   Termination Agreement, dated as of May 23, 2006, terminating the Management Consulting Agreement, dated
                     as of October 15, 2002, among Golfsmith International Holdings, Inc., Golfsmith International, Inc. and First
                     Atlantic Capital, Ltd.
             10 .4   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 International Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117)
                     and incorporated herein by reference)
Table of Contents


          Exhibit
          Number                                                    Description of Documents

             10 .5    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 (No. 333-101117) and incorporated herein by reference)
             10 .6    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 (No. 333-101117) and incorporated herein by reference)
             10 .7    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 (No. 333-101117) and incorporated herein by reference)
             10 .8    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 (No. 333-101117) and incorporated herein by reference)
             10 .9    Amendment No. 5 to Credit Agreement, dated as of July 21, 2004, by and among Golfsmith International, L.P.,
                      Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit Parties
                      to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.1 to
                      Golfsmith International Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2004 (No.
                      333-101117) and incorporated herein by reference)
             10 .10   Amendment No. 6 to Credit Agreement, dated as of October 4, 2004, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.7 to
                      Golfsmith International Holdings, Inc.’s Current Report on Form 8-K filed on October 8, 2004 (No.
                      333-101117) and incorporated herein by reference)
             10 .11   Amendment No. 7 to Credit Agreement, dated as of November 5, 2004, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.8 to
                      Golfsmith International Holdings, Inc.’s Current Report on Form 8-K filed on November 12, 2004 (No.
                      333-101117) and incorporated herein by reference)
             10 .12   Amendment No. 8 to Credit Agreement, dated as of March 29, 2005, by and among Golfsmith International,
                      L.P., Golfsmith NU, L.L.C. and Golfsmith USA, L.L.C., as Borrowers, the other Persons designated as Credit
                      Parties to the Credit Agreement, the lenders signatory thereto from time to time, and General Electric Capital
                      Corporation, for itself and as a Lender, as L/C Issuer and as Agent for the Lenders (filed as Exhibit 10.29 to
                      Golfsmith International Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005,
                      (No. 333-101117) and incorporated herein by reference)
             10 .13   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 International
                      Holdings, Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
Table of Contents




          Exhibit
          Number                                                   Description of Documents

             10 .14   Indemnification Agreement, dated as of October 15, 2002, by Golfsmith International, Inc. in favor of Carl F.
                      Paul (filed as Exhibit 10.7 to Golfsmith International Holdings, Inc.’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 Franklin
                      Paul (filed as Exhibit 10.8 to Golfsmith International Holdings, Inc.’s Registration Statement on Form S-4
                      (No. 333-101117) and incorporated herein by reference)
             10 .16   Indemnification Agreement, dated as of October 15, 2002, by Golfsmith International, Inc. in favor of Barbara
                      Paul (filed as Exhibit 10.9 to Golfsmith International Holdings, Inc.’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 International Holdings, Inc.’s Registration Statement on Form S-4 (No.
                      333-101117) and incorporated herein by reference)
             10 .18   Letter Agreement amending the Carl F. Paul Employment Agreement, dated as of March 29, 2005, by and
                      between Golfsmith International, Inc. and Carl F. Paul (filed as Exhibit 10.31 to Golfsmith International
                      Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005 (No. 333-101117) and
                      incorporated herein by reference)
             10 .19   Employment Agreement, dated as of October 15, 2002, between Golfsmith International, Inc. and Franklin C.
                      Paul (filed as Exhibit 10.13 to Golfsmith International Holdings, Inc.’s Registration Statement on Form S-4 (No.
                      333-101117) and incorporated herein by reference)
             10 .20   Letter Agreement amending the Franklin C. Paul Employment Agreement, dated as of March 29, 2005, by and
                      between Golfsmith International, Inc. and Franklin C. Paul (filed as Exhibit 10.30 to Golfsmith International
                      Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 1, 2005 (No. 333-101117) and
                      incorporated herein by reference)
             10 .21   Employment Agreement, dated as of May 30, 2006, between Golfsmith International, Inc. and James D.
                      Thompson
             10 .22   Employment Agreement, dated as of May 30, 2006, between Golfsmith International, Inc. and Virginia Bunte
             10 .23   Consulting Agreement, dated as of June 9, 2005, between Mr. Larry Mondry and Golfsmith International
                      Holdings, Inc. (filed as Exhibit 10.1 to Golfsmith International Holdings, Inc.’s Current Report on Form 8-K
                      (No. 333-101117) filed on June 14, 2005, and incorporated herein by reference)
             10 .24   Termination Agreement, dated as of May 22, 2006, terminating the Consulting Agreement, dated as of June 9,
                      2005, between Mr. Larry Mondry and Golfsmith International Holdings, Inc.
             10 .25   Settlement Agreement and General Release, dated as of September 30, 2004, between James C. Loden and
                      Golfsmith International, L.P. (filed as Exhibit 10.1 to Golfsmith International Holdings, Inc.’s Current Report on
                      Form 8-K filed on October 8, 2004 (No. 333-101117) and incorporated herein by reference)
             10 .26   2002 Incentive Stock Plan (filed as Exhibit 10.18 to Golfsmith International Holdings, Inc.’s Registration
                      Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
             10 .27   2006 Incentive Compensation Plan
             10 .28   Golfsmith International Holdings, Inc. Annual Management Incentive Plan (filed as Exhibit 10.1 to Golfsmith
                      International Holdings, Inc.’s Current Report on Form 8-K (No. 333-101117) filed on August 30, 2005, and
                      incorporated herein by reference)
             10 .29   Form Individual Notice of Award (filed as Exhibit 10.2 to Golfsmith International Holdings, Inc.’s Current
                      Report on Form 8-K (No. 333-101117) filed on August 30, 2005, and incorporated herein by reference)
             10 .30   Golfsmith International, Inc. Severance Benefit Plan (filed as Exhibit 10.17 to Golfsmith International Holdings,
                      Inc.’s Registration Statement on Form S-4 (No. 333-101117) and incorporated herein by reference)
Table of Contents




          Exhibit
          Number                                                       Description of Documents

             10 .31       Golfsmith 2004 Management Incentive Plan (filed as Exhibit 10.23 to Golfsmith International Holdings, Inc.’s
                          Registration Statement on Form S-1 (No. 333-117210) and incorporated herein by reference)
             10 .32       Golfsmith International Holdings, Inc. Severance Pay Plan (filed as Exhibit 10.2 to Golfsmith International
                          Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2004, (No. 333-101117) and
                          incorporated herein by reference)
             10 .33       Form of Indemnification Agreement by Golfsmith International Holdings, Inc. in favor of its directors, its
                          officers and certain senior management
             10 .34       Management Rights Agreement, dated as of May 23, 2006, among Golfsmith International Holdings, Inc. and
                          Atlantic Equity Partners III, L.P.
             10 .35       Commitment Letter, dated May 31, 2006, between Golfsmith International Holdings, Inc. and General Electric
                          Capital Corporation
             21 .1        Subsidiaries of Golfsmith International Holdings, Inc. (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 (No. 333-10117) and incorporated
                          herein by reference)
             23 .1        Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
             23 .2        Consent of White & Case LLP (included in Exhibit 5.1)
             24 .1        Power of Attorney (included in signature page)*
             99 .1        Consent of Marvin E. Lesser, dated as of May 15, 2006*


 *    Previously filed.
                                                               Exhibit 1.1



                      GOLFSMITH INTERNATIONAL HOLDINGS, INC.


                                (a Delaware corporation)


                                Shares of Common Stock


                              PURCHASE AGREEMENT

Dated: May  , 2006
                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.


                                                           (a Delaware corporation)


                                                          Shares of Common Stock


                                                          (Par Value $  Per Share)


                                                        PURCHASE AGREEMENT

                                                                                                                                 May  , 2006

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated

J.P. Morgan Securities Inc.
as Representatives of the several Underwriters
c/o      Merrill Lynch & Co.
         Merrill Lynch, Pierce, Fenner & Smith
                       Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
   Golfsmith International Holdings, Inc., a Delaware corporation (the ―Company‖), confirms its agreement with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (―Merrill Lynch‖), J.P. Morgan Securities Inc. (―J.P. Morgan‖) and each of the other Underwriters
named in Schedule A hereto (collectively, the ―Underwriters,‖ which term shall also include any underwriter substituted as hereinafter provided
in Section 10 hereof), for whom Merrill Lynch and J.P. Morgan are acting as representatives (in such capacity, the ―Representatives‖), with
respect to (i) the sale by the Company, and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $0.001 per share, of the Company (―Common Stock‖) set forth in Schedule A and (ii) the grant by the
Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 
additional shares of Common Stock to cover overallotments, if any. The aforesaid  shares of Common Stock (the ―Initial Securities‖) to be
purchased by the Underwriters and all or any part of the  shares of Common Stock subject to the option described in Section 2(b) hereof (the
―Option Securities‖) are hereinafter called, collectively, the ―Securities.‖
   The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem
advisable after this Agreement has been executed and delivered.
   The Company and the Underwriters agree that up to  shares of the Securities to be purchased by the Underwriters (the ―Reserved
Securities‖) shall be reserved for sale by the Underwriters to certain eligible employees and persons having business relationships with the
Company (the
―Invitees‖), as part of the distribution of the Securities by the Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities Dealers, Inc. (the ―NASD‖) and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally confirmed for purchase by Invitees by the end of the first business day
after the date of this Agreement, such Reserved Securities may be offered to the public as part of the public offering contemplated hereby.
    The Company has filed with the Securities and Exchange Commission (the ―Commission‖) a registration statement on Form S-1
(No. 333-132414), including the related preliminary prospectus or prospectuses, covering the registration of the Securities under the Securities
Act of 1933, as amended (the ―1933 Act‖). Promptly after execution and delivery of this Agreement, the Company will prepare and file a
prospectus in accordance with the provisions of Rule 430A (―Rule 430A‖) of the rules and regulations of the Commission under the 1933 Act
(the ―1933 Act Regulations‖) and paragraph (b) of Rule 424 (―Rule 424(b)‖) of the 1933 Act Regulations. The information included in such
prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration
statement at the time it became effective pursuant to paragraph (b) of Rule 430A is referred to as ―Rule 430A Information.‖ Each prospectus
used before such registration statement became effective, and any prospectus that omitted the Rule 430A Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is herein called a ―preliminary prospectus.‖ Such registration
statement, including the amendments thereto, the exhibits and any schedules thereto, at the time it became effective, and including the
Rule 430A Information, is herein called the ―Registration Statement.‖ Any registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the ―Rule 462(b) Registration Statement,‖ and after such filing the term ―Registration Statement‖ shall
include the Rule 462(b) Registration Statement. The final prospectus in the form first furnished to the Underwriters for use in connection with
the offering of the Securities is herein called the ―Prospectus.‖ For purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (―EDGAR‖).
   SECTION 1. Representations and Warranties .
    (a) Representations and Warranties by the Company . The Company represents and warrants to each Underwriter as of the date hereof, the
Applicable Time referred to in Section 1(a)(i) hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as follows:
       (i) Compliance with Registration Requirements . Each of the Registration Statement, any Rule 462(b) Registration Statement and any
    post-effective amendment thereto has been declared effective under the 1933 Act and no stop order suspending the effectiveness of the
    Registration Statement, any Rule 462(b) Registration Statement or any post-effective amendment thereto has been issued under the 1933
    Act and no proceedings for such purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by
    the Commission, and any request on the part of the Commission for additional information has been complied with.
       At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto
    became effective and at the Closing Time (and, if any Option Securities are purchased, at the Date of Delivery), the Registration Statement,
    the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects
    with the requirements of the 1933 Act and the 1933 Act

                                                                        2
Regulations and did not, as of its respective date, and will not contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading and the Prospectus, any preliminary prospectus and
any supplement thereto or prospectus wrapper prepared in connection therewith, at their respective times of issuance and at the Closing
Time, complied and will comply in all material respects with any applicable laws or regulations of foreign jurisdictions in which the
Prospectus and such preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the offer and
sale of Reserved Securities. Neither the Prospectus nor any amendments or supplements thereto (including any prospectus wrapper), at the
time the Prospectus or any such amendment or supplement was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a
material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading.
   As of the Applicable Time (as defined below), neither (x) the Issuer General Use Free Writing Prospectus(es) (as defined below),
including the information included on Schedule E hereto issued at or prior to the Applicable Time and the Statutory Prospectus (as defined
below) as of the Applicable Time, all considered together (collectively, the ―General Disclosure Package‖), nor (y) any individual Issuer
Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a
material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
   As used in this subsection and elsewhere in this Agreement:
   ―Applicable Time‖ means  :00 [a/p]m (Eastern time) on [DATE] or such other time as agreed by the Company and Merrill Lynch.
   ―Issuer Free Writing Prospectus‖ means any ―issuer free writing prospectus,‖ as defined in Rule 433 of the 1933 Act Regulations
(―Rule 433‖), relating to the Securities that (i) is required to be filed with the Commission by the Company, (ii) is a ―road show that is a
written communication‖ within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission or (iii) is exempt
from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final
terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form required to be
retained in the Company’s records pursuant to Rule 433(g).
   ―Issuer General Use Free Writing Prospectus‖ means any Issuer Free Writing Prospectus that is intended for general distribution to
prospective investors (other than a Bona Fide Electronic Road Show (as defined below)), as evidenced by its being specified in Schedule D
hereto.
   ―Issuer Limited Use Free Writing Prospectus‖ means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing
Prospectus.
  ―Statutory Prospectus‖ as of any time means the prospectus relating to the Securities that is included in the Registration Statement
immediately prior to that time, including any document incorporated by reference therein.
    Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale
of the Securities or until any earlier date that

                                                                     3
the issuer notified or notifies Merrill Lynch as described in Section 3(e), did not, does not and will not include any information that
conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or
other prospectus deemed to be a part thereof that has not been superseded or modified.
   The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement, any
preliminary prospectus or Statutory Prospectus, the Prospectus, any Issuer Free Writing Prospectus or the information included on
Schedule E hereto made in reliance upon and in conformity with written information furnished to the Company by any Underwriter
through Merrill Lynch expressly for use therein.
   Each preliminary prospectus (including the prospectus filed as part of the Registration Statement as originally filed or as part of any
amendment thereto) complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
   At the time of filing the Registration Statement, any 462(b) Registration Statement and any post-effective amendments thereto and at
the date hereof, the Company was not and is not an ―ineligible issuer,‖ as defined in Rule 405 of the 1933 Act Regulations.
  (ii) Independent Accountants . The accountants who certified the financial statements and supporting schedules included in the
Registration Statement are independent registered public accountants as required by the 1933 Act and the 1933 Act Regulations.
   (iii) Financial Statements . The financial statements included in the Registration Statement, the General Disclosure Package and the
Prospectus, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting
principles (―GAAP‖) applied on a consistent basis throughout the periods involved. The supporting schedules, if any, present fairly in
accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information
included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Registration Statement. The pro forma financial statements and the related notes thereto
included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the
Registration Statement, the General Disclosure Package or the Prospectus regarding ―non-GAAP financial measures‖ (as such term is
defined by the rules and regulations of the Commission) comply with Regulation G of the 1934 Act and Item 10 of Regulation S-K of the
1933 Act, to the extent applicable.
   (iv) No Material Adverse Change in Business . Since the respective dates as of which information is given in the Registration
Statement, the General Disclosure Package or the Prospectus, except as otherwise stated therein, (A) there has been no material adverse
change, or

                                                                   4
any development that could reasonably be expected to have a material adverse change, in the condition, financial or otherwise, or in the
earnings or business affairs of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course
of business (a ―Material Adverse Effect‖), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital
stock.
    (v) Good Standing of the Company . The Company has been duly organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its
business as described in the Statutory Prospectus and the Prospectus and to enter into and perform its obligations under this Agreement;
and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material Adverse Effect.
   (vi) Good Standing of Subsidiaries . Each ―significant subsidiary‖ of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each, a ―Subsidiary‖ and, collectively, the ―Subsidiaries‖) has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Statutory Prospectus and the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity;
none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the Company are the subsidiaries listed on Exhibit 21 to the Registration
Statement.
   (vii) Capitalization . The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus in the column
entitled ―Actual‖ under the caption ―Capitalization‖ (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and outstanding capital stock have been duly authorized and validly issued and
are fully paid and non-assessable; none of the outstanding shares of capital stock was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
   (viii) Authorization of Agreement . This Agreement has been duly authorized, executed and delivered by the Company.
   (ix) Authorization and Description of Securities . The Securities to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company

                                                                   5
pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable;
the Common Stock conforms in all material respects to all statements relating thereto contained in the Statutory Prospectus and the
Prospectus and such description conforms in all material respects to the rights set forth in the instruments defining the same; no holder of
the Securities will be subject to personal liability by reason of being such a holder; and the issuance of the Securities is not subject to the
preemptive or other similar rights of any securityholder of the Company.
   (x) Absence of Defaults and Conflicts . Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (collectively, ―Agreements and Instruments‖) except for such defaults that would not reasonably be expected to result
in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated herein and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Statutory Prospectus and the Prospectus under the caption ―Use of Proceeds‖) and compliance
by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment
Events or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary, or reasonably be expected to result in any violation of any
applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a
―Repayment Event‖ means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any subsidiary. Exhibit A to the Opinion of White & Case LLP, required by Section 5(b) of this Agreement, is a
complete list of all of the Agreements and Instruments that are material to the Company and its subsidiaries.
    (xi) Absence of Labor Dispute . No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or
any subsidiary’s principal suppliers, manufacturers, customers or contractors, which, in either case, would reasonably be expected to result
in a Material Adverse Effect.
   (xii) Absence of Proceedings . There is no action, suit, proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which
could reasonably be expected to result in a Material Adverse Effect, or which could reasonably be expected to materially and adversely
affect the properties or assets

                                                                    6
thereof or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations
hereunder.
   (xiii) Accuracy of Exhibits . There are no contracts or documents which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so described and filed as required.
   (xiv) Possession of Intellectual Property . To the Company’s knowledge, the Company and its subsidiaries own or possess, or believe
that they can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property necessary to carry on the business now operated by them (collectively, ―Intellectual
Property‖), and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would reasonably be
expected to render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein,
and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would reasonably be expected to result in a Material Adverse Effect.
   (xv) Absence of Further Requirements . No filing with, or authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations
hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as have been already obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and (ii) such as have been obtained under the laws and regulations of jurisdictions outside the United
States in which the Reserved Securities are offered.
   (xvi) Absence of Manipulation . Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate
take, directly or indirectly, any action which is designed to or which has constituted or which would be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
   (xvii) Possession of Licenses and Permits . The Company and its subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, ―Governmental Licenses‖) issued by the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse Effect; the Company and its subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect
would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would not reasonably be expected to result in a
Material Adverse Effect.

                                                                    7
    (xviii) Title to Property . The Company and its subsidiaries have good and marketable title to all real property owned by the Company
and its subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Statutory Prospectus and the
Prospectus or (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases material to the business
of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties
described in the Statutory Prospectus and the Prospectus, are in full force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or sublease.
   (xix) Environmental Laws . Except as described in the Registration Statement and except as would not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold
(collectively, ―Hazardous Materials‖) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, ―Environmental Laws‖), (B) the Company and its subsidiaries have all permits,
authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances known to the Company that would reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or
affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws.
    (xx) Registration Rights . There are no persons with registration rights or other similar rights to have any securities registered pursuant
to the Registration Statement or, except as described in the Registration Statement, otherwise registered by the Company under the 1933
Act.
   (xxi) Accounting Controls . The Company and each of its subsidiaries maintain a system of internal accounting controls (as defined in
Rule 13a-15(f) of the Exchange Act) sufficient to provide reasonable assurances that (A) transactions are executed in accordance with
management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s
general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. Except as described in the Statutory Prospectus and the Prospectus, since
the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the

                                                                     8
Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
    (xxii) Compliance with the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that, upon the effectiveness of
the Registration Statement, it will be in compliance with all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations
promulgated thereunder or implementing the provisions thereof (the ―Sarbanes-Oxley Act‖) that are then in effect and which the Company
is required to comply with as of the effectiveness of the Registration Statement, and is actively taking steps to ensure that it will be in
compliance with other provisions of the Sarbanes-Oxley Act not currently in effect, upon the effectiveness of such provisions, or which
will become applicable to the Company at all times after the effectiveness of the Registration Statement.
    (xxiii) Payment of Taxes . All United States federal income tax returns of the Company and its subsidiaries required by law to be filed
on or prior to the date hereof (taking into account any applicable extension of time within which to file) have been filed, and all taxes
shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals or
contests have been or will be promptly taken or commenced and as to which adequate reserves have been provided. The Company and its
subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other
law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and has paid all taxes shown on such
filed returns that are due pursuant to such filed returns or taxes due pursuant to any assessment received by the Company and its
subsidiaries relating to any such returns, except for such taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax
liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect.
    (xxiv) Insurance . The Company and its subsidiaries carry or are entitled to the benefits of insurance, with reputable insurers, in such
amounts and covering such risks as is generally maintained by companies engaged in the same or similar business, and all such insurance
is in full force and effect. The Company has no reason to believe that it or any subsidiary will not be able (A) to renew its existing
insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would not result in a material adverse change. Neither of the
Company nor any subsidiary has been denied any insurance coverage which it has sought or for which it has applied.
   (xxv) Statistical and Market-Related Data . Any statistical and market-related data included in the Registration Statement and the
Statutory Prospectus and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate in all
material respects, and the Company has obtained the written consent to the use of such data from such sources to the extent such consent is
required for the inclusion of such data therein.
   (xxvi) Foreign Corrupt Practices Act . Neither the Company nor, to the knowledge of the Company, any director, officer, agent,
employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries has taken any action, directly or indirectly,
that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the

                                                                     9
    rules and regulations thereunder (the ―FCPA‖), including, without limitation, making use of the mails or any means or instrumentality of
    interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other
    property, gift, promise to give, or authorization of the giving of anything of value to any ―foreign official‖ (as such term is defined in the
    FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the
    Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have
    instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued
    compliance therewith.
       (xxvii) Money Laundering Laws . The operations of the Company are and have been conducted at all times in compliance with
    applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as
    amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules,
    regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the ―Money Laundering Laws‖) and
    no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company
    with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
       (xxviii) OFAC . Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or person
    acting on behalf of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
    Treasury Department (―OFAC‖); and the Company will not knowingly directly or indirectly use the proceeds of the offering, or lend,
    contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of
    financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
       (xxix) Investment Company Act . The Company is not required, and upon the issuance and sale of the Securities as herein contemplated
    and the application of the net proceeds therefrom as described in any preliminary prospectus and the Prospectus will not be required, to
    register as an ―investment company‖ under the Investment Company Act of 1940, as amended (the ―1940 Act‖).
   (c) Officer’s Certificates . Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Representatives
or to counsel for the Underwriters pursuant to the terms of this Agreement shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
   SECTION 2. Sale and Delivery to Underwriters; Closing .
    (a) Initial Securities . On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter, severally and not jointly, agrees to purchase from the Company,
at the price per share set forth in Schedule B, the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter,
plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make
to eliminate any sales or purchases of fractional securities.

                                                                        10
    (b) Option Securities . In addition, on the basis of the representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional
 shares of Common Stock, at the price per share set forth in Schedule B, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering overallotments which
may be made in connection with the offering and distribution of the Initial Securities upon notice by Merrill Lynch to the Company setting
forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (a ―Date of Delivery‖) shall be determined by Merrill Lynch, but shall
not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase
that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial Securities, subject in each case to such adjustments as Merrill Lynch
in its discretion shall make to eliminate any sales or purchases of fractional shares.
   (c) Payment . Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of
Shearman & Sterling LLP, 599 Lexington Avenue, New York, NY 10022, or at such other place as shall be agreed upon by the Representatives
and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery
being herein called ―Closing Time‖).
   In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon
by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company.
    Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company
against delivery to the Representatives for the respective accounts of the Underwriters of certificates for the Securities to be purchased by them.
It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment
of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually
and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant
Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.
   (d) Denominations; Registration . Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least one full business day before the Closing Time or the relevant
Date of Delivery, as the case may be. The certificates for the Initial Securities and the Option Securities, if any, will be made available for
examination and packaging by the Representatives in The City of New York not later

                                                                        11
than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be.
   SECTION 3. Covenants of the Company . The Company covenants with each Underwriter as follows:
    (a) Compliance with Securities Regulations and Commission Requests . The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A, and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have
been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(e) of the 1933 Act concerning the
Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the
offering of the Securities. The Company will effect the filings required under Rule 424(b), in the manner and within the time period required by
Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will use reasonable efforts to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment.
    (b) Filing of Amendments and Exchange Act Documents . The Company will give the Representatives notice of its intention to file or
prepare any amendment to the Registration Statement (including any filing under Rule 462(b)) or any amendment, supplement or revision to
either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, and will furnish the
Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object. The Company has
given the Representatives notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable
Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time
and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case
may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.
    (c) Delivery of Registration Statements . The Company has furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits
filed therewith and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the
Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
   (d) Delivery of Prospectuses . The Company has delivered to each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the

                                                                         12
Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter,
without charge, during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
    (e) Continued Compliance with Securities Laws . The Company will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist
as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish
to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. If at any time
following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free
Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement relating to the Securities or
included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances, prevailing at that subsequent time, not misleading, the Company will promptly notify
Merrill Lynch and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such
conflict, untrue statement or omission.
   (f) Blue Sky Qualifications . The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may
designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
   (g) Rule 158 . The Company will timely file such reports pursuant to the Securities Exchange Act of 1934 (the ―1934 Act‖) as are
necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to
provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
   (h) Use of Proceeds . The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the
Prospectus under ―Use of Proceeds.‖
   (i) Listing . The Company will use its best efforts to effect the quotation of the Securities on the Nasdaq National Market.

                                                                        13
    (j) Restriction on Sale of Securities . During a period of 180 days from the date of the Prospectus (the ―Lock-up Period‖), the Company will
not, without the prior written consent of Merrill Lynch and J.P. Morgan, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (i) the Securities to be sold hereunder, (ii) the grant of options to purchase shares of
Common Stock pursuant to the equity incentive or other employee compensation plans described in the Registration Statement (the ―Plans‖),
(iii) the issuance of shares of Common Stock under the Plans, (iv) the filing of a registration statement on Form S-8 with respect to the Plans,
or (v) the issuance of up to 1,637,268 shares of Common Stock (as adjusted for any stock split, stock consolidation or similar event) in
connection with a merger, acquisition or joint venture and the filing of any registration statement in connection therewith, provided that the
holders of any shares of Common Stock issued pursuant to this subclause (v) shall agree to be bound by an agreement substantially in the form
of Exhibit C hereto for a period that shall not exceed the remainder of the Lock-up Period (as the same may be extended pursuant hereto).
Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period the Company issues an earnings release or
material news or a material event relating to the Company occurs or (2) prior to the expiration of the 180-day restricted period, the Company
announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period
beginning on the last day of the 180-day restricted period, the restrictions imposed in this clause (j) shall continue to apply until the expiration
of the 180-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
    (k) Reporting Requirements . The Company, during the period when the Prospectus is required to be delivered under the 1933 Act, will file
all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the rules
and regulations of the Commission thereunder.
   (l) Compliance with NASD Rules. With respect to persons purchasing Reserved Securities, the Underwriters will notify the Company as to
which persons, if any, will need to be restricted from selling, transferring, assigning, pledging or hypothecating their Reserved Securities for a
period of three months following the date of this Agreement as required by NASD Rule 2790. At the request of the Underwriters, the Company
will direct the transfer agent to place a stop transfer restriction upon such securities for such period of time. Should the Company release, or
seek to release, from such restrictions any of such Reserved Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in connection with such release.
   (m) Issuer Free Writing Prospectuses . The Company represents and agrees that, unless it obtains the prior consent of the Representatives,
and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made
and will not make any offer relating to the Securities that would constitute an ―issuer free writing prospectus,‖ as defined in Rule 433, or that
would otherwise constitute a ―free writing prospectus,‖ as defined in Rule 405, required to be filed with the Commission. Any such free writing
prospectus consented to by the Representatives or by the Company and the Representatives, as the case may be, is hereinafter referred to as a
―Permitted Free Writing Prospectus.‖ The Company represents that it has treated or agrees that it will treat each Permitted Free Writing
Prospectus as an ―issuer free writing prospectus,‖ as defined in Rule 433, and has complied and will comply with the requirements of Rule 433
applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record
keeping.

                                                                        14
   SECTION 4. Payment of Expenses .
    (a) Expenses . The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed
and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other
transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the
printing and delivery to the Underwriters of copies of each preliminary prospectus, any Permitted Free Writing Prospectus and of the
Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the
Underwriters to investors, (vii) the fees and expenses of any transfer agent or registrar for the Securities, (viii) the costs and expenses of the
Company relating to investor presentations on any ―road show‖ undertaken in connection with the marketing of the Securities, including
without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such
consultants, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the
review by the NASD of the terms of the sale of the Securities, (x) the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market; (xi) the fees and disbursements of counsel for the Underwriters in connection with matters related to
the Reserved Securities which are designated by the Company for sale to Invitees and (xii) the costs and expenses (including without limitation
any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale
of the Securities made by the Underwriter caused by a breach of the representation contained in the third paragraph of Section 1(a)(i).
   (b) Termination of Agreement . If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5,
Section 9(a)(i) or Section 11 hereof, the Company shall reimburse the Underwriters for their out-of-pocket expenses reasonably incurred by the
Underwriters in connection with this Agreement and the transactions contemplated hereby, including the reasonable fees and disbursements of
counsel for the Underwriters.
   SECTION 5. Conditions of Underwriters’ Obligations . The obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other
obligations hereunder, and to the following further conditions:
    (a) Effectiveness of Registration Statement . The Registration Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933
Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the
Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without
reliance on Rule

                                                                       15
424(b)(8) or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the
requirements of Rule 430A.
  (b) Opinion of Counsel for Company . At Closing Time, the Representatives shall have received the favorable opinion, dated as of Closing
Time, of White & Case LLP, counsel for the Company, together with signed or reproduced copies of such letter for each of the other
Underwriters in the form set forth in Exhibit A hereto.
   (c) Opinion of General Counsel of Company . At Closing Time, the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Scott Wood, Esq., general counsel of the Company, together with signed or reproduced copies of such letter for each of the
Underwriters in the form set forth in Exhibit B hereto.
   (d) Opinion of Counsel for Underwriters . At Closing Time, the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Shearman & Sterling LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of
the other Underwriters in form and substance satisfactory to the Underwriters.
    (e) Officers’ Certificate . At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus or the General Disclosure Package, any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representatives shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time and (iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time.
   (f) Accountant’s Comfort Letter . At the time of the execution of this Agreement, the Representatives shall have received from Ernst &
Young LLP, an independent registered public accounting firm, a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants’ ―comfort letters‖ to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the Prospectus.
   (g) Bring-down Comfort Letters . On each of the date of the Prospectus and at Closing Time, the Representatives shall have received from
Ernst & Young LLP, an independent registered public accounting firm, a letter, dated as of the date of the Prospectus and as of the Closing
Time, respectively, in form and substance satisfactory to the Representatives.
   (h) Approval of Listing . At Closing Time, the Securities shall have been approved for inclusion in the Nasdaq National Market, subject
only to official notice of issuance.
   (i) No Objection . The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

                                                                       16
  (j) Lock-up Agreements . At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule C hereto.
   (k) Conditions to Purchase of Option Securities . In the event that the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in
any certificates furnished by the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery,
the Representatives shall have received:
       (i) Officers’ Certificate . A certificate, dated such Date of Delivery, of the President or a Vice President of the Company and of the chief
    financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d)
    hereof remains true and correct as of such Date of Delivery.
       (iii) Opinion of Counsel for Company . The favorable opinion of White & Case LLP, counsel for the Company, dated such Date of
    Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion
    required by Section 5(b) hereof.
       (iv) Opinion of General Counsel of Company . The favorable opinion of Scott Wood, Esq., general counsel of the Company, dated such
    Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion
    required by Section 5(c) hereof.
       (vi) Opinion of Counsel for Underwriters . The favorable opinion of Shearman & Sterling LLP, counsel for the Underwriters, dated
    such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the
    opinion required by Section 5(d) hereof.
       (vii) Bring-down Comfort Letter . A letter from Ernst & Young LLP, an independent registered public accounting firm, in form and
    substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter
    furnished to the Representatives pursuant to Section 5(f) hereof, except that the ―specified date‖ in the letter furnished pursuant to this
    paragraph shall be a date not more than five days prior to such Date of Delivery.
   (l) Additional Documents . At Closing Time and at each Date of Delivery counsel for the Underwriters shall have been furnished with such
documents and opinions as they may reasonably request for the purpose of enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions,
herein contained.
    (m) Termination of Agreement . If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability
of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.

                                                                        17
   SECTION 6. Indemnification .
   (a) Indemnification of Underwriters . The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, as such term is
defined in Rule 501(b) under the 1933 Act (each, an ―Affiliate‖), its selling agents and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
        (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged
    untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A
    Information or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the
    statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any
    preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto), or the omission
    or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under
    which they were made, not misleading;
        (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in
    settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any
    claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that
    (subject to Section 6(e) below) any such settlement is effected with the written consent of the Company; and
        (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch),
    reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental
    agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such
    alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
    provided , however , that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out
of any such untrue statement or omission or any such alleged untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information, or any preliminary prospectus, any Issuer Free Writing Prospectus or the
Prospectus (or any amendment or supplement thereto).
    (b) Indemnification of Company, Directors and Officers . Each Underwriter severally agrees to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense (including the
reasonable cost of investigation) described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information or any preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through
Merrill Lynch expressly for use therein.

                                                                       18
    (c) Actions against Parties; Notification . Each indemnified party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result
thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the
case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the
case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such action; provided , however , that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under
this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on
behalf of any indemnified party.
    (d) Settlement Without Consent if Failure to Reimburse . If at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) or settlement of any claim in connection with any violation referred to in Section 6(e) effected without
its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of
such settlement.
    (e) Indemnification for Reserved Securities . In connection with the offer and sale of the Reserved Securities, the Company agrees to
indemnify and hold harmless the Underwriters, their Affiliates and selling agents and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and against any and all loss, liability, claim, damage and
expense (including, without limitation, any legal or other expenses reasonably incurred in connection with defending, investigating or settling
any such action or claim), as incurred, (i) arising out of the violation of any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered; (ii) arising out of any untrue statement or alleged untrue statement of a material fact contained in any
prospectus wrapper or other material prepared by or with the consent of the Company for distribution to Invitees in connection with the
offering of the Reserved Securities or caused by any omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided , however , that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any such alleged untrue statement or omission or any such alleged untrue
statement or omission made in reliance upon or in conformity with written information furnished to the Company by any Underwriter through
Merrill Lynch expressly for use in the prospectus wrapper or other such material, it being understood that the only such information furnished
to the Company by any Underwriter is the name of each such Underwriter; (iii) caused by the failure of any Invitee to pay for and accept
delivery of

                                                                        19
Reserved Securities which have been orally confirmed for purchase by any Invitee by the end of the first business day after the date of the
Agreement; or (iv) related to, or arising out of or in connection with, the offering of the Reserved Securities.
    SECTION 7. Contribution . If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then in lieu of indemnifying
such Indemnified Party thereunder each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand, and the Underwriters on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the Company on the one hand, and of the Underwriters, on the other hand, in
connection with the statements or omissions, or in connection with any violation of the nature referred to in Section 6(e) hereof, which resulted
in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
   The relative benefits received by the Company on the one hand, and the Underwriters on the other hand, in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of
the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received
by the Underwriters, in each case as set forth on the cover of the Prospectus bear to the aggregate initial public offering price of the Securities
as set forth on the cover of the Prospectus.
   The relative fault of the Company on the one hand, and the Underwriters on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, or any violation of the nature referred to in Section 6(e) hereof.
    The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
   Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission
or alleged omission.

                                                                        20
   No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
   For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the
Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial
Securities set forth opposite their respective names in Schedule A hereto and not joint.
   SECTION 8. Representations, Warranties and Agreements to Survive . All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its
officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.
   SECTION 9. Termination of Agreement .
    (a) Termination; General . The Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to Closing
Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the
Prospectus or General Disclosure Package, any material adverse change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial
markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq National Market, or
if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of
said exchanges or by such system or by order of the Commission, the NASD or any other governmental authority, or (iv) a material disruption
has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or
Euroclear systems in Europe, or (v) if a banking moratorium has been declared by either Federal or New York authorities.
   (b) Liabilities . If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive such termination and remain in full
force and effect.
  SECTION 10. Default by One or More of the Underwriters . If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the ―Defaulted Securities‖), the
Representatives shall have the right,

                                                                        21
within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Representatives shall not have completed such arrangements within such 24-hour period, then:
       (i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the
    non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their
    respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or
       (ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or,
    with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase and of the
    Company to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any
    non-defaulting Underwriter.
   No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.
   In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after
the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant
Option Securities, as the case may be, either the Representatives or the Company shall have the right to postpone Closing Time or the relevant
Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used herein, the term ―Underwriter‖ includes any person substituted for
an Underwriter under this Section 10.
     Default by the Company . If the Company shall fail at Closing Time or at the Date of Delivery to sell the number of Securities that it is
obligated to sell hereunder, then this Agreement shall terminate without any liability on the part of any non-defaulting party; provided,
however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
   SECTION 11. Tax Disclosure . Notwithstanding any other provision of this Agreement, immediately upon commencement of discussions
with respect to the transactions contemplated hereby, the Company (and each employee, representative or other agent of the Company) may
disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax
treatment and tax structure. For purposes of the foregoing, the term ―tax treatment‖ is the purported or claimed U.S. federal income, state or
local tax treatment of the transactions contemplated hereby, and the term ―tax structure‖ includes any fact that may be relevant to understanding
the purported or claimed federal income tax treatment of the transactions contemplated hereby.
   SECTION 12. Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representatives, c/o
Merrill Lynch, Pierce, Fenner & Smith Incorporated at 4 World Financial Center, New York, New York 10080, attention General Counsel,
with a copy to Shearman & Sterling LLP, 599 Lexington Avenue, New York,

                                                                         22
NY 10022, attention of Michael Schiavone; notices to the Company shall be directed to it at 11000 N. IH-35, Austin, TX 78753-3195, attention
of General Counsel, with a copy to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036, attention Mark Mandel.
   SECTION 13. No Advisory or Fiduciary Relationship . The Company acknowledges and agrees that (a) the purchase and sale of the
Securities pursuant to this Agreement, including the determination of the public offering price of the Securities and any related discounts and
commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other
hand, (b) in connection with the offering contemplated hereby and the process leading to such transaction each Underwriter is and has been
acting solely as a principal and is not the agent or fiduciary of the Company, or its respective stockholders, creditors, employees or any other
party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the
offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the
Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering contemplated hereby except the
obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of each of the Company, and (e) the Underwriters have not provided any legal,
accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company has consulted its own respective legal,
accounting, regulatory and tax advisors to the extent it deemed appropriate.
   SECTION 14. Parties . This Agreement shall each inure to the benefit of and be binding upon the Underwriters, the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and their respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and their respective successors, and said controlling persons and officers and directors and
their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
  SECTION 15. GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
  SECTION 16. TIME . TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
   SECTION 17. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same Agreement.
   SECTION 18. Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction hereof.

                                                                        23
   If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters and the Company in
accordance with its terms.

                                                                      Very truly yours,

                                                                      GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                                                                      By
                                                                                              Title:


CONFIRMED AND ACCEPTED,
  as of the date first above written:

MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
                 INCORPORATED

By
                                        Authorized Signatory

By: J.P. MORGAN SECURITIES INC.

By
                                        Authorized Signatory
For themselves and as Representatives of the other Underwriters named in Schedule A hereto.

                                                                    24
                                                     SCHEDULE A

                                                                  Number of
                                                                    Initial
Name of Underwriter                                               Securities
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.
Lazard Capital Markets LLC
   Total                                                                 


                                                      Sch A - 1
                                                                   SCHEDULE B


                                                       Golfsmith International Holdings, Inc.
                                                            Shares of Common Stock
                                                            (Par Value $  Per Share)
1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $  .
2. The purchase price per share for the Securities to be paid by the several Underwriters shall be $  , being an amount equal to the initial
public offering price set forth above less $  per share; provided that the purchase price per share for any Option Securities purchased upon the
exercise of the overallotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

                                                                      Sch B - 1
                                                    SCHEDULE C


                                     List of persons and entities subject to lock-up
Atlantic Equity Partners III, L.P.
Carl Paul
Franklin Paul
James D. Thompson
Virginia Bunte
Kenneth Brugh
Fred Quandt
David Pritchett
Kiprian Miles
Jeff Sheets
Matthew Corey
David Lowe
Charles Shaw
Roberto Buaron
James Grover
Noel Wilens
Thomas G. Hardy
James Long
Lawrence Mondry

                                                       Sch C - 1
                       SCHEDULE D


[SPECIFY EACH ISSUER GENERAL USE FREE WRITING PROSPECTUS]

                         Sch E - 1
SCHEDULE E

 Sch E - 1
                                           Exhibit A


 FORM OF OPINION OF COMPANY’S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)


            [TO BE PROVIDED]

                  A-1
                                           Exhibit B


  FORM OF OPINION OF GENERAL COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(c)


            [TO BE PROVIDED]

                  B-1
                                                                                                                                           Exhibit C


                                                                       , 2006

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
J.P. MORGAN SECURITIES INC.

c/o         Merrill Lynch & Co.
            Merrill Lynch, Pierce, Fenner & Smith
                        Incorporated
            4 World Financial Center
            New York, New York 10080
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
      Re: Proposed Public Offering by Golfsmith International Holdings, Inc.
Dear Sirs:
    The undersigned, a stockholder of Golfsmith International Holdings, Inc., a Delaware corporation (the ―Company‖), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (―Merrill Lynch‖), J.P. Morgan Securities Inc. (―J.P. Morgan‖) and
Lazard Capital Markets LLC propose to enter into a Purchase Agreement (the ―Purchase Agreement‖) with the Company providing for the
initial public offering (the ―Offering‖) of shares (the ―Securities‖) of the Company’s common stock, par value $0.001 per share (the ―Common
Stock‖). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder of the Company, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter
to be named in the Purchase Agreement that, during a period of 180 days from the date of the Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch and J.P. Morgan, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Company’s Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of
disposition, or file, or cause to be filed, any registration statement under the Securities Act of 1933, as amended, with respect to any of the
foregoing (collectively, the ―Lock-Up Securities‖) or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to
be settled by delivery of Common Stock or other securities, in cash or otherwise.
   The foregoing restrictions shall not apply to (a) transactions relating to shares of Common Stock Shares or other securities acquired in open
market transactions after the completion of the Offering, unless such transaction would result in the filing of any reports pursuant to Section 16
of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, (b) the exercise of stock options
granted pursuant to the Company’s equity incentive plans or otherwise

                                                                    Exhibit C-1
outstanding on the date hereof, provided that it shall apply to any shares of Common Stock issued upon such exercise, (c) the establishment of
any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Securities Exchange Act of 1934 (a
―Plan‖) provided that no sales of shares of Common Stock or securities convertible into, or exchangeable or exercisable for, shares of Common
Stock, shall be made pursuant to a Plan prior to the expiration of the 180-day lock-up period (as the same may be extended pursuant to the
provisions hereof), (d) transfers of shares of Common Stock or any security convertible into, or exercisable for, shares of Common Stock as a
bona fide gift or gifts (which shall include, in the case of an individual, a gift occurring at death by will or intestacy, and transfers during
lifetime to a trust or other entity for bona fide estate planning or tax purposes), (e) distributions of shares of Common Stock or any security
convertible into, or exercisable for, shares of Common Stock to limited partners or shareholders of the undersigned or (f) transfers to an entity
controlling, controlled by or under common control with, the undersigned; provided that in the case of any transfer or distribution pursuant to
clause (d), (e) or (f), each donee, distributee or other transferee shall sign and deliver a letter substantially in the form of this letter.
   Notwithstanding the foregoing, if:
   (1) during the last 17 days of the 180-day lock-up period, the Company issues an earnings release or material news or a material event
relating to the Company occurs; or
  (2) prior to the expiration of the 180-day lock-up period, the Company announces that it will release earnings results or becomes aware that
material news or a material event will occur during the 16-day period beginning on the last day of the 180-day lock-up period,
the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of
the earnings release or the occurrence of the material news or material event, as applicable, unless Merrill Lynch waives, in writing, such
extension.
   The undersigned hereby acknowledges and agrees that written notice of any extension of the 180-day lock-up period pursuant to the
previous paragraph will be delivered by Merrill Lynch and/or J.P. Morgan to the Company (in accordance with Section 12 of the Purchase
Agreement) and that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The
undersigned further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up
agreement during the period from the date of this lock-up agreement to and including the 34 th day following the expiration of the initial
180-day lock-up period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unless it
has received written confirmation from the Company that the 180-day lock-up period (as may have been extended pursuant to the previous
paragraph) has expired.
   The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against
the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions.

                                                                  Exhibit C-2
   If (i) the Company notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the
Commission with respect to the Offering is withdrawn, (iii) for any reason the Purchase Agreement shall be terminated prior to the closing of
the Offering, or (iv) the Offering is not completed by July 1, 2006, this Lock-Up Agreement shall be terminated and the undersigned shall be
released from its obligations hereunder.

                                                              Very truly yours,

                                                              Signature:


                                                              Print Name:


                                                                   Exhibit C-3
                                                                                                                                       Exhibit 3.2


                                                   SECOND AMENDED AND RESTATED


                                                   CERTIFICATE OF INCORPORATION


                                                                       OF


                                           GOLFSMITH INTERNATIONAL HOLDINGS, INC.
  Golfsmith International Holdings, Inc. (the ―Corporation‖), a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the ―DGCL‖), does hereby certify that:
   1. The Certificate of Incorporation of the Corporation was originally filed in the Office of the Secretary of State of the State of Delaware on
September 4, 2002, and was amended and restated on October 3, 2002.
   2. This Second Amended and Restated Certificate of Incorporation (the ―Certificate of Incorporation‖), which amends and restates the
Corporation’s existing Amended and Restated Certificate of Incorporation in its entirety, has been duly adopted pursuant to the provisions of
Sections 242 and 245 of the DGCL, and the requisite stockholders of the Corporation have given their written consent hereto in accordance
with Section 228 of the DGCL.
   The Amended and Restated Certificate of Incorporation of the Corporation is amended and restated to read in its entirety as follows:


                                                                   ARTICLE I
      The name of the Corporation is Golfsmith International Holdings, Inc.


                                                                   ARTICLE II
     The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.


                                                                  ARTICLE III
      The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may
be organized under the DGCL.


                                                                  ARTICLE IV
       The Corporation is authorized to issue two classes of stock to be designated, respectively, ―Common Stock‖ and ―Preferred Stock.‖ The
total number of shares that the Corporation is authorized to issue is one hundred and ten million (110,000,000). One hundred million
(100,000,000) shares shall be Common Stock, par value $0.001 per share, and ten million (10,000,000) shares shall be Preferred Stock, par
value $0.001 per share.
      1. Common Stock
      (a) Dividends . Subject to any applicable limitations set forth in the DGCL, this Certificate of Incorporation or the Bylaws of the
Corporation, dividends may be declared and paid on the Common Stock as, if and when determined by the Board of Directors and subject to
any preferential dividend rights of any then outstanding shares of Preferred Stock. Dividends may be paid either in cash, in property, or in
shares of the Corporation’s capital stock.
       (b) Liquidation Rights . In the event of a voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders
of shares of Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation, to
share in the distribution of any remaining assets available for distribution to its stockholders ratably, subject to any preferential rights of any
then-outstanding Preferred Stock.
       (c) Voting Rights . The holders of Common Stock shall be entitled to one vote per share in voting or consenting to the election of
directors and for all other matters presented to the stockholders of the Corporation for their action or consideration. Cumulative voting for the
election of directors is not permissible. Except as otherwise required by law, the holders of the Common Stock shall vote together as a single
class on all matters submitted to the stockholders of the Corporation.
       2. Preferred Stock . The Board of Directors is hereby authorized to provide by resolution for the issuance from time to time of shares of
Preferred Stock in one or more series, without further stockholder approval, by filing a certificate pursuant to the applicable law of the State of
Delaware (hereinafter referred to as a ―Preferred Stock Designation‖), setting forth such resolution, to establish by resolution from time to time
the number of shares to be included in each such series, and to fix by resolution the designation, powers, preferences and rights of the shares of
each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, the determination of the following:
      (a) the designation of the series, which may be by distinguishing number, letter or title;
      (b) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the
Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);
     (c) the amounts or rates at which dividends will be payable on, and the preferences, if any, of shares of the series in respect of dividends,
and whether such dividends, if any, shall be cumulative or noncumulative;
      (d) dates at which dividends, if any, shall be payable;
      (e) the redemption rights and price or prices, if any, for shares of the series;

                                                                           2
      (f) the terms and amount of any sinking fund, if any, provided for the purchase or redemption of shares of the series;
      (g) the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation;
      (h) whether the shares of the series shall be convertible into, or exchangeable, or redeemable for, shares of any other class or series, or
any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security,
the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible
or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;
      (i) restrictions on the issuance of shares of the same series or of any other class or series;
      (j) the voting rights, if any, of the holders of shares of the series generally or upon specified events; and
      (k) any other rights, powers, preferences of such shares as are permitted by law.
      3. No Preemptive Rights . The holders of Common Stock or any series of Preferred Stock shall have no preemptive right to subscribe for
any shares of any class of capital stock of the Corporation whether now or hereafter authorized, except as expressly set forth in this Certificate
of Incorporation, any Preferred Stock Designation, any resolution or resolutions providing for the issuance of a series of stock adopted by the
Board of Directors, or any agreement between the Corporation and its stockholders.
      4. Record Ownership . The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the
owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any
other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

                                                                           3
                                                                   ARTICLE V
      1. Amendment of Bylaws by Board of Directors . In furtherance and not in limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to make, adopt, amend, supplement and repeal any or all of the Bylaws of the Corporation by resolution
adopted by the affirmative vote of a majority of the entire Board of Directors, subject to any Bylaw requiring the affirmative vote of a larger
percentage of the members of the Board of Directors.
       2. Amendment of Bylaws by Stockholders . The stockholders shall also have the power to make, adopt, amend, supplement and repeal
the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of shares of any class or series of stock of the
Corporation required by applicable law or by this Certificate of Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class at a meeting of stockholders, shall be required for the stockholders to make, adopt,
amend, supplement or repeal the Bylaws of the Corporation. For purposes of this Certificate of Incorporation, ―Affiliate‖ shall have the
meaning set forth in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the ―Exchange Act‖).


                                                                  ARTICLE VI
       1. Powers and Duties of the Board of Directors . Subject to the provisions of the DGCL and any limitations in the Bylaws or this
Certificate of Incorporation relating to action required to be approved by the stockholders, the business and affairs of the Corporation shall be
managed, and all corporate powers shall be exercised, by or under the direction of the Board of Directors.
       2. Number of Directors . The Board of Directors shall have that number of directors set out in the Bylaws of the Corporation as adopted
or as set from time to time by a duly adopted amendment thereto by the Board of Directors or stockholders of the Corporation. The number of
members of the Board of Directors which shall constitute the whole Board of Directors shall be fixed by the Board of Directors in the manner
provided in the Bylaws of the Corporation.


                                                                  ARTICLE VII
      1. No Written Ballots . Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
     2. Nominations . Advance notice of stockholder nominations for the election of directors and of any other business to be brought before
any meeting of the stockholders shall be given in the manner provided in the Bylaws.
      3. Election of Directors . At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until the
expiration of the term for which they

                                                                         4
are elected, or until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election
shall take place at a stockholders’ meeting called and held in accordance with the DGCL.


                                                                  ARTICLE VIII
       1. Vacancies and Newly-Created Directorships . Subject to the rights of the holders of any series of Preferred Stock then outstanding,
newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation or other cause (including removal from office by a vote of the stockholders) shall be filled in accordance with
the terms of that certain Management Rights Agreement by and among Atlantic Equity Partners III, L.P. (―AEP‖) and the Corporation (the
―Management Rights Agreement‖) and by the vote of a majority of the remaining members of the Board of Directors, even if less than a
quorum, at any meeting of the Board of Directors, or by a sole remaining director. A person so elected by the Board of Directors to fill a
vacancy shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such
director’s successor shall have been duly elected and qualified.
       2 Removal of Directors . Subject to the rights of the holders of any series of Preferred Stock then outstanding, unless otherwise restricted
by this Certificate of Incorporation or the Bylaws, any director, or the entire Board of Directors, may be removed from office at any time, with
or without cause, by the affirmative vote of the holders of more than fifty percent (50%) of the voting power of all of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
       3. Directors Elected by Preferred Stockholders . During any period when the holders of any series of Preferred Stock have the right to
elect additional directors as provided for in a Preferred Stock Designation, then upon commencement and for the duration of the period during
which such right continues, to the extent provided for in a Preferred Stock Designation or by applicable law: (i) the then otherwise total
authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of
such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such
additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold
such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or
removal. Except as otherwise provided for in the Preferred Stock Designation establishing such series of Preferred Stock, whenever the holders
of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such
stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the
death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total and authorized number of
directors of the Corporation shall be reduced accordingly.

                                                                          5
                                                                   ARTICLE IX
       1. Action by Written Consent of Stockholders . For so long as any security of the Company is registered under Section 12 of the
Exchange Act, the stockholders of the Corporation shall take action by meetings held pursuant to this Certificate of Incorporation and the
Bylaws and shall have no right to take any action by written consent without a meeting. Notwithstanding the foregoing provision of this
Article IX, for so long as AEP (directly or through its Affiliates) is the holder of record of at least forty percent (40%) of the outstanding shares
of common stock of the Corporation, either on its own or together with any group as such term is defined in Section 13(d)(3) of the Exchange
Act, the stockholders of the Corporation shall have the right to take any action by written consent without a meeting.
      2. Meetings of Stockholders . Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide.
Special meetings of the stockholders, for any purpose or purposes, may only be called by the Chairman of the Board of Directors of the
Corporation or the Board of Directors upon a request by the holders of at least twenty-five percent (25%) of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the notice.


                                                                    ARTICLE X
      The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.


                                                                   ARTICLE XI
      The Corporation expressly elects to be governed by Section 203 of the DGCL. Notwithstanding the terms of Section 203 of the DGCL,
AEP and its Affiliates shall not be deemed at any time and without regard to the percentage of voting stock of the Corporation owned by AEP
or any of its Affiliates, as applicable, to be an ―interested stockholder‖ as such term is defined in Section 203(c)(5) of the DGCL.


                                                                   ARTICLE XII
      To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is
amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
      The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, she, his or her testator or intestate is

                                                                          6
or was a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation or serves or served at any
other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation.
      Neither any amendment or repeal of any provision of this Article XII, nor the adoption of any amendment to this Certificate of
Incorporation inconsistent with this Article XII, shall eliminate or reduce the effect of this Article XII, in respect of any matter occurring, or
any action or proceeding accruing or arising prior to such amendment, repeal or adoption of an inconsistent provision.


                                                                   ARTICLE XIII
      The Corporation is to have perpetual existence.


                                                                  ARTICLE XIV
       The Corporation reserves the right, at any time, and from time to time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation.
       Notwithstanding the foregoing, the provisions set forth in Articles IV, V, VI, VII, VIII, IX, X, XI, XII, XIII and this Article XIV of this
Certificate of Incorporation may not be amended, altered, changed or repealed in any respect without the affirmative vote of the holders of at
least seventy-five percent (75%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors voting together as a single class. No amendment, alteration, change or amendment of this Certificate of
Incorporation shall be made unless the same is first approved by the Board of Directors of the Corporation pursuant to a resolution adopted by
the directors then in office in accordance with the Bylaws.


                                                                        ***

                                                                          7
     IN WITNESS WHEREOF, the undersigned has executed this Second Amended and Restated Certificate of Incorporation
on                  2006.



                                                                 Virginia Bunte
                                                                 Senior Vice President, Chief Financial Officer and
                                                                 Treasurer
                                                                                                                                         Exhibit 3.4


                                                   AMENDED AND RESTATED
                                                          BYLAWS OF
                                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                                                                    ARTICLE I


                                                             CORPORATE OFFICES
      Section 1.1. Registered Office . The registered office of Golfsmith International Holdings, Inc. (the ―Corporation‖) shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation at such location is The Corporation
Trust Company.
      Section 1.2. Other Offices . The Corporation may also have offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the Corporation may require.


                                                                   ARTICLE II


                                                       MEETINGS OF STOCKHOLDERS
      Section 2.1. Place of Meetings . Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated
by the Board of Directors. In the absence of any such designation, stockholders’ meetings shall be held at the corporate headquarters of the
Corporation.
      Section 2.2. Notice of Stockholders’ Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given, which notice shall state the place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.
      Notices shall be deemed given (i) if by mail, when deposited in the United States mail, postage prepaid, directed to the stockholder at the
stockholder’s address as it appears on the record of stockholders of the Corporation; (ii) if by facsimile, when faxed to a number where the
stockholder has consented to receive notice; (iii) if by electronic mail, when mailed electronically to an electronic mail address at which the
stockholder consented to receive such notice; (iv) if by posting on an electronic network (such as a website or chatroom) together with a
separate notice to the stockholder of such specific posting, upon the later to occur of (A) such posting or (B) the giving of the separate notice of
such posting; or (v) if by any other form of electronic communication, when directed to the stockholder in the manner consented to by the
stockholder. For notice given by electronic transmission to a stockholder to be effective, such stockholder must consent to the Corporation’s
giving notice by that particular form of electronic transmission. A stockholder may revoke consent to receive notice by electronic transmission
by written notice to the Corporation. A stockholder’s consent to notice by electronic transmission is automatically revoked if the Corporation is
unable to deliver two consecutive electronic

                                                                         1
transmission notices and such inability becomes known to the Secretary or the Assistant Secretary of the Corporation, the transfer agent or
other person responsible for giving notice.
       Section 2.3. Annual Meetings of Stockholders . (a) Annual meetings of stockholders shall be held at such date and time as shall be
designated from time to time by the Board of Directors and stated in the notice of the meeting. At each annual meeting, the stockholders shall
elect directors and shall transact only such other business as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business (including the nominations of persons for election to the Board of Directors and any other business to be
considered by the stockholders) must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought
before the meeting by any stockholder of the Corporation
       (b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a) of this Section 2.3, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder notice (a ―Stockholder Notice‖) shall be
mailed to the Secretary and received at the principal executive offices of the Corporation not earlier than 120 calendar days and not later than
the close on business on the 90th calendar day prior to the first anniversary of the preceding year’s annual meeting of stockholders, provided ,
however , that for the first annual meeting following the initial public offering of the Corporation’s common stock, or if no annual meeting was
held in the previous year or the date of the annual meeting is in any other year advanced by more than 30 days, or delayed by more than
60 days, from the first anniversary of the preceding year’s annual meeting, notice by the stockholders to be timely must be received at the
principal executive offices of the Corporation (i) not earlier than 120 calendar days prior to the scheduled date of such annual meeting and
(ii) not later than the close of business on the later of the 90th calendar day prior to the scheduled date of such annual meeting or the 10th day
following the day on which public announcement of the date of such annual meeting is first made or sent by the Corporation.
    In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or
extend any time period) for the giving of a Stockholder Notice as described above. Such Stockholder Notice shall set forth: (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the ―Exchange Act‖) and Rule 14a-11 thereunder (and such person’s
written consent to being named in a proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the
proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to
amend the Bylaws of the Corporation (the ―Bylaws‖), the language of the proposed amendment) and the reasons for conducting such business
at the meeting; and (iii) as to the stockholder giving

                                                                        2
the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (A) the name and address of such stockholder,
as they appear on the Corporation’s books, and of such beneficial owner, (B) the class and number of shares of capital stock of the Corporation
that are owned beneficially and of record by such stockholder and such beneficial owner, (C) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such
business or nomination, (D) any material interest of the stockholder or such beneficial owner in such business and (E) a representation whether
the stockholder or the beneficial owner, if any, intends, or is part of a group which intends to: (1) deliver a proxy statement and/or form of
proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the
nominee and/or (2) otherwise solicit proxies from stockholders in support of such proposal or nomination. The Corporation may require any
proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve
as a director of the Corporation.
        (c) Notwithstanding anything in the second sentence of paragraph (b) of this Section 2.3 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by
the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the
first anniversary of the preceding year’s annual meeting, a Stockholder’s Notice required by this Section 2.3 shall also be considered timely,
but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement
is first made by the Corporation.
      (d) For purposes of this Section 2.3 and Section 2.4, ―public announcement‖ shall mean disclosure in a press release reported by the Dow
Jones News Service, Associate Press or comparable national news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
       Section 2.4. Special Meetings of Stockholders . (a) Special meetings of the stockholders, for any purpose or purposes, may only be called
by the Chairman of the Board of Directors of the Corporation or the Board of Directors upon a request by the holders of at least twenty-five
percent (25%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the
election of directors. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
       (b) Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than 10 nor more than 60 days before the date of the meeting, to each stockholder entitled to vote at such
meeting.

                                                                        3
       (c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are
to be elected (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has specified in its notice of meeting
that directors shall be elected at such meeting, by any stockholder of the Corporation who provides a timely Stockholder Notice to the
Secretary of the Corporation that complies with the notice procedures set forth in paragraph (b) of Section 2.3. In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any stockholder of the
Corporation entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s)
as specified in the Corporation’s notice of meeting. The Stockholder Notice required by paragraph (c) of this Section 2.4 shall be delivered to
the Secretary or mailed and received at the principal executive offices of the Corporation not earlier than 120 calendar days and not later than
the close of business on the 90th calendar day prior to the date of the meeting. In no event shall the public announcement of an adjournment or
postponement of a special meeting commence a new time period (or extend any time period) for the giving of a Stockholder Notice as
described above.
       Section 2.5. Compliance with Procedures . No business shall be conducted at a meeting except in accordance with the procedures set
forth in Section 2.3 and Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the procedures prescribed by this Section 2.5, and if such person
should so determine, such person shall so declare to the meeting and any such business not properly brought before the meeting shall not be
transacted.
       Section 2.6. Compliance with Exchange Act . Notwithstanding the provisions of Section 2.3 and Section 2.4, a stockholder shall also
comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in
Section 2.3 and Section 2.4. Nothing in this Section 2.6 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals
in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to
elect directors pursuant to any applicable provisions of the Certificate of Incorporation, in a resolution for the issuance of shares of Preferred
Stock in one or more series and by filing a certificate pursuant to the applicable law of the State of Delaware or by applicable law.
       Section 2.7. Quorum . The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided
by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the
stockholders, then either the Chairman of the Board or a majority of the voting stock represented in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted
at the meeting as originally notified.

                                                                          4
      Section 2.8. Stockholder Action by Written Consent . For so long as any security of the Company is registered under Section 12 of the
Exchange Act, the stockholders of the Corporation shall take action by meetings held pursuant to this Certificate of Incorporation and the
Bylaws and shall have no right to take any action by written consent without a meeting. Notwithstanding the foregoing provision of this
Section 2.8, for so long as Atlantic Equity Partners III, L.P. (―AEP‖) (directly or through its Affiliates) is the holder of record of at least forty
percent (40%) of the outstanding shares of common stock of the Corporation, either on its own or together with any group as such term is
defined in Section 13(d)(3) of the Exchange Act, the stockholders of the Corporation shall have the right to take any action by written consent
without a meeting. For purposes of these Bylaws, ―Affiliate‖ shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act.
       Section 2.9. Adjourned Meeting; Notice . When a meeting is adjourned to another time or place, unless these Bylaws otherwise require,
notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.
If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
      Section 2.10. Required Vote . When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which
by express provision of the statute, of the Certificate of Incorporation or these Bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. At all meetings of stockholders for the election of directors, directors shall be
elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of
directors.
      Section 2.11. Voting Procedures and Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another
person or persons to act for him by (i) a written proxy, signed by the stockholder and filed with the Secretary of the Corporation, or (ii)
transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the
holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be
the holder of the proxy to receive such transmission in accordance with the provisions of Section 212(c)(2) of the Delaware General
Corporation Law (the ―DGCL‖), but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(c) of the DGCL. Unless otherwise provided by the Certificate of Incorporation,
each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the
record date set by the Board of Directors as provided in Section 7.1 hereof.

                                                                          5
       Section 2.12. List of Stockholders Entitled to Vote . The officer who has charge of the stock ledger of the Corporation shall prepare and
make available, at least ten (10) days before every meeting, a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at
least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
      Section 2.13. Chairperson of the Meeting . Unless otherwise determined by the Board of Directors, one of the following shall act as
chairperson of the meeting and preside thereat, in the following order of precedence: (a) the Chairman of the Board (if any); (b) the Chief
Executive Officer; (c) the President; or (d) any member of the Board present at such meeting designated to act as chairperson of such meeting
and preside thereat by the members of the Board present at such meeting;.
       Section 2.14. Secretary of the Meeting . Unless otherwise determined by the Board of Directors, at each meeting of the stockholders, the
Secretary of the Corporation shall act as secretary of the meeting and keep the minutes thereof. In the absence of the Secretary or if such office
shall be vacant, the chairperson of the meeting shall appoint a person to act as secretary of the meeting and keep the minutes thereof.
       Section 2.15. Inspectors of Elections . (a) Preceding any meeting of the stockholders, the Corporation may, and shall if required by law,
appoint one or more persons to act as inspectors at the meeting and make a written report thereof. The Corporation may designate one or more
alternate inspectors to replace any inspector who fails to act. In the event no inspector or alternate inspector is able to act at a meeting of
stockholders, the chairperson of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable
law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of
inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such
inspector’s ability.
       (b) In addition to the duties prescribed by applicable law, the inspectors shall (i) ascertain the number of shares outstanding and the
voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots,
(iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspector(s) may
appoint or retain other persons or entities to assist the inspectors in the performance of the duties of inspector.

                                                                         6
       (c) In determining the shares represented and the validity and counting of proxies and ballots, each inspector shall be limited to an
examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 211(e) or
Section 212(c)(2) of the DGCL, any information provided pursuant to Section 211(a)(2)(B)(i) or (iii) of the DGCL, ballots, and the regular
books and records of the Corporation, except that each inspector may consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers or their nominees or a similar person which represent more votes than the
holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If any inspector considers other
reliable information for the limited purpose permitted by this paragraph, such inspector, at the time of the making of his or her certification
referred to in paragraph (a) of this Section 2.15, shall specify the precise information considered, the person or persons from whom the
information was obtained, when this information was obtained, the means by which the information was obtained, and the basis for such
inspector’s belief that such information is accurate and reliable.
       (d) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and authority to
convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (1) the establishment of an
agenda or order of business for the meeting; (2) rules and procedures for maintaining order at the meeting and the safety of those present;
(3) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall determine; (4) restrictions on entry to the meeting after the time
fixed for the commencement thereof and (5) limitations on the time allotted to questions or comments by participants. The presiding officer at
any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the
facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding
officer should so determine, such person shall so declare to the meeting, and any such matter or business not properly brought before the
meeting shall not be transacted or considered.


                                                                 ARTICLE III
                                                                 DIRECTORS
      Section 3.1. General Powers . The business and affairs of the Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities expressly conferred upon them by these Bylaws, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are not by law or by

                                                                        7
the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.
       Section 3.2. Number . The number of directors of this Corporation that shall constitute the whole Board shall be no less than [five (5)]
and no more than [thirteen (13)] until changed by a proper amendment to this Section 3.2 and shall not be inconsistent with the terms of that
certain Management Rights Agreement by and among AEP and this Corporation (the ―Management Rights Agreement‖) for so long as such
agreement is in effect; provided, however, that no decrease in the number of directors shall have the effect of shortening the term of an
incumbent director. Within the limits specified, the number of directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting.
      Section 3.3. Election of Directors . The Board of Directors shall be elected by ballot at the annual meeting of the stockholders and each
director shall be elected to serve a term of one year or until his successor shall be elected and shall qualify or until earlier resignation or
removal; provided that in the event of failure to hold such meeting or to hold such election at such meeting, such election may be held at any
special meeting of the stockholders called for that purpose.
      There shall be no right with respect to shares of stock of the Corporation to cumulate votes in the election of directors.
      Section 3.4. Removal . Subject to the rights of the holders of any series of Preferred Stock then outstanding, unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any director or the entire Board of Directors, may be removed from office at any time, with
or without cause, by the affirmative vote of the holders of more than fifty percent (50%) of the voting power of all of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
       Section 3.5. Vacancies and Newly-Created Directorships . Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation or other cause (including removal from office by a vote of the stockholders) shall be filled in
accordance with the Management Rights Agreement and only by the vote of a majority of the remaining members of the Board of Directors,
even if less than a quorum, at any meeting of the Board of Directors, or by a sole remaining director. A person so elected by the Board of
Directors to fill a vacancy shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and
until such director’s successor shall have been duly elected and qualified.
      If there are no directors in office, then an election of directors shall be held in the manner provided by statute.
     Section 3.6. Committees . The Board of Directors may, by resolution passed by a majority of the Board of Directors at any meeting at
which there is a quorum, designate one or more committees, each committee to consist of one or more of the directors of the Corporation,

                                                                          8
and the composition of each such committee shall be in accordance with the Management Rights Agreement The Board may designate one
(1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the
committee.
      In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he/she or they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified member.
       Any such committee, to the extent provided in the resolution of the Board of Directors or in these Bylaws, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to
amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation’s property and assets, to recommend to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or to amend these Bylaws of the Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of
Directors.
      Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
       Section 3.7. Reliance on Records . A member of the Board of Directors, or a member of any committee designated by the Board of
Directors, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board
of Directors, or by any other person as to matters the director reasonably believes are within such other person’s professional or expert
competence and who has been selected with reasonable care by or on behalf of the Corporation, including, but not limited to, such records,
information, opinions, reports or statements as to the value and amount of assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which
the Corporation’s capital stock might properly be purchased or redeemed.
      Section 3.8. Compensation . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be reimbursed for their expenses, if any, of attendance at each
meeting of the Board of Directors or each meeting of a committee of the Board of Directors, and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from

                                                                         9
serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.


                                                                  ARTICLE IV


                                                MEETINGS OF THE BOARD OF DIRECTORS
      Section 4.1. General . The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without
the State of Delaware.
       Section 4.2. Regular Meetings . Regular meetings of the Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the Board of Directors.
       Section 4.3. Special Meetings . Special meetings of the Board of Directors for any purpose or purposes may be called by the Chairman of
the Board or the Chief Executive Officer or the President on twelve (12) hours’ notice to each director either personally or by telephone,
telegram, facsimile or electronic mail; special meetings shall be called by the Chief Executive Officer or the President or Secretary in like
manner and on like notice on the written request of a majority of the Board of Directors.
       Section 4.4. Waiver of Notice . Whenever notice is required to be given under any provision of the DGCL or the Certificate of
Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
      Section 4.5. Quorum . At all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
       Section 4.6. Board Action by Written Consent without a Meeting Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings

                                                                        10
of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the
minutes are maintained in electronic form.
      Section 4.7. Telephonic Meetings . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board
of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee,
by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in person at the meeting.


                                                                   ARTICLE V


                                                                    OFFICERS
       Section 5.1. Officers . The officers of the Corporation shall be a Chief Executive Officer, a President (who may be the same individual as
another officer), a Chief Financial Officer, one or more Senior Vice Presidents or Vice Presidents, a Secretary and a Treasurer. Any number of
offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Such officers shall be
elected from time to time by the Board of Directors to hold office until their respective successors shall have been duly elected and qualified, or
until death, resignation or removal.
       Section 5.2. Appointment of Officers . The officers of the Corporation, except such officers as may be appointed in accordance with the
provisions of Section 5.3 and Section 5.4 of these Bylaws, shall be appointed by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment.
      Section 5.3. Other Officers . The Board of Directors may from time to time elect, or empower the Chief Executive Officer or the
President to appoint, such other officers and agents, as may be necessary or desirable for the conduct of the business of the Corporation. Such
other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these Bylaws or as may be
prescribed by the Board of Directors.
      Section 5.4. Removal and Resignation of Officers; Filling Vacancies . Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any
regular or special meeting of the Board of Directors or, except in the case of an officer chosen by the Board of Directors, by any officer upon
whom such power of removal may be conferred by the Board of Directors.
       Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect on the date of the receipt
of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which
the officer is a party.

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      Section 5.5. Vacancies in Offices . Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors or the
Chief Executive Officer.
      Section 5.6. Salaries . The salaries of all officers of the Corporation shall be fixed by the Board of Directors or any committee established
by the Board of Directors for such purpose. The salaries of agents of the Corporation shall, unless fixed by the Board of Directors, be fixed by
the President or any Vice-President of the Corporation.
       Section 5.7. Security . The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the
faithful performance of such officer’s, agent’s or employee’s duties, in such amount and of such character as may be determined from time to
time by the Board of Directors.
       Section 5.8. Chairman of the Board . The Board of Directors shall select a Chairman of the Board of the Corporation who shall be subject
to the control of the Board of Directors and shall preside at all meetings of the Board of Directors and stockholders. The Chairman of the Board
shall have and perform such other duties, and exercise such powers, as from time to time may be assigned to him by the Board of Directors or
these Bylaws.
       Section 5.9. Chief Executive Officer . The Board of Directors shall select a Chief Executive Officer of the Corporation who shall be
subject to the supervision of the Board of Directors. The Chief Executive Officer shall (i) be primarily responsible for the entire business and
affairs of the Corporation and for implementing the policies and directives of the Board of Directors, (ii) preside at all meetings of stockholders
and the Board of Directors during the absence or disability of the Chairman of the Board, (iii) have authority to make contracts on behalf of the
Corporation in the ordinary course of the Corporation’s business, and (iv) perform such other duties as from time to time may be assigned by
the Board of Directors.
       Section 5.10. President . The President shall (i) preside at all meetings of the stockholders and the Board of Directors during the absence
of disability of both the Chairman of the Board or the Chief Executive Officer, (ii) be primarily responsible for the general management of the
business of the Corporation and for implementing the policies and directives of the Board of Directors during the absence or disability of both
the Chairman of the Board and the Chief Executive Officer, (iii) have authority to make contracts on behalf of the Corporation in the ordinary
course of the Corporation’s business and (iv) perform such other duties as from time to time may be assigned by the Chairman of the Board, the
Chief Executive Officer or the Board of Directors.
      Section 5.11. Senior Vice Presidents and Vice Presidents . In the absence or disability of the President, the Senior Vice Presidents and
Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Senior Vice President or Vice President
designated by the Board of Directors, shall perform all the duties of the President and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President. The Senior Vice Presidents and Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the President or the
Chairman of the Board.

                                                                        12
       Section 5.12. Secretary . The Secretary or his or her designee shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors and shall cause such records to be
kept in a book kept for that purpose and shall perform like duties for the standing committees when required. He/she shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the Board of Directors. He/she shall have custody of the corporate seal
of the Corporation and he/she, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his/her signature or by the signature of such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to attest the affixing by his/her signature. The Secretary shall perform, in
general, all duties incident to the office of secretary and such other duties as may be specified in these Bylaws or as may be assigned to him or
her from time to time by the Board of Directors or the Chief Executive Officer.
      Section 5.13. Assistant Secretary . The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined
by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the
event of his/her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors or these Bylaws may from time to time prescribe.
       Section 5.14. Chief Financial Officer . Unless otherwise designated by the Board of Directors, the Chief Financial Officer shall be the
Treasurer. The Chief Financial Officer shall perform such duties and shall have such powers as may from time to time be assigned to him or
her by the Board of Directors, the Chief Executive Officer or the President. In addition, subject to the powers and authority of the Board of
Directors or any duly authorized committee thereof, the Chief Financial Officer shall perform such duties and have such powers as are incident
to the office of chief financial officer, including without limitation, the duty and power to keep and be responsible for all funds and securities of
the Corporation, to maintain the financial records of the Corporation, to deposit funds of the Corporation in depositories as authorized, to
disburse such funds as authorized, to make proper accounts of such funds, and to render as required by the Board of Directors accounts of all
such transactions and of the financial condition of the Corporation.
      Notwithstanding anything herein to the contrary, the Board of Directors shall be entitled to assign the title of Treasurer to an officer of
the Corporation other than the Chief Financial Officer, in which case the Treasurer shall perform such duties and have such powers (which may
include some or all of the duties and powers enumerated above for the Chief Financial Officer) as the Board of Directors may from time to time
prescribe.
      Section 5.15. Execution of Bonds, Mortgages and other Contracts . The Chief Executive Officer, the Chief Financial Officer, the
President or any Vice President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and except where the

                                                                         13
signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.


                                                                    ARTICLE VI


                                                           CERTIFICATES OF STOCK
       Section 6.1. Certificates of Stock . Every holder of record of stock in the Corporation shall be entitled to have a certificate, signed by, or
in the name of the Corporation by, the Chairman of the Board of Directors, or the President or a Vice President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him/her in the
Corporation.
       Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.
       If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations
or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock, provided that, except as ot