<SUBMISSION>
<ACCESSION-NUMBER>0000950137-04-007713
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>12
<PERIOD>20040731
<FILING-DATE>20040914
<DATE-OF-FILING-DATE-CHANGE>20040914
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ASHWORTH INC
<CIK>0000820774
<ASSIGNED-SIC>2320
<IRS-NUMBER>841052000
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1031
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-14547
<FILM-NUMBER>041029850
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2765 LOKER AVE WEST
<CITY>CARLSBAD
<STATE>CA
<ZIP>92008
<PHONE>7604386610
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2765 LOKER AVENUE WEST
<CITY>CARLSBAD
<STATE>CA
<ZIP>92008
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CHARTER GOLF INC
<DATE-CHANGED>19920703
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>a01811e10vq.htm
<DESCRIPTION>FORM 10-Q FOR PERIOD ENDED 6-31-2004
<TEXT>
<HTML>
<HEAD>
<TITLE>Ashworth, Inc.</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 14pt"><B>UNITED STATES</B>

<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>

<P align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>


<P align="center" style="font-size: 18pt"><B>FORM 10-Q</B>


<P align="center" style="font-size: 12pt"><B>&#091;X&#093; QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</B>



<P align="center" style="font-size: 10pt"><B>For the quarterly period ended July&nbsp;31, 2004</B>



<P align="center" style="font-size: 10pt">OR



<P align="center" style="font-size: 12pt">&#091;&nbsp;&nbsp;&#093; TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934



<P align="center" style="font-size: 10pt">For the transition period from <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U> to <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>



<P align="center" style="font-size: 10pt"><B>Commission file number: 0-18553</B>



<P align="center" style="font-size: 24pt"><B>Ashworth, Inc.</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>84-1052000</B></TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employee</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>2765 LOKER AVENUE WEST<BR>
CARLSBAD, CA 92008</B><BR>
(Address of Principal Executive Offices)



<P align="center" style="font-size: 10pt"><B>(760)&nbsp;438-6610</B><BR>
(Telephone No.&nbsp;Including Area Code)



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports), and (2)&nbsp;has been subject to such
filing requirements for the past 90&nbsp;days. Yes &#091;X&#093; No &#091;&nbsp;&nbsp;&#093;


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Exchange Act). Yes &#091;&nbsp;&nbsp;&#093; No &#091;X&#093;


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Indicate the number of shares outstanding of each of the issuer&#146;s classes of
common stock, as of the latest practicable date.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Title
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Outstanding at September&nbsp;9, 2004</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">$.001 par value Common Stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13,461,502</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center" style="font-size: 10pt">INDEX


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>PAGE</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" align="left" valign="top"><A href="#101">Part I. Financial Information</A></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><DIV style="margin-left:20px; text-indent:-10px">Item 1.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#102">Condensed Consolidated Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#103">Condensed Consolidated Statements of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#104">Condensed Consolidated Statements of Cash Flows</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#105">Notes to Condensed Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><DIV style="margin-left:20px; text-indent:-10px"><A href="#106">Item
2.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#106">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#107"><DIV style="margin-left:20px; text-indent:-10px">Item
3.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#107">Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><DIV style="margin-left:20px; text-indent:-10px"><A href="#108">Item 4.</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#108">Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top" colspan="3"><A href="#109">Part II. Other Information</A></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#110"><DIV style="margin-left:20px; text-indent:-10px">Item
1.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#110">Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#111"><DIV style="margin-left:20px; text-indent:-10px">Item
2.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#111">Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#112"><DIV style="margin-left:20px; text-indent:-10px">Item
3.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#112">Defaults Upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#113"><DIV style="margin-left:20px; text-indent:-10px">Item
4.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#113">Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top" nowrap><A href="#114"><DIV style="margin-left:20px; text-indent:-10px">Item
5.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#114">Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top"><A href="#115"><DIV style="margin-left:20px; text-indent:-10px">Item
6.</DIV></A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#115">Exhibits and Reports on Form&nbsp;8-K</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#116">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:20px; text-indent:-10px"><A href="#117">Exhibit&nbsp;Index</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx1y.txt">EXHIBIT 10.(z)(1)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx2y.txt">EXHIBIT 10.(z)(2)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx3y.txt">EXHIBIT 10.(z)(3)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx4y.txt">EXHIBIT 10.(z)(4)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx5y.txt">EXHIBIT 10.(z)(5)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx6y.txt">EXHIBIT 10.(z)(6)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv10wxzyx7y.txt">EXHIBIT 10.(z)(7)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv31w1.txt">EXHIBIT 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv31w2.txt">EXHIBIT 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv32w1.txt">EXHIBIT 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a01811exv32w2.txt">EXHIBIT 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt">-i-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PART I</B>



<P align="center" style="font-size: 10pt"><B>FINANCIAL INFORMATION</B>



<P align="left" style="font-size: 10pt">ASHWORTH, INC. AND SUBSIDIARIES


<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt">CONDENSED CONSOLIDATED BALANCE SHEETS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>July 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(UNAUDITED)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,024,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable &#150; trade, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,993,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable &#150; other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,575,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,406,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,476,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,595,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,676,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred income tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,890,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,953,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,434,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,697,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property, plant and equipment, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,746,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,985,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,029,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,523,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,717,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,462,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,974,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">156,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">106,036,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Line of credit payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,400,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,545,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable &#150; trade</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,133,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,731,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,053,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,218,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,917,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,699,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,455,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt, net of current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,631,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred income tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,586,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,496,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,230,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,211,000</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,906,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,482,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,406,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,202,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,555,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">156,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">106,036,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">See accompanying notes to condensed consolidated financial statements.




<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">ASHWORTH, INC. AND SUBSIDIARIES


<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
</DIV>


<DIV align="left" style="font-size: 10pt">(UNAUDITED)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,960,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">124,835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">117,118,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,798,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,284,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,808,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,515,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,027,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,676,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,027,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,603,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Selling, general and
administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,560,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,051,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,052,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,445,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,467,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,625,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,975,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,158,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(452,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(232,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(848,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(683,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,183,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,664,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,621,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(186,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,466,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(406,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before provision
for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">846,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,439,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,509,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,752,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,376,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,204,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,301,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Weighted average shares
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,444,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,006,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,366,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,972,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Weighted average shares
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,211,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,703,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,124,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.49</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">See accompanying notes to condensed consolidated financial statements.




<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">ASHWORTH, INC. AND SUBSIDIARIES


<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
</DIV>


<DIV align="left" style="font-size: 10pt">(UNAUDITED)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net cash provided by operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,432,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from sale of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,277,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,263,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,422,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Acquisition of business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,678,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net cash used in investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,664,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,422,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Increase in restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Principal payments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(127,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(129,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Borrowings on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,539,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,102,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payments on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,350,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,227,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Borrowing on notes payable and long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,666,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Principal payments on notes payable and long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,677,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(355,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net cash provided by (used in) financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,985,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Effect of exchange rate changes on cash</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="right">1,076,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,884,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,693,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,336,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,029,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Supplemental disclosures of noncash transactions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Note payable issued for acquisition of business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">See accompanying notes to condensed consolidated financial statements.




<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">ASHWORTH, INC. AND SUBSIDIARIES


<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

</DIV>


<DIV align="left" style="font-size: 10pt">JULY 31, 2004
</DIV>


<P align="left" style="font-size: 10pt"><B>NOTE 1 &#150; Basis of Presentation.</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the opinion of management, the accompanying condensed consolidated
balance sheets and related interim condensed consolidated statements of
operations and cash flows include all adjustments (consisting only of normal
recurring items) necessary for their fair presentation. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses and the disclosure of contingent assets
and liabilities. Actual results could differ from those estimates. Interim
results are not necessarily indicative of results to be expected for the
full year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain information in footnote disclosures normally included in financial
statements has been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission (&#147;SEC&#148;). The
information included in this Form 10-Q should be read in conjunction with
Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations, and consolidated financial statements and notes thereto included
in the annual report on Form 10-K for the year ended October&nbsp;31, 2003, filed
with the SEC on January&nbsp;30, 2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Shipping and Handling Revenue</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company includes payments from its customers for shipping and handling
in its net revenues line item in accordance with Emerging Issues Task Force
(&#147;EITF&#148;) 00-10, <I>Accounting of Shipping and Handling Fees and Costs</I>.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Cost of Goods Sold</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company includes F.O.B. purchase price, inbound freight charges, duty,
buying commissions and overhead in its cost of goods sold line item.
Overhead costs include purchasing and receiving costs, inspection costs,
warehousing costs, internal transfers costs and other costs associated with
the Company&#146;s distribution. The Company does not exclude any of these costs
from cost of goods sold.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Shipping and Handling Expenses</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shipping expenses, which consist primarily of payments made to freight
companies, are reported in selling, general and administrative expenses.
Shipping expenses for the quarters ended July&nbsp;31, 2004 and 2003 were
$572,000 and $525,000, respectively. For the nine-month periods ended July
31, 2004 and 2003, shipping expenses were $1,504,000 and $1,357,000,
respectively.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Reclassifications</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain reclassifications have been made to the prior period&#146;s condensed
consolidated financial statements to conform to classifications used in the
current period. These reclassifications had no impact on previously
reported results.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 2 &#150; Inventories.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inventories consisted of the following at July&nbsp;31, 2004 and October&nbsp;31, 2003:</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>July 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">127,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,349,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">46,406,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,476,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>NOTE 3 </B>&#150; <B>Disposal and Acquisition of Fixed Assets.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company owned land and two buildings located in Carlsbad, California
that were purchased on December&nbsp;9, 1993 for $3,500,000 and were reported in
the domestic segment. On February&nbsp;24, 2004 the Company completed the sale
of the land, buildings and other assets for approximately $5,747,000 and
paid off the $2,610,000 balance due on the existing mortgage. The property
was sold as a unit on an &#147;as is&#148; basis for a price which exceeded its
carrying value. The gain on the sale of the property was recorded in the
second quarter of fiscal 2004. The Company has also entered into a lease
agreement to lease the facility from the new owner commencing on February
24, 2004 and terminating on December&nbsp;31, 2004, with an option to renew the
term of the lease for a period of 60&nbsp;days. Under the terms of the lease
agreement, the Company pays monthly rent of approximately $47,000 plus
taxes, insurance and utilities.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On October&nbsp;25, 2002, the Company entered into an agreement to purchase the
land and building, to be built to the Company&#146;s specifications, in the Ocean
Ranch Corporate Center in Oceanside, California. The building was
constructed with approximately 200,000 square feet of useable office and
warehouse space and will be used by the Company to warehouse, embroider,
finish, package and distribute clothing products and related accessories.
On April&nbsp;2, 2004, the Company completed the purchase of the new distribution
center in Oceanside, California for approximately $14,023,000 and entered
into a secured loan agreement with a bank to finance $11,650,000 of the
purchase price. The loan carries a fixed interest rate of 5% and will be
amortized over 30&nbsp;years, but is due and payable on May&nbsp;1, 2014.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 4 </B>&#150; <B>Acquisition of Membership Interests in Gekko Brands, LLC.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At close of business on July&nbsp;6, 2004, Ashworth, Inc. completed the
acquisition of all of the membership interests in Gekko Brands, LLC (the
&#147;Acquisition&#148;), a leading designer, producer and distributor of headwear and
apparel under The Game&#174; and Kudzu&#174; brands, pursuant to the Membership
Interests Purchase Agreement entered into on July&nbsp;6, 2004, between Ashworth
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Ashworth, Inc. and the selling members identified therein.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The purchase price for the Acquisition was $24&nbsp;million consisting of $23
million in cash, a $1&nbsp;million promissory note and $0.7&nbsp;million in
acquisition costs. Up to an additional $6.5&nbsp;million will be paid to the
remaining members of Gekko Brands, LLC management if the subsidiary achieves
specific EBIT and other operating targets over approximately the next four
years or through Ashworth&#146;s fiscal year 2008. Ashworth intends that the
operations of the newly acquired subsidiary will continue to focus on
designing, producing and distributing headwear and apparel. Gekko Brands,
LLC will be included in the Company&#146;s existing reportable domestic segment.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with the Acquisition, Ashworth entered into a new secured
5-year bank facility comprised of a $20&nbsp;million term loan and a $35&nbsp;million
line of credit replacing its prior $55&nbsp;million facility. To finance the
cash purchase price of the Acquisition, Ashworth utilized the term loan
together with part of the new line of credit.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The operating results of Gekko Brands, LLC are included in the Company&#146;s
consolidated results from the date of acquisition.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The acquisition has been accounted for using the purchase method in
accordance with Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.
141, <I>Business Combinations</I>. The Company is obtaining a third party
valuation of certain tangible and intangible assets acquired with the Gekko
brands acquisition and expects to receive the final report prior to October
31, 2004. The following table presents the tentative allocation of the
aggregate purchase price for Gekko Brands, LLC based on its estimated fair
value of the assets and liabilities acquired:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>In millions</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net working capital (net of cash received)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.6</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total net assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The $12.3&nbsp;million allocated to goodwill reflects the benefit the Company
expects to realize from expanding its distribution into new channels.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The $10.4&nbsp;million in other assets includes tradenames, customer lists and
non-compete agreements.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Pro Forma Results of Operations</B></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The results of Gekko Brand, LLC&#146;s operations have been included in the
consolidated financial statements since July&nbsp;7, 2004. Had the acquisition
been completed as of the beginning of the fiscal year, the Company would have reported pro forma net revenues, net income
(loss)&nbsp;and basic and diluted net income (loss)&nbsp;per share amounts as follows
(in millions, except per share data):</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="39%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">46.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">145.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">138.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)
per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The pro forma results include interest expense on the Company&#146;s term loan
and line of credit that were used to finance the acquisition. The pro forma
results also include adjustments for income taxes and deprecation and
amortization of assets to give effect for purchase accounting adjustments in
recording the acquisition. The pro forma amounts are not indicative of
anticipated future results.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><B>NOTE 5 &#150; Intangible Assets.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company accounts for goodwill and intangible assets in accordance with
SFAS No.&nbsp;142, <I>Goodwill and Other Intangible Assets. </I>Under SFAS No.&nbsp;142,
goodwill and certain intangible assets are not amortized but are subject to
an annual impairment test. Changes in goodwill and tradenames during the
nine months ended July&nbsp;31, 2004 were due to the acquisition of Gekko Brands,
LLC. The following sets forth the intangible assets by major category:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>July 31, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>October 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Useful</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Book</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net Book</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Years)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Non-amortizing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tradenames</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortizing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Customer lists</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3-5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,530,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Non-Compete</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">4-10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(639,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">733,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,142,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(549,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">593,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,265,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,188,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total intangible
assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,161,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,917,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,244,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,373,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,737,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">636,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Intangible assets with definite lives are amortized using the straight-line
method over periods ranging from 2 to 10&nbsp;years. During the three months
ended July&nbsp;31, 2004 and 2003, aggregate amortization expense was
approximately $40,000 and $50,000, respectively. During the nine months
ended July&nbsp;31, 2004 and 2003, aggregate amortization expense was
approximately $91,000 and $149,000, respectively. Amortization expense
related to intangible assets at July&nbsp;31, 2004 in each of the next five
fiscal years and beyond is expected to be as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Remainder 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">749,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,274,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>NOTE 6 &#150; Line of Credit Agreement.</B>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On July&nbsp;6, 2004, the Company entered into a new business loan agreement with
Union Bank of California, N.A., as the administrative agent, and two other
lenders. The new loan agreement is comprised of a $20,000,000 term loan and
a $35,000,000 revolving credit facility, which expires on July&nbsp;6, 2009 and
is collateralized by substantially all of the assets of the Company other
than the Company&#146;s real estate.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under this loan agreement, interest on the $20,000,000 term loan is fixed at
5.4% for the term of the loan. Interest on the revolving credit facility is
charged at the bank&#146;s reference rate. At July&nbsp;31, 2004, the bank&#146;s
reference rate was 4.50%. The loan agreement also provides for optional
interest rates based on London interbank offered rates (&#147;LIBOR&#148;) for periods
of at least 30&nbsp;days in increments of $500,000.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On September&nbsp;3, 2004, the Company entered into the First Amendment to the
loan agreement to amend Section&nbsp;6.12(a). The loan agreement, as amended,
contains certain financial covenants that include a requirement that the
Company maintain (1)&nbsp;a minimum tangible net worth of $74,000,000 plus the
net proceeds from any equity securities issued (including net proceeds from
stock option exercises) after the date of the loan agreement for the period
ending October&nbsp;31, 2004, and a minimum tangible net worth of $74,000,000,
plus 90% of net income after taxes (without subtracting losses) earned in
each quarterly accounting period commencing after January&nbsp;31, 2005, plus the
net proceeds from any equity securities issued (including net proceeds from
stock option exercises) after the date of the loan agreement, (2)&nbsp;a minimum
EBITDA determined on a rolling four quarter basis ranging from $16,500,000
at July&nbsp;6, 2004 and increasing over time to $27,000,000 at October&nbsp;31, 2008
and thereafter, (3)&nbsp;a minimum ratio of cash and accounts receivable to
current liabilities of 0.75:1.00 for fiscal quarters ending January&nbsp;31 and
April&nbsp;30 and 1.00:1.00 for fiscal quarters ending July&nbsp;31 and October&nbsp;31,
and (4)&nbsp;a minimum fixed charge coverage ratio of 1.10:1.00 at April&nbsp;30, 2004
and 1.25:1.00 thereafter. The loan agreement limits annual lease and rental
expense associated with the Company&#146;s new distribution center in Oceanside,
California as well as annual capital expenditures in any single fiscal year
on a consolidated basis in excess of certain amounts allowed for the
acquisition of real property and equipment in connection with the new
distribution center. The loan agreement has an additional requirement
where, for any period of 30 consecutive days, the total indebtedness under
the revolving credit facility may not be more than $15,000,000. The loan
agreement also limits the annual aggregate amount the Company may spend to
acquire shares of its common stock. The Company is in compliance with, or
has obtained waivers for, all of the loan agreement&#146;s financial covenants as
of July&nbsp;31, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The line of credit under the loan agreement may also be used to finance
commercial letters of credit and standby letters of credit. Commercial
letters of credit outstanding under this loan agreement totaled $2,532,000
at July&nbsp;31, 2004 as compared to $5,998,000 outstanding at July&nbsp;31, 2003
under the prior loan agreement. The Company had $1,750,000 outstanding
against the revolving credit facility under this loan agreement at July&nbsp;31,
2004, compared to $6,000,000 outstanding at July&nbsp;31, 2003 under the prior
agreement. The decrease in outstanding letters of credit and borrowings is
primarily due to converting several vendors from letters of credit to open
credit terms. The Company had $20,000,000 outstanding on the term loan
under this loan agreement at July&nbsp;31, 2004. At July&nbsp;31, 2004, $30,718,000
was available for borrowings against the revolving credit facility under
this loan agreement.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 7 &#150; Net Income Per Share Information.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Basic net income per share has been computed based on the weighted average
number of common shares outstanding during the period. Diluted net income
per share has been computed based on the weighted average number of common shares outstanding plus the dilutive effects of common shares potentially
issuable from the exercise of common stock options. Common stock options
are excluded from the computation of net income per share if their effect is
anti-dilutive. The following table sets forth the computation of basic and
diluted net income per share based on the requirements SFAS No.&nbsp;128,
<I>Earnings Per Share</I>:</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Numerator</B>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Numerator for basic and diluted
income per share &#150; income
available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Denominator</B>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Denominator for basic income
per share &#150; weighted average shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,444,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,006,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,366,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,972,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Denominator for diluted income
per share &#150; adjusted weighted
average
shares and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,211,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,703,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,124,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Basic net income per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Diluted net income per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.49</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the quarters ended July&nbsp;31, 2004 and 2003, the
diluted weighted average shares outstanding computation excludes 327,000 and 916,000 options whose
impact would have an anti-dilutive effect, respectively. For the nine-month
periods ended July&nbsp;31, 2004 and 2003, the diluted weighted average shares
outstanding computation excludes 318,000 and 1,095,000 options whose impact
would have an anti-dilutive effect, respectively.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 8 &#150; Issuance of Common Stock.</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Common stock and capital in excess of par value increased by $1,266,000 in
the nine months ended July&nbsp;31, 2004, of which $1,081,000 is due to the
issuance of 194,000 shares of common stock on exercise of options and
$185,000 is the tax benefit related to the exercise of those options.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 9 &#150; Stock Option Compensation.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has elected to follow Accounting Principles Board Opinion
(&#147;APB&#148;) No.&nbsp;25, <I>Accounting for Stock Issued to Employees, </I>and related
interpretations in accounting for its employee stock options. Under APB No.
25, because the exercise price of the Company&#146;s employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. The interim information regarding pro
forma net income and earnings per share is required by SFAS No.&nbsp;123,
<I>Accounting for Stock Based Compensation</I>, and SFAS No.&nbsp;148, <I>Accounting for
Stock Based Compensation &#150; Transition and Disclosure</I>. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the vesting period of the options.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Compensation expense for options issued to non-employees is based on the
fair value of each option estimated at date of grant using the Black-Scholes
option-pricing model. The Company made no such grants to non-employees
during the first nine months of either fiscal year 2004 or fiscal year 2003.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the following pro forma disclosures required by SFAS No.
123, the fair value of each option granted after fiscal 1995 has been
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants during the
third quarter of fiscal 2004 and the third quarter fiscal 2003,
respectively: risk-free interest rate of</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4.71% in 2004 and 3.34% to 3.43% in 2003; expected volatility of 56.4% in
2004 and 58.0% in 2003; and expected life of 10&nbsp;years in 2004 and 2003. The
following weighted-average assumptions were used for grants during the first
nine months of fiscal 2004 and first nine months of fiscal 2003,
respectively: risk-free interest rates of 3.73% to 4.71% in fiscal 2004 and
3.34% to 4.01% in fiscal 2003; expected volatility of 56.4% to 58.3% in
fiscal 2004 and 58.0% to 58.3% in fiscal 2003; and expected life of 10&nbsp;years
in fiscal 2004 and fiscal 2003.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has not paid any cash or other dividends and does not anticipate
paying dividends in the foreseeable future; therefore, the expected dividend
yield is zero for all periods.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s pro forma information is as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct: Stock-based
employee compensation
expense determined
under fair value based
method for all awards,
net of tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(179,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(100,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(548,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(437,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">329,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,963,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,757,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,014,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic &#150; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic &#150; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted &#150; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted &#150; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>

    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company did not reflect any stock-based employee compensation expense in
the consolidated financial statements for the periods presented in the above
table.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOTE 10 &#150; Comprehensive Income.</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company includes the cumulative foreign currency translation adjustment
as well as the net unrealized gains and loss on cash flow hedges as
components of the comprehensive income in addition to net income for the
period. The following table sets forth the computation of comprehensive
income for the periods presented:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net unrealized gains (losses)&nbsp;on cash
flow hedges, net of tax of $72,000 and
$33,000, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effects of foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">544,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">968,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,052,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,381,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,119,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>NOTE 11 &#150; Legal Proceedings.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;22, 1999, Milberg Weiss Bershad Hynes &#038; Lerach LLP filed a class
action in the United States District Court for the Southern District of
California (&#147;U.S. District Court&#148;) on behalf of purchasers of the Company&#146;s
common stock during the period between September&nbsp;4, 1997 and July&nbsp;15, 1998.
The action was subsequently consolidated with two similar suits and
plaintiffs filed their Amended and Consolidated Complaint on December&nbsp;17,
1999. Upon the Company&#146;s motion, the U.S. District Court dismissed the
Complaint with leave to amend on July&nbsp;18, 2000. On September&nbsp;18, 2000,
plaintiffs served their Second Consolidated Amended Complaint (&#147;Second
Amended Complaint&#148;). On November&nbsp;6, 2000, the Company filed its motion to
dismiss the Second Amended Complaint, which the U.S. District Court granted,
in part, and denied, in part. The remaining portions of the Second Amended
Complaint alleged that, among other things, during the class period and in
violation of the Securities Exchange Act of 1934, the Company&#146;s financial
statements, as reported, did not conform to generally accepted accounting
principles with respect to revenues and inventory levels. It further
alleged that certain Company executives made false or misleading statements
or omissions concerning product demand and that two former executives
engaged in insider trading. The Company has reached a tentative settlement
to conclude this securities class action lawsuit. Under the settlement, all
claims will be dismissed and the litigation will be terminated in exchange
for a payment of $15.25&nbsp;million, approximately 82% of which will be paid by
Ashworth&#146;s insurance carriers. As part of the settlement, Ashworth also
agreed to adopt modifications to certain corporate governance policies.
Ashworth recorded a pre-tax charge in the third quarter of fiscal year 2004
of $3&nbsp;million related to settlement of this suit.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is party to other claims and litigation proceedings arising in
the normal course of business. Although the legal responsibility and
financial impact with respect to such other claims and litigation cannot
currently be ascertained, the Company does not believe that these other
matters will result in payment by the Company of monetary damages, net of
any applicable insurance proceeds, that, in the aggregate, would be material
in relation to the consolidated financial position or results of operations
of the Company.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>NOTE 12 &#150; Segment Information.</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company defines its operating segments as components of an enterprise
for which separate financial information is available and regularly reviewed
by the Company&#146;s senior management. The Company has the following two
reportable segments: domestic and international. The chief operating
decision maker evaluates segment performance based primarily on revenues and
income from operations. Interest income and expense is evaluated on a
consolidated basis and is not allocated to the Company&#146;s business segments.
Segment information is summarized (for the periods or dates presented)
below:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three months ended July 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended July 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,795,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,674,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">103,305,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">98,651,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,286,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,530,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,467,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,960,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">124,835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">117,118,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income from operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,429,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,877,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,259,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,344,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,038,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">748,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,716,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,814,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,467,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,625,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,975,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,158,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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<P align="center" style="font-size: 10pt">11
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>July 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

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<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">132,849,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,947,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,089,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">156,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">106,036,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long lived assets, cost
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">76,077,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,327,000</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,505,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,272,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">77,582,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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</DIV>


<DIV align="left">
<A name="106"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>



<P align="left" style="font-size: 10pt"><B>General</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates in an industry that is highly competitive and must
accurately anticipate fashion trends and consumer demand for its products.
There are many factors that could cause actual results to differ materially
from the projected results contained in certain forward-looking statements in
this report. For additional information, see &#147;Cautionary Statements and Risk
Factors,&#148; below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the Company&#146;s business is seasonal, the current balance sheet
balances at July&nbsp;31, 2004 may more meaningfully be compared to the balances at
July&nbsp;31, 2003, rather than to the balances at October&nbsp;31, 2003.


<P align="left" style="font-size: 10pt"><B>Critical Accounting Policies</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In response to the SEC&#146;s Release Numbers 33-8040, &#147;Cautionary Advice
Regarding Disclosure About Critical Accounting Policies&#148; and 33-8056,
&#147;Commission Statement About Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; the Company has identified the following
critical accounting policies that affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue Recognition. </I>Based on its terms of F.O.B. shipping point, where
risk of loss and title transfer to the buyer at the time of shipment, the
Company recognizes revenue at the time products are shipped or, for Company
stores, at the point of sale. The Company records sales in accordance with SEC
Staff Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition</I>. Under these
guidelines, revenue is recognized when all of the following exist: persuasive
evidence of a sale arrangement exists, delivery of the product has occurred,
the price is fixed or determinable and payment is reasonably assured.
Provisions are made in the period of the sale for estimated product returns and
sales allowances. The Company also includes payments from its customers for
shipping and handling in its net revenues line item in accordance with Emerging
Issues Task Force (&#147;EITF&#148;) 00-10, <I>Accounting of Shipping and Handling Fees and
Costs</I>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sales Returns and Other Allowances. </I>Management must make estimates of
potential future product returns related to current period product revenues.
The Company also makes payments and/or grants credits to its customers as
markdown (buydown)&nbsp;allowances and must make estimates of such potential future
allowances. Management analyzes historical returns and allowances, current
economic trends, changes in customer demand, and sell-through of the Company&#146;s
products when evaluating the


<P align="center" style="font-size: 10pt">12
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">adequacy of the sales returns and other allowances. Significant
management judgments and estimates must be made and used in connection with
establishing the sales returns and other allowances in any accounting period.
These markdown allowances are reported as a reduction of the Company&#146;s net
revenues. Material differences may result in the amount and timing of the
Company&#146;s revenues for any period if management makes different judgments or
utilizes different estimates. The reserves for sales returns and other
allowances amounted to $1,050,000 at July&nbsp;31, 2004 compared to $728,000 at
October&nbsp;31, 2003 and $526,000 at July&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Allowance for Doubtful Accounts. </I>Management must also make estimates of
the uncollectability of accounts receivable. The Company maintains an
allowance for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments, which results in bad debt
expense. Management determines the adequacy of this allowance by analyzing
current economic conditions, historical bad debts and continually evaluating
individual customer receivables considering the customer&#146;s financial condition.
If the financial condition of any significant customers were to deteriorate,
resulting in the impairment of their ability to make payments, material
additional allowances for doubtful accounts may be required. In October&nbsp;2002,
the Company acquired credit insurance to cover many of its major accounts. The
Company&#146;s trade accounts receivable balance was $42.2&nbsp;million, net of
allowances for doubtful accounts of $1.6&nbsp;million, at July&nbsp;31, 2004, as compared
to the balance of $31.0&nbsp;million, net of allowances for doubtful accounts of
$1.3&nbsp;million, at October&nbsp;31, 2003. At July&nbsp;31, 2003, the trade accounts
receivable balance was $33.7&nbsp;million, net of allowances for doubtful accounts
of $1.1&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Inventory. </I>The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost
of inventory and the estimated net realizable value based on assumptions about
age of the inventory, future demand and market conditions. This process
provides for a new basis for the inventory until it is sold. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required. The Company&#146;s inventory balance was
$46.4&nbsp;million, net of inventory write-downs of $0.8&nbsp;million, at July&nbsp;31, 2004,
as compared to an inventory balance of $44.5&nbsp;million, net of inventory
write-downs of $1.0&nbsp;million, at October&nbsp;31, 2003. At July&nbsp;31, 2003, the
inventory balance was $42.3&nbsp;million, net of inventory write-downs of $1.0
million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Asset Purchase Credits. </I>In November&nbsp;2000, the Company entered into an
agreement with a third party whereby prior seasons&#146; slower selling inventory
which was not damaged was exchanged for future asset purchase credits (&#147;APCs&#148;),
which may be utilized by the Company to purchase future goods and services over
a four-year period. The original value of the inventory exchanged (at cost)
was $1.4&nbsp;million resulting in $1.4&nbsp;million in future APCs. In December&nbsp;2003,
the Company amended its agreement with the third party to exchange $0.9&nbsp;million
of additional prior seasons&#146; slower selling inventory (at cost) for an
additional $0.9&nbsp;million in future APCs and an extension of the original
November&nbsp;2000 agreement through December&nbsp;1, 2007. The Company has entered into
contracts with several third party suppliers who have agreed to accept these
APCs, in part, as payment for goods and services. The Company purchases
products such as sales fixtures, office and packaging supplies, as well as
temporary help, freight and printing services from such third party suppliers.
From time to time the Company may enter into additional contracts with such
third party suppliers to use the APCs. Management reviews and estimates the
likelihood of fully utilizing the APCs on a periodic basis. If the Company is
unable to find suppliers who agree to accept the APCs in quantities as
projected by management, a write-down of the value of the APCs may be required.
At July&nbsp;31, 2004, the Company had $0.9&nbsp;million of the APCs remaining and
management expects to fully utilize them over the remaining life of the
contract through December&nbsp;1, 2007. At July&nbsp;31, 2004, the Company recorded $0.5
million of the APC&#146;s in its &#147;Other Current Assets&#148; line item and $0.4&nbsp;million
in its &#147;Other Assets&#148; line item.


<P align="center" style="font-size: 10pt">13
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<P align="left" style="font-size: 10pt"><B>Off-Balance Sheet Arrangements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At July&nbsp;31, 2004 and 2003, the Company did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes. In addition, the Company
does not engage in trading activities involving non-exchange traded contracts
which rely on estimation techniques to calculate fair value. As such, the
Company is not exposed to any financing, liquidity, market or credit risk that
could arise if the Company had engaged in such relationships.


<P align="left" style="font-size: 10pt"><B>Overview</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company earns revenues and income and generates cash through the
design, marketing and distribution of quality men&#146;s and women&#146;s sports apparel
under the Ashworth<SUP>&#174;</SUP> and Callaway Golf apparel brands. The Company&#146;s products
are sold in the United States, Europe, Canada and various other international
markets to selected golf pro shops, resorts, off-course specialty shops,
upscale department stores, to top specialty-advertising firms for the corporate
market as well as in the Company&#146;s own stores. Nearly all of the Company&#146;s
production is through &#147;full package&#148; purchases of ready-made goods with
approximately 85% of its products manufactured in Asian countries. The Company
embroiders a majority of these garments with custom golf course, tournament and
corporate logos for its customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company includes F.O.B. purchase price, inbound freight charges, duty,
buying commissions and overhead in its cost of goods sold line item. Overhead
costs include purchasing and receiving costs, inspection costs, warehousing
costs, internal transfers costs and other costs associated with the Company&#146;s
distribution. The Company does not exclude any of these costs from cost of
goods sold.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the second quarter of fiscal 2004 the Company completed two
transactions relating to its distribution facilities. In February&nbsp;2004, the
Company completed the sale and lease-back of its old distribution center
located in Carlsbad, California. The Company sold the Carlsbad distribution
center for $5,747,000 and realized a gain on sale of fixed assets of
$1,589,000. In April&nbsp;2004, the Company completed the purchase of the new
distribution facility in Oceanside, California for approximately $14,023,000.
The Company applied the tax deferred gain on sale of the old facility to reduce
the cost basis of the new facility, for tax purposes, utilizing a tax-deferred
exchange under Internal Revenue Code section 1031.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the third quarter of fiscal 2004 the Company completed the
acquisition of all of the membership interests in Gekko Brands, LLC (the
&#147;Acquisition&#148;), a leading designer, producer and distributor of headwear and
apparel under The Game&#174; and Kudzu&#174; brands, pursuant to that certain Membership
Interests Purchase Agreement entered into on July&nbsp;6, 2004, by and among
Ashworth Acquisition Corp., a Delaware corporation and wholly owned subsidiary
of Ashworth, Inc. and the selling members identified therein. Ashworth intends
that the operations of the newly acquired subsidiary will continue to focus on
designing, producing and distributing headwear and apparel.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price for the Acquisition was $24,000,000 consisting of
$23,000,000 in cash and a $1,000,000 promissory note. Up to an additional
$6,500,000 will be paid to the remaining members of Gekko Brands, LLC
management if the subsidiary achieves specific EBIT and other operating targets
over approximately the next four years or through Ashworth&#146;s fiscal year 2008.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Acquisition, Ashworth entered into a new secured
5-year bank facility comprised of a $20,000,000 term loan and a $35,000,000
line of credit replacing its prior $55,000,000


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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">facility. To finance the cash purchase price of the Acquisition, Ashworth
utilized the term loan together with part of the new line of credit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also during the third quarter of fiscal 2004 the Company recorded a
pre-tax charge of $3,000,000 related to a tentative settlement to conclude the
securities class action lawsuit brought in 1999 against the Company and certain
current and former directors and officers in the United States District Court
for the Southern District of California. The litigation was brought on behalf
of a class of investors who purchased the Company&#146;s stock in the open market
between September&nbsp;4, 1997 and July&nbsp;15, 1998. Under the settlement, all claims
will be dismissed and the litigation will be terminated in exchange for a
payment of $15,250,000, approximately 82% of which will be paid by Ashworth&#146;s
insurance carriers. As part of the settlement, Ashworth also agreed to adopt
modifications to certain corporate governance policies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third quarter fiscal 2004 net revenue increased 12.8% to $42,825,000 as
compared to $37,960,000 for the same period of the prior year. The increase
was primarily driven by the addition of Gekko Brands, LLC in the month of July
2004 as well as net revenue increases in its international, retail and core
golf and off-course specialty distribution channels, offset by decreases in net
revenues from the Company owned stores and corporate distribution channel. The
net revenues growth, combined with improved gross margins, offset by the $1.8
million after tax charge related to the settlement of the class action law
suit, resulted in third quarter net income of $508,000 or $0.04 per diluted
share, compared to net income of $2,063,000 or $0.16 per diluted share in the
same quarter of last fiscal year.


<P align="left" style="font-size: 10pt"><B>Results of Operations</B>



<P align="left" style="font-size: 10pt"><B>Third quarter 2004 compared to third quarter 2003</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues for the third quarter of fiscal 2004 increased
12.8% to $42,825,000 from $37,960,000 for the same period in 2003 primarily due
the addition of Gekko&#146;s net revenues as well as higher revenues from the
Company&#146;s retail and core golf and off-course specialty distribution channels
and the international segment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the domestic segment increased 13.0% to $35,795,000 for
the current quarter from $31,674,000 in the third quarter of 2003, primarily
due to the Gekko acquisition, which contributed $3,434,000 in net revenues.
Net revenues from the Company&#146;s retail distribution channel increased 6.3% or
$187,000 resulting from an increase in the number of doors selling the
Company&#146;s product lines. Net revenues from the green grass and off-course
specialty distribution channel increased 3.8% or $785,000 primarily driven by
an increase in sales of Callaway Golf apparel. These increases were partially
offset by the 12.5% or $191,000 decrease in revenues from Company-owned stores
primarily due to the closing of the studio store in September&nbsp;2003, and a 1.5%
or $95,000 decrease in revenues in the corporate distribution channel primarily
due to generally weak industry-wide trends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the international segment increased 11.8% to $7,030,000
for the current quarter from $6,286,000 for the same period of the prior fiscal
year. The increase was primarily due to higher revenues in the Company&#146;s U.K.
subsidiary and Canadian divisions, of which $515,000 was due to the weakening
of the U.S. dollar against the British pound and Canadian dollar during the
third quarter of fiscal 2004, partially offset by slight decreases in other
international territories.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated gross margin for the third quarter of fiscal 2004 increased
80 basis points to 42.1% as compared to 41.3% for the same quarter a year
earlier. This improvement was primarily due to improved sourcing and the
addition of Gekko Brands, LLC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated selling, general and administrative (&#147;SG&#038;A&#148;) expenses
increased 12.5% to $13,560,000 for the third quarter of fiscal 2004 from
$12,051,000 for the same period in fiscal 2003. As a



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<P align="left" style="font-size: 10pt">percent of net revenues, SG&#038;A expenses were 31.7% for the third quarter of
fiscal 2004 as compared to 31.8% for the same period of the prior year. The
improved operating margin was partly due to the seasonally high sales of Gekko
products and the associated operating leverage.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other expense increased to $3,621,000 for the third quarter of
fiscal 2004 from $186,000 in the third quarter of fiscal 2003. The increase
was primarily due to the $3,000,000 charge related to the settlement of the
class action law suit, higher interest expense resulting from increased
long-term debt and equipment financing as well as currency transaction losses
recorded in the third quarter of fiscal 2004 as compared to currency
transaction gains recorded by the Company&#146;s U.K. subsidiary and Canadian
divisions in the same period of the prior fiscal year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rate for the third quarter of fiscal 2004
remained unchanged from the same period of fiscal year 2003 at 40.0% of pre-tax
income.


<P align="left" style="font-size: 10pt"><B>Nine months ended July&nbsp;31, 2004 compared to nine months ended July&nbsp;31, 2003</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues for the first nine months of fiscal 2004
increased 6.6% to $124,835,000 from $117,118,000 for the same period in fiscal
2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the domestic segment increased 4.7% to $103,305,000 from
$98,651,000 in the first nine months of fiscal 2003. Net revenues increased
$3,434,000 as a result of the Company&#146;s recent acquisition of Gekko Brands,
LLC. Net revenues from the Company&#146;s retail distribution channel increased
33.5% or $2,989,000. The increase in the retail distribution channel in the
first nine months of fiscal 2004 as compared to the same period of the prior
fiscal year is primarily due to the increased number of doors as well as
slightly higher comparable store sales resulting from retail-specific product
offerings and the implementation of the resort shop concept in retail
locations. Net revenues from the Company&#146;s corporate distribution channel
increased 2.7% or $441,000 in the first nine months of fiscal 2004 as compared
to the same period of the prior fiscal year. The increase in the corporate
distribution channel was primarily due to the addition of the Callaway Golf
apparel Sport line to the other product lines offered by the corporate
distribution channel. These increases were partially offset by a decrease in
the net revenues from the Company&#146;s golf-related distribution channel as well
as from the Company-owned stores. Net revenues from the Company&#146;s green grass
and off-course specialty distribution channel decreased 2.0% or $1,352,000 in
the first nine months of fiscal 2004 as compared to the same period of the
prior fiscal year. This decrease was primarily due to continuing industry
weakness resulting in a reduction in the average order size. Net revenues from
the Company-owned stores decreased 17.8% or $861,000 primarily due to the
closing of two of the nine Company-owned stores.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the international segment increased 16.6% to $21,530,000
from $18,467,000 for the same period of the prior fiscal year. The increase
was primarily due to higher revenues in the Company&#146;s U.K. subsidiary and
Canadian divisions, of which $2,064,000 was due to the weakening of the U.S.
dollar against the British pound and Canadian dollar during the first nine
months of fiscal 2004. This increase was partially offset by an 11.9% or
$273,000 decrease in net revenues from other international territories. Net
revenues from the Company&#146;s U.K. subsidiary in the first nine months of fiscal
2004 increased by $2,475,000 or 22.2% compared to the same period of the prior
fiscal year, of which $1,587,000 was due to fluctuations in currency exchange
rates. The balance of the increase was due to an increased number of accounts
as well as an increased average order size. Net revenue from the Canadian
divisions increased by $590,000 or 11.8% as compared to net revenues in the
same period of the prior fiscal year, of which $477,000 was due to changes in
currency exchange rates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated gross margin for the first nine months of fiscal 2004
improved 100 basis points to 41.7% as compared to 40.7% in the first nine
months of fiscal 2003. The improvement was primarily due


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<P align="left" style="font-size: 10pt">to improved sourcing.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated SG&#038;A expenses increased 7.1% to $39,052,000 for the first
nine months of fiscal 2004 from $36,445,000 for the same period in fiscal 2003.
As a percent of net revenues, SG&#038;A expenses were 31.3% for the first nine
months of fiscal 2004 as compared to 31.1% for the same period of the prior
year. The increase in SG&#038;A is primarily due to timing of sales and marketing
related expenses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other expense increased to $2,466,000 in the first nine months of
fiscal 2004 from $406,000 during the same period of fiscal 2003. The increase
was primarily due to the $3,000,000 charge related to the settlement of the
class action law suit, higher interest expense resulting from increased
long-term debt and equipment financing as well as lower currency transaction
gains recorded by the Company&#146;s U.K. subsidiary and Canadian divisions in the
first nine months of fiscal 2004 as compared to the same period of the prior
fiscal year. This increase in other expenses was partially offset by the
$1,517,000 net gain on disposal of fixed assets recorded in the first nine
months of fiscal 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rate in the first nine months of fiscal 2004
remained unchanged from the same period of fiscal year 2003 at 40.0% of pre-tax
income.


<P align="left" style="font-size: 10pt"><B>Capital Resources and Liquidity</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s primary sources of liquidity for the next 12&nbsp;months are
expected to be its cash flows from operations, the working capital line of
credit with its bank and other financial alternatives such as leasing. The
Company requires cash for capital expenditures and other requirements
associated with the expansion of its domestic and international production,
distribution and sales, as well as for general working capital purposes.
Ashworth&#146;s need for working capital is seasonal with the greatest requirements
existing from approximately December through the end of July each year. The
Company typically builds up its inventory during this period to provide product
for shipment for the spring/summer selling season.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;6, 2004, the Company entered into a new business loan agreement
with Union Bank of California, N.A., as the administrative agent, and two other
lenders. The new loan agreement is comprised of a $20,000,000 term loan and a
$35,000,000 revolving credit facility, which expires on July&nbsp;6, 2009 and is
collateralized by substantially all of the assets of the Company other than the
Company&#146;s real estate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under this loan agreement, interest on the $20,000,000 term loan is fixed
at 5.4% for the term of the loan. Interest on the revolving credit facility is
charged at the bank&#146;s reference rate. At July&nbsp;31, 2004, the bank&#146;s reference
rate was 4.50%. The loan agreement also provides for optional interest rates
based on London interbank offered rates (&#147;LIBOR&#148;) for periods of at least 30
days in increments of $500,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;3, 2004, the Company entered into the First Amendment to the
loan agreement to amend Section&nbsp;6.12(a), Tangible Net Worth. The loan
agreement, as amended, contains certain financial covenants that include a
requirement that the Company maintain (1)&nbsp;a minimum tangible net worth of
$74,000,000 plus the net proceeds from any equity securities issued (including
net proceeds from stock option exercises) after the date of the loan agreement
for the period ending October&nbsp;31, 2004, and a minimum tangible net worth of
$74,000,000, plus 90% of net income after taxes (without subtracting losses)
earned in each quarterly accounting period commencing after January&nbsp;31, 2005,
plus the net proceeds from any equity securities issued (including net proceeds
from stock option exercises) after the date of the loan agreement, (2)&nbsp;a
minimum EBITDA determined on a rolling four quarter basis ranging from
$16,500,000 at July&nbsp;6, 2004 and increasing over time to $27,000,000 at October
31, 2008 and thereafter, (3)&nbsp;a minimum ratio of cash and accounts receivable to
current liabilities of 0.75:1.00 for fiscal quarters ending January&nbsp;31 and
April&nbsp;30 and 1.00:1.00 for fiscal quarters ending July&nbsp;31 and October&nbsp;31, and
(4)&nbsp;a minimum fixed charge coverage ratio of 1.10:1.00 at April&nbsp;30, 2004 and
1.25:1.00 thereafter.


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<P align="left" style="font-size: 10pt">The loan agreement limits annual lease and rental expense associated with
the Company&#146;s new distribution center in Oceanside, California as well as
annual capital expenditures in any single fiscal year on a consolidated basis
in excess of certain amounts allowed for the acquisition of real property and
equipment in connection with the new distribution center. The loan agreement
has an additional requirement where, for any period of 30 consecutive days, the
total indebtedness under the revolving credit facility may not be more than
$15,000,000. The loan agreement also limits the annual aggregate amount the
Company may spend to acquire shares of its common stock. The Company is in
compliance with or has obtained waivers for, all of the loan agreement&#146;s
financial covenants as of July&nbsp;31, 2004.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The line of credit under the loan agreement may also be used to finance
commercial letters of credit and standby letters of credit. Commercial letters
of credit outstanding under this loan agreement totaled $2,532,000 at July&nbsp;31,
2004 as compared to $5,998,000 outstanding at July&nbsp;31, 2003 under the prior
loan agreement. The Company had $1,750,000 outstanding against the revolving
credit facility under this loan agreement at July&nbsp;31, 2004, compared to
$6,000,000 outstanding at July&nbsp;31, 2003 under the prior agreement. The
decrease in outstanding letters of credit and borrowings is primarily due to
converting several vendors from letters of credit to open credit terms. The
Company had $20,000,000 outstanding on the term loan under this loan agreement
at July&nbsp;31, 2004. At July&nbsp;31, 2004, $30,718,000 was available for borrowings
against the revolving credit facility under this loan agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first nine months ended July&nbsp;31, 2004, cash provided by
operations was $8,588,000 as compared to $8,432,000 provided during the same
period of the prior fiscal year. The improvement in cash flow from operations
was primarily due to the Company being able to convert several of its vendors
from letters of credit to open credit terms.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net trade receivables were $42,185,000 at July&nbsp;31, 2004, an increase of
$11,192,000 from the balance at October&nbsp;31, 2003. Because the Company&#146;s
business is seasonal, the net receivables balance may more meaningfully be
compared to the balance of $33,733,000 at July&nbsp;31, 2003, rather than the
year-end balance. The comparison of the third quarter fiscal 2004 balance to
the third quarter fiscal 2003 balance shows an increase of 25.1% in net trade
receivables while net revenues increased 12.8% for the comparable quarter.
This increase is in part due to the addition of the Gekko Brands, LLC accounts
receivable. The Company also implemented certain sales programs that offered
extended payment terms to customers meeting credit worthiness requirements and
other specified qualification criteria.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net inventories increased 4.3% to $46,406,000 at July&nbsp;31, 2004 from
$44,476,000 at October&nbsp;31, 2003. Compared to net inventories of $42,321,000 at
July&nbsp;31, 2003, net inventories at July&nbsp;31, 2004 have increased by 9.7%,
primarily due to the addition of Gekko Brands, LLC. The Company believes that
its current inventory mix is appropriate to respond to market demand.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current liabilities increased 113.3% to $28,699,000 at July&nbsp;31, 2004 from
$13,455,000 at October&nbsp;31, 2004. Compared to current liabilities of
$17,360,000 at July&nbsp;31, 2003, current liabilities increased 65.3%, primarily
due to the $4,370,000 in additional current liabilities from the acquisition of
Gekko Brands, LLC, the $4,000,000 in additional current portion of long-term
debt related to the term loan used to finance part of the acquisition as well
as the accrual of the $3,000,000 related to the settlement of the class action
lawsuit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;25, 2002, the Company entered into an agreement to purchase the
land and building, to be built to the Company&#146;s specifications, in the Ocean
Ranch Corporate Center in Oceanside, California. The building was constructed
with approximately 200,000 square feet of useable office and warehouse space
and will be used by the Company to warehouse, embroider, finish, package and
distribute clothing products and related accessories. On April&nbsp;2, 2004, the
Company completed the purchase of the new distribution center for approximately
$13,686,000 and entered into a secured loan agreement with a


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<P align="left" style="font-size: 10pt">bank to finance $11,650,000 of the purchase price. The loan is at a fixed
interest rate of 5% and will be amortized over 30&nbsp;years, but is due and payable
on May&nbsp;1, 2014. To fulfill certain requirements under the mortgage loan
agreement, the Company created Ashworth EDC LLC, a special purpose entity, to
be the purchaser and mortgagor. Ashworth EDC LLC is a wholly owned limited
liability company organized under the laws of the State of Delaware and its
results and assets are reported in the condensed consolidated statements
included in this report.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first nine months of fiscal 2004, the Company incurred capital
expenditures of $19,263,000 primarily for the purchase of the new distribution
center, computer systems and equipment, leasehold improvements and distribution
center equipment. The Company anticipates capital spending of approximately
$800,000 during the remainder of fiscal 2004, primarily on distribution center
related improvements, outlet stores openings and renovations and upgrades of
computer systems and equipment. Except for the purchase of the real property,
for which the Company obtained mortgage financing, management currently intends
to finance the purchase of the additional capital equipment from its own cash
resources, but may use leases or equipment financing agreements if deemed
appropriate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company capitalized interest of $107,000 and $0 during the nine months
ended July&nbsp;31, 2004 and 2003, respectively, related to self-constructed
construction in progress for the new distribution center.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;24, 2004, the Company sold certain property located in
Carlsbad, California, used in its distribution operation for $5,747,000 and
recorded a gain on disposal of fixed assets of $1,589,000. The land, buildings
and other assets were reported in the Company&#146;s domestic segment and were sold
as a unit on an &#147;as is&#148; basis. As a result of the sale, the Company paid the
$2,610,000 balance due on the mortgage relating to the subject property. The
Company has entered into a lease agreement to lease the facility from the new
owner. The term of the lease commenced on February&nbsp;24, 2004 and terminates on
December&nbsp;31, 2004, with an option to renew the term of the lease for a period
of 60&nbsp;days with written notice of intent to exercise the option due at least 90
days prior to the expiration of the initial term of the lease. Under the terms
of the lease agreement, the Company pays monthly rent of approximately $47,000
plus taxes, insurance and utilities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has entered into agreements with equipment manufacturers to
purchase the equipment required for the operation of the Company&#146;s new
distribution center in Oceanside, California. On June&nbsp;23, 2003, the Company
entered into a Master Equipment Lease Agreement with a financial institution
which has accepted an assignment of these purchase agreements and assumed all
rights and payment obligations under these agreements. From time to time,
commencing approximately June&nbsp;26, 2003, the financial institution made progress
payments to the equipment manufacturers during the period while the equipment
was being purchased, assembled, installed and/or tested as required by the
purchase agreements. The total cost of the equipment is approximately
$10,439,000. The Company has paid the financial institution for interest costs
related to the progress payments calculated using the prime rate plus one half
of one percentage point per annum based on a 360-day year. As of July&nbsp;31,
2004, the financial institution has made progress payments of $7,915,000
leaving an available balance of $2,524,000 and the Company has paid $145,000 in
interest charges during the first nine months of fiscal 2004. On August&nbsp;30,
2004, the Company entered into Equipment Schedule&nbsp;No.&nbsp;01. Under the terms of
the Schedule, the Company will be leasing the equipment for an initial term of
91&nbsp;months beginning on September&nbsp;1, 2004 for $128,800 per month.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is party to an exclusive licensing agreement with Callaway
Golf Company which requires certain minimum royalty payments which began in
January&nbsp;2003. The revenues from the Callaway Golf apparel product line have
been, and the Company believes will continue to be, sufficient to cover such
minimum guarantees.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock and capital in excess of par value increased by $1,266,000 in
the nine months ended July&nbsp;31, 2004, of which $1,081,000 is due to the issuance
of 194,000 shares of common stock on exercise of options and $185,000 is the
tax benefit related to the exercise of those options.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on current levels of operations, the Company expects that sufficient
cash flow will be generated from operations so that, combined with other
financing alternatives available, including cash on hand, borrowings under its
bank credit facility and leasing alternatives, the Company will be able to meet
all of its debt service, capital expenditure and working capital requirements
for at least the next 12&nbsp;months.


<P align="left" style="font-size: 10pt"><B>Derivatives</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time the Company enters into short-term foreign exchange
contracts with its bank to hedge against the impact of currency fluctuations
between the U.S. dollar and the British pound and the U.S. dollar and the
Canadian dollar. The contracts provide that, on specified dates, the Company
would sell the bank a specified number of British pounds or Canadian dollars in
exchange for a specified number of U.S. dollars. Additionally, from time to
time the Company&#146;s U.K. subsidiary enters into similar contracts with its bank
to hedge against currency fluctuations between the British pound and the U.S.
dollar and the British pound and other European currencies. Realized gains and
losses on these contracts are recognized in the same period as the hedged
transactions. These contracts have maturity dates that do not normally exceed
12&nbsp;months. On July&nbsp;15, 2003, the Company&#146;s U.K. subsidiary entered into four
forward exchange contracts to sell British pounds and buy U.S. dollars, as well
as five forward exchange contracts to sell Euros and buy British pounds. All
of these contracts were settled as intended and, at July&nbsp;31, 2004, neither the
Company nor any of its subsidiaries had any outstanding foreign exchange
contracts.


<P align="left" style="font-size: 10pt"><B>New Accounting Standards</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, the Financial Accounting Standards Board (&#147;FASB&#148;) issued
Interpretation No.&nbsp;46, <I>Consolidation of Variable Interest Entities </I>(&#147;FIN No.
46&#148;). FIN No.&nbsp;46 addresses consolidation of entities that are not controllable
through voting interests or in which the equity investors do not bear the
residual economic risks and rewards. These entities have been commonly
referred to as special purpose entities. FIN No.&nbsp;46 provides guidance related
to identifying variable interest entities and determining whether such entities
should be consolidated. It also provides guidance related to the initial and
subsequent measurement of assets, liabilities and non-controlling interests in
newly consolidated variable interest entities and requires disclosures for both
the primary beneficiary of a variable interest entity and other beneficiaries
of the entity. For variable interest entities created, or interests in
variable interest entities obtained, subsequent to January&nbsp;31, 2003, the
Company is required to apply the consolidation provisions of FIN No.&nbsp;46
immediately. For variable interest entities created, or interests in variable
interest entities obtained, on or before January&nbsp;31, 2003, the consolidation
provisions of FIN No.&nbsp;46 were first required to be applied in the Company&#146;s
financial statements as of July&nbsp;31, 2003. In January&nbsp;2004, the FASB issued a
revision to FIN No.&nbsp;46, to clarify some requirements and add new scope
exceptions. The revised guidance is effective for the first reporting period
beginning after December&nbsp;15, 2003. The provisions of FIN No.&nbsp;46 have not had a
material impact on the Company&#146;s financial position and results of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the Emerging Issues Task Force (&#147;EITF&#148;) reached a consensus
on Issue No.&nbsp;03-01, <I>The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. </I>EITF Issue No.&nbsp;03-01 requires the use of
fair values calculated in connection with SFAS No.&nbsp;107, <I>Disclosures about Fair
Value of Financial Instruments</I>, to be used as the basis for determining whether
a cost method investment is impaired. Any impairment would be applied
prospectively to all current and future investments, within the scope of EITF
Issue No.&nbsp;03-01, effective in reporting periods


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<P align="left" style="font-size: 10pt">beginning after June&nbsp;15, 2004. EITF Issue No.&nbsp;03-01 further specifies
disclosures an investor should provide about unrealized losses that have not
been recognized as other-than-temporary impairments for cost method
investments. The Company&#146;s adoption of EITF Issue No.&nbsp;03-01 (effective August
1, 2004) is not expected to have a material impact on the Company&#146;s financial
position and results of operations.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the EITF reached a consensus regarding Issue No.&nbsp;03-16,
<I>Accounting for Investments in Limited Liability Companies</I>. EITF Issue No.
03-16 requires investments in limited liability companies (&#147;LLCs&#148;) that have
separate ownership accounts for each investor to be viewed as similar to a
limited partnership for purposes of determining whether a non-controlling
investment in an LLC should be accounted for using the cost method or the
equity method of accounting. Therefore, the provisions of Statement of
Position (&#147;SOP&#148;) No.&nbsp;78-9, <I>Accounting for Investments in Real Estate Ventures</I>,
and the guidance provided by the SEC staff in Topic D-46, would apply to such
LLCs. EITF Issue No.&nbsp;03-16 is effective for the first reporting period
beginning after June&nbsp;15, 2004. The effect of that consensus would be applied
to the accounting for existing investments in LLCs as of the beginning of the
first fiscal period beginning after FASB ratification of the consensus, by
recognizing the cumulative effect of retroactive application. The adoption of
EITF Issue No.&nbsp;03-16 (effective August&nbsp;1, 2004) is not expected to have a
material impact on the Company&#146;s financial position and results of operations.


<P align="left" style="font-size: 10pt"><B>Cautionary Statements and Risk Factors</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This report contains certain forward-looking statements, including without
limitation those regarding the Company&#146;s plans and expectations for revenue
growth, product lines, strategic alliances, designs and seasonal collections,
capital spending, marketing programs, foreign sourcing, cost controls,
inventory levels and availability of working capital. These forward-looking
statements may contain the words &#147;believe,&#148; &#147;anticipate,&#148; &#147;expect,&#148;
&#147;estimate,&#148; &#147;project,&#148; &#147;will be,&#148; &#147;will continue,&#148; &#147;will likely result&#148; or
other similar words and phrases. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to update any such statements or publicly announce any updates or
revisions to any of the forward-looking statements contained herein.
Forward-looking statements and the Company&#146;s plans and expectations are subject
to a number of risks and uncertainties that could cause actual results to
differ materially from those anticipated, and the Company&#146;s business in general
is subject to certain risks that could affect the value of the Company&#146;s common
stock. These risks include, but are not limited to, the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Demand for the Company&#146;s products may decrease significantly if the
economy weakens, if the popularity of golf decreases or if unusual
weather conditions cause a reduction in rounds played.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Like other apparel manufacturers, the Company must correctly
anticipate and help direct fashion trends within its industry. The
Company&#146;s results of operations would suffer if the Company fails to
develop fashions or styles that are well received in any season.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is party to a multi-year licensing agreement to design,
source and sell Callaway Golf apparel primarily in the United States,
Europe and Canada. The Company must correctly anticipate the fashion
trends and demand for these product lines. The Company&#146;s results of
operations would suffer if it fails to develop fashions or styles for
the Callaway Golf apparel product line that are well received in any
season.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The market for golf apparel and sportswear is extremely competitive.
The Company has several strong competitors that are better
capitalized. Outside the green grass market, the Company&#146;s market
share is not as significant. Price competition or industry
consolidation could weaken the Company&#146;s competitive position.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2004, Ashworth, Inc. acquired Gekko Brands, LLC (&#147;Gekko&#148;), a
leading designer, producer and distributor of headwear and apparel
under The Game&#174; and Kudzu&#174; brands. The Company must successfully
integrate the acquisition to realize the expected growth in new,
quality channels of distribution for the Ashworth&#174; and Callaway Golf
apparel brands as well as further growth from The Game and Kudzu
brands&#146; sales into the Company&#146;s current distribution channels. The
Company&#146;s results of operations would be adversely affected if it
fails to successfully integrate the new operations as anticipated or
the expected synergies are not realized.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has purchased land and a building in Oceanside, California
to replace and expand existing owned and leased office and
distribution facilities. The Company&#146;s results of operations would be
adversely affected if the Oceanside distribution center does not
become operational as anticipated or functionality problems are
encountered. Any such delay or operational problems may cause the
Company to incur additional expense, experience delays in customer
shipments, require the Company to lease additional distribution space
or extend the term of existing leases. In addition, whether or not
the facilities are operational at the time anticipated, the Company&#146;s
results of operations could be negatively impacted if future sales
volume growth does not reach expected levels and the facility&#146;s
additional distribution capacity is not fully utilized, or if the
Company does not achieve projected cost savings from the new
distribution facilities as soon as, or in the amounts, anticipated.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company relies on domestic and foreign contractors to manufacture
various products. If these contractors deliver goods late or fail to
meet the Company&#146;s quality standards, the Company could lose sales and
its reputation could suffer. The Company&#146;s foreign suppliers&#146; ability
to deliver products may be adversely affected by future changes in
tariffs, quotas and other trade barriers imposed by the foreign
countries, as well as by the United States. In particular the
suppliers for the Company&#146;s newly acquired subsidiary are concentrated
in China.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The outbreak of Severe Acute Respiratory Syndrome affected travel to
countries where the Company&#146;s products are manufactured. Visiting
manufacturers in the affected countries is an important part of the
product development process for the Company. If travel to these
countries is again restricted by a similar outbreak, the Company&#146;s
product development process and reputation as a designer and
manufacturer of innovative products may be adversely affected, our
international production and shipments may be limited, and the Company
could lose sales.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s domestic and foreign suppliers rely on readily available
supplies of raw materials at reasonable prices. If these raw
materials are in short supply or are only available at inflated
prices, the contractors may be unable to deliver the Company&#146;s
products in sufficient quantities or at expected prices and the
Company could lose sales or have lower gross profit margins.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An increase in terrorist activities, as well as continued conflicts
around the world, would likely adversely affect the level of demand
for the Company&#146;s products as customers&#146; and consumers&#146; attention and
interest are diverted from golf and fashion and become focused on
these events and the economic, political, and public safety issues and
concerns associated with them. Also, such events could adversely
affect the Company&#146;s ability to manage its supply and delivery of
product from domestic and foreign contractors. If such events caused
a significant disruption in domestic or international shipments, the
Company&#146;s ability to fulfill customer orders also would be materially
adversely affected.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If economic conditions deteriorate, the ability of the Company&#146;s
customers to pay current obligations may be adversely impacted and the
Company may experience an increase in delinquent and uncollectible
accounts.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is from time to time party to claims and litigation
proceedings. Such matters include the specific litigation described
in this report and other litigation arising in the ordinary course of
business. See &#147;Legal Proceedings,&#148; below. Such matters are subject
to many uncertainties and the Company cannot predict with assurances
the outcomes and ultimate financial impacts of them. There can be no
guarantees that actions that have been or may be brought against the
Company in the future will be resolved in the Company&#146;s favor or that
insurance carried by the Company will be available or paid to cover
any litigation exposure. Any losses resulting from settlements or
adverse judgments arising out of these claims could materially and
adversely affect the Company&#146;s consolidated financial position and
results of operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fluctuations in foreign currency exchange rates could affect the
Company&#146;s ability to sell its products in foreign markets and the
value in U.S. dollars of revenues received in foreign currencies. The
Company&#146;s revenues from its international segment may also be
adversely affected by taxation and laws or policies of the foreign
countries in which the Company has operations, as well as laws and
policies of the United States affecting foreign trade, investment and
taxation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company maintains high levels of inventory to support its
Authentics<SUP>TM</SUP> program as well as the Callaway Golf apparel Classics
program. Additional products, greater sales volume, and customer
trends toward increased &#147;at-once&#148; ordering may require increased
inventory. Disposal of excess prior season inventory is an ongoing
part of the Company&#146;s business, and write-downs of inventories may
materially impair the Company&#146;s financial performance in any period.
Particular inventories may be subject to multiple write-downs if the
Company&#146;s initial reserve estimates for inventory obsolescence or lack
of throughput prove to be too low. These risks increase as inventory
increases.</TD>
</TR>

</TABLE>

<DIV align="left">
<A name="107"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>



<P align="left" style="font-size: 10pt"><B>Interest Rate Risk</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s debt consists of notes payable which had a total balance of
$32,639,000 at July&nbsp;31, 2004. The debt bears interest at variable and fixed
rates ranging from 3.5% to 8.3%, which approximates fair value based on current
rates offered for debt with similar risks and maturities. The Company also had
$1,750,000 outstanding at July&nbsp;31, 2004 on its revolving line of credit with
interest charged at the bank&#146;s reference rate. The loan agreement also
provides for optional interest rates based on LIBOR for periods of at least 30
days in increments of $500,000. A hypothetical 10% increase in interest rates
during the nine months ended July&nbsp;31, 2004 would have resulted in a $25,000
decrease in net income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For details regarding the Company&#146;s variable and fixed rate debt, see Item
2. Management Discussion and Analysis of Financial Condition and Results of
Operations &#150; Capital Resources and Liquidity.


<P align="left" style="font-size: 10pt"><B>Foreign Currency Exchange Rate Risk</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s ability to sell its products in foreign markets and the U.S.
dollar value of the sales made in foreign currencies can be significantly
influenced by foreign currency fluctuations. A decrease in the value of
foreign currencies relative to the U.S. dollar could result in downward price
pressure for the Company&#146;s products or losses from currency exchange rates.
From time to time the Company enters into short-term foreign exchange contracts
with its bank to hedge against the impact of currency fluctuations between the
U.S. dollar and the British pound and the U.S. dollar and the Canadian dollar.
The contracts provide that, on specified dates, the Company would sell the bank
a specified number of British pounds or Canadian dollars in exchange for a
specified number of U.S. dollars. Additionally, from time to time the


<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Company&#146;s U.K. subsidiary enters into similar contracts with its bank to
hedge against currency fluctuations between the British pound and the U.S.
dollar and the British pound and other European currencies. Realized gains and
losses on these contracts are recognized in the same period as the hedged
transaction. These contracts have maturity dates that do not normally exceed
12&nbsp;months. The Company will continue to assess the benefits and risks of
strategies to manage the risks presented by currency exchange rate
fluctuations. There is no assurance that any strategy will be successful in
avoiding losses due to exchange rate fluctuations, or that the failure to
manage currency risks effectively would not have a material adverse effect on
the Company&#146;s results of operations. On July&nbsp;15, 2003, the Company&#146;s U.K.
subsidiary entered into four forward exchange contracts to sell British pounds
and buy U. S. dollars, as well as five forward exchange contracts to sell Euros
and buy British pounds. All of these contracts were settled as intended and,
at July&nbsp;31, 2004, neither the Company nor any of its subsidiaries had any
outstanding foreign exchange contracts.


<DIV align="left">
<A name="108"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;4. CONTROLS AND PROCEDURES</B>



<P align="left" style="font-size: 10pt"><B>Evaluation of Disclosure Controls and Procedures</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2004, the Company carried out an evaluation, under the
supervision and with the participation of the Company&#146;s management, including
the Company&#146;s Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company&#146;s disclosure controls
and procedures pursuant to Exchange Act Rule&nbsp;13a-15. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that the Company&#146;s disclosure controls and procedures are effective and provide
reasonable assurance that information required to be disclosed by the Company
in the reports it files under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within required time periods.


<P align="left" style="font-size: 10pt"><B>Changes in Internal Control over Financial Reporting</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There was no significant change in the Company&#146;s internal controls over
financial reporting during the Company&#146;s third quarter of fiscal 2004 that has
materially affected or is reasonably likely to materially affect the Company&#146;s
internal control over financial reporting.

<DIV align="left">
<A name="109"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PART II</B>



<P align="center" style="font-size: 10pt"><B>OTHER INFORMATION</B>


<DIV align="left">
<A name="110"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;1. LEGAL PROCEEDINGS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;22, 1999, Milberg Weiss Bershad Hynes &#038; Lerach LLP filed a
class action in the United States District Court for the Southern District of
California (&#147;U.S. District Court&#148;) on behalf of purchasers of the Company&#146;s
common stock during the period between September&nbsp;4, 1997 and July&nbsp;15, 1998.
The action was subsequently consolidated with two similar suits and plaintiffs
filed their Amended and Consolidated Complaint on December&nbsp;17, 1999. Upon the
Company&#146;s motion, the U.S. District Court dismissed the Complaint with leave to
amend on July&nbsp;18, 2000. On September&nbsp;18, 2000, plaintiffs served their Second
Consolidated Amended Complaint (&#147;Second Amended Complaint&#148;). On November&nbsp;6,
2000, the Company filed its motion to dismiss the Second Amended Complaint,
which the U.S. District Court granted, in part, and denied, in part. The
remaining portions of the Second Amended Complaint allege that, among other
things, during the class period and in violation of the Securities Exchange Act
of 1934, the Company&#146;s financial statements, as reported, did not conform to
generally accepted accounting principles with respect to revenues and inventory
levels. It further alleges that certain Company executives made false or
misleading statements or omissions concerning product demand and


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">that two former executives engaged in insider trading. Ashworth has
reached a tentative settlement to conclude this securities class action
lawsuit. Under the settlement, all claims will be dismissed and the litigation
will be terminated in exchange for a payment of $15,250,000, approximately 82%
of which will be paid by Ashworth&#146;s insurance carriers. As part of the
settlement, Ashworth also agreed to adopt modifications to certain corporate
governance policies. Ashworth recorded a pre-tax charge in the third quarter
of fiscal year 2004 of $3,000,000 related to settlement of this suit.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is party to other claims and litigation proceedings arising in
the normal course of business. Although the legal responsibility and financial
impact with respect to such other claims and litigation cannot currently be
ascertained, the Company does not believe that these other matters will result
in payment by the Company of monetary damages, net of any applicable insurance
proceeds, that, in the aggregate, would be material in relation to the
consolidated financial position or results of operations of the Company.

<DIV align="left">
<A name="111"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS &#150; None</B>


<DIV align="left">
<A name="112"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;3. DEFAULTS UPON SENIOR SECURITIES &#150; Not applicable.</B>


<DIV align="left">
<A name="113"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS &#150;
Not applicable.</B>


<DIV align="left">
<A name="114"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;5. OTHER INFORMATION &#150; Not applicable.</B>


<DIV align="left">
<A name="115"></A>
</DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;6. EXHIBITS AND REPORTS ON FORM 8-K</B>



<P align="left" style="font-size: 10pt">(a)&nbsp;Exhibits


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Incorporation as filed March&nbsp;19, 1987 with the Secretary
of State of Delaware, Amendment to Certificate of Incorporation as filed
August&nbsp;3, 1987 and Amendment to Certificate of Incorporation as filed
April&nbsp;26, 1991 (filed as Exhibit&nbsp;3(a) to the Company&#146;s Registration
Statement dated February&nbsp;21, 1992 (File No.&nbsp;33-45078) and incorporated
herein by reference) and Amendment to Certificate of Incorporation as
filed April&nbsp;6, 1995 (filed as Exhibit&nbsp;3(a) to the Company&#146;s Form&nbsp;10-K for
the fiscal year ended October&nbsp;31, 1994 (File No.&nbsp;0-18553) and incorporated
herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of the Company (filed as Exhibit&nbsp;3.1 to the
Company&#146;s Current Report on Form&nbsp;8-K on February&nbsp;23, 2000 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen certificate for Common Stock, par value $.001 per share, of the
Company (filed as Exhibit&nbsp;4(a) to the Company&#146;s Registration Statement
dated November&nbsp;4, 1987 (File No.&nbsp;33-16714-D) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(b)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen certificate for Options granted under the Amended and Restated
Nonqualified Stock Option Plan dated March&nbsp;12, 1992 (filed as Exhibit&nbsp;4(b)
to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 1993
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(b)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen certificate for Options granted under the Founders Stock
Option Plan dated November&nbsp;6, 1992 (filed as Exhibit&nbsp;4(b)(2) to the
Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 1993 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen certificate for Options granted under the Incentive Stock Option
Plan dated June&nbsp;15, 1993 (filed as Exhibit&nbsp;4(c) to the Company&#146;s Form&nbsp;10-K
for the fiscal year ended October&nbsp;31, 1993 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights Agreement dated as of October&nbsp;6, 1998 and amended on February&nbsp;22,
2000 by and between Ashworth, Inc. and American Securities Transfer &#038;
Trust, Inc. (filed as Exhibit&nbsp;4.1 to the Company&#146;s Form&nbsp;8-K filed on March
14, 2000 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(a)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Personal Services Agreement and Acknowledgement of Termination of
Executive Employment effective December&nbsp;31, 1998 by and between Ashworth,
Inc. and Gerald W. Montiel (filed as Exhibit&nbsp;10(b) to the Company&#146;s Form
10-K for the fiscal year ended October&nbsp;31, 1998 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(b)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Personal Services Agreement effective January&nbsp;1, 1999 by
and between Ashworth, Inc. and Gerald W. Montiel (filed as Exhibit&nbsp;10(c)
to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 1998
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(c)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amended and Restated Executive Employment Agreement effective
February&nbsp;22, 1999 by and between Ashworth, Inc. and Randall L. Herrel, Sr.
(filed as Exhibit&nbsp;10(a) to the Company&#146;s Form&nbsp;10-Q for the quarter ended
April&nbsp;30, 1999 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(d)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement effective December&nbsp;15, 2000 by and between
Ashworth, Inc. and Terence W. Tsang (filed as Exhibit&nbsp;10(f) to the
Company&#146;s Form&nbsp;10-Q for the quarter ended January&nbsp;31, 2001 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Nonqualified Stock Option Plan dated November&nbsp;1,
1996 (filed as Exhibit&nbsp;10(i) to the Company&#146;s Form&nbsp;10-K for the fiscal
year ended October&nbsp;31, 2000 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(f)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Incentive Stock Option Plan dated November&nbsp;1, 1996
(filed as Exhibit&nbsp;10(j) to the Company&#146;s Form&nbsp;10-K for the fiscal year
ended October&nbsp;31, 2000 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(g)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated 2000 Equity Incentive Plan dated December&nbsp;14, 1999
adopted by the stockholders on March&nbsp;24, 2000 (filed as Exhibit&nbsp;4.1 to the
Company&#146;s Form&nbsp;S-8 filed on December&nbsp;12, 2000 (File No.&nbsp;333-51730) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated April&nbsp;24, 2003, between Ashworth, Inc. as
Borrower, Bank of America, N.A., as Administrative Agent and Lender, Union
Bank of California, N.A. and Bank of the West as Lenders, expiring April
30, 2005 (filed as Exhibit&nbsp;10(i)(1) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended April&nbsp;30, 2003 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty Agreement dated April&nbsp;24, 2003 between Ashworth Store I,
Inc., Ashworth Store II, Inc. and Ashworth Store III, Inc. as Guarantors
and Bank of America, N.A., as Administrative Agent on behalf of Ashworth,
Inc. as the Borrower (filed as Exhibit&nbsp;10(i)(2) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended April&nbsp;30, 2003 (File No.&nbsp;0-18553) and incorporated
herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of April&nbsp;24, 2003 to the Credit
Agreement dated April&nbsp;24, 2000, between Ashworth, Inc. as Pledgor, Bank of
America, N.A., as Administrative Agent and Lender, Union Bank of
California, N.A. and Bank of the West as Lenders, expiring</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;30, 2005 (filed as Exhibit&nbsp;10(i)(3) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended April&nbsp;30, 2003 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of April&nbsp;24, 2003 to the Credit
Agreement dated April&nbsp;24, 2000, between Ashworth Store I, Inc., Ashworth
Store II, Inc. and Ashworth Store III, Inc. as Pledgor, Bank of America,
N.A., as Administrative Agent and Lender, Union Bank of California, N.A.
and Bank of the West as Lenders, expiring April&nbsp;30, 2005 (filed as Exhibit
10(i)(4) to the Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2003
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed of Hypothec of Universality of Moveable Property effective as of
April&nbsp;24, 2003 to the Credit Agreement dated April&nbsp;24, 2000, between
Ashworth, Inc. as Grantor, Bank of America, N.A., as Administrative Agent
and Lender, Union Bank of California, N.A. and Bank of the West as
Lenders, expiring April&nbsp;30, 2005 (filed as Exhibit&nbsp;10(i)(5) to the
Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2003 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equitable Mortgage Over Securities effective as of April&nbsp;24, 2003 to
the Credit Agreement dated April&nbsp;24, 2000, between Ashworth, Inc. as
Mortgagor, Bank of America, N.A., as Security Trustee and Beneficiary,
Union Bank of California, N.A. and Bank of the West as Beneficiaries,
expiring April&nbsp;30, 2005 (filed as Exhibit&nbsp;10(i)(6) to the Company&#146;s Form
10-Q for the quarter ended April&nbsp;30, 2003 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(i)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Agreement dated November&nbsp;1, 2000 by and between
Ashworth, Inc. and Randall L. Herrel, Sr. (filed as Exhibit&nbsp;10(m) to the
Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(j)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Agreement dated November&nbsp;1, 2000 by and between
Ashworth, Inc. and Terence W. Tsang (filed as Exhibit&nbsp;10(n) to the
Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(k)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promotion Agreement effective November&nbsp;1, 1999 by and between Ashworth,
Inc. and Fred Couples (filed as Exhibit&nbsp;10(o) to the Company&#146;s Form&nbsp;10-K
for the fiscal year ended October&nbsp;31, 2000 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(l)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer and Acceptance of Executive Employment effective May&nbsp;29, 2001 by
and between Ashworth, Inc. and Eddie Fadel (filed as Exhibit&nbsp;10(o) to the
Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2002 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(m)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contract Termination Agreement effective October&nbsp;31, 2002 by and among
Ashworth, Inc., James Nantz, III and Nantz Communications, Inc. (filed as
Exhibit&nbsp;10(p) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October
31, 2002 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(n)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Estate Purchase and Sale Agreement and Joint Escrow Instructions
effective October&nbsp;25, 2002 by and between Innovative Development
Enterprises, Inc. and Ashworth, Inc. (filed as Exhibit&nbsp;10(q) to the
Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2002 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(o)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promotion Agreement effective October&nbsp;31, 2002 by and among Ashworth,
Inc., James W. Nantz, III and Nantz Enterprises, Ltd. (filed as Exhibit
10(q) to the Company&#146;s Form&nbsp;10-Q for the quarter ended January&nbsp;31, 2003
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase and Installation Agreement dated April&nbsp;10, 2003 between
Ashworth, Inc. and Gartner Storage &#038; Sorter Systems of Pennsylvania (filed
as Exhibit&nbsp;10&#174; to the Company&#146;s Form&nbsp;10-Q</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">for the quarter ended April&nbsp;30, 2003 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(q)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement for Lease dated May&nbsp;1, 2003 by and among Ashworth, Inc.,
Ashworth U.K. Limited and Juniper Developments Limited (filed as Exhibit
10(s) to the Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2003
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(r)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease dated September&nbsp;1, 2003 by and among Ashworth, Inc., Ashworth U.K.
Limited and Juniper Developments Limited (filed as Exhibit&nbsp;10(t) to the
Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31, 2003 (File No.&nbsp;0-18553)
and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(s)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Master Equipment Lease Agreement dated as of June&nbsp;23, 2003 by and
between Key Equipment Finance and Ashworth, Inc. including Amendment 01,
the Assignment of Purchase Agreement and the Certificate of Authority
(filed as Exhibit&nbsp;10(u) to the Company&#146;s Form&nbsp;10-Q for the quarter ended
July&nbsp;31, 2003 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(s)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equipment Schedule&nbsp;No.&nbsp;01 dated as of August&nbsp;30, 2004 by and between
Ashworth, Inc. and Key Equipment Finance, a Division of Key Corporate
Capital, Inc.(filed as Exhibit&nbsp;99.1 to the Company&#146;s Form&nbsp;8-K on September
3, 2004 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(t)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer and Acceptance of Executive Employment effective August&nbsp;30, 2001
by and between Ashworth, Inc. and Gary I. Schneiderman (filed as Exhibit
10(u) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31,
2003 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(u)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement, effective May&nbsp;14, 2001, by and between Ashworth, Inc.
and Callaway Golf Company (filed as Exhibit&nbsp;10(v) to the Company&#146;s Form
10-K for the fiscal year ended October&nbsp;31, 2003 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(v)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to License Agreement, effective December&nbsp;16, 2003, by and
between Ashworth, Inc. and Callaway Golf Company (filed as Exhibit&nbsp;10(w)
to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2003
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase and Sale Agreement, dated as of December&nbsp;2, 2003, by and
between Ashworth, Inc. and LBA Inc. (filed as Exhibit&nbsp;10(w)(1) to the
Company&#146;s Form&nbsp;10-Q for the quarter ended January&nbsp;31, 2004 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Purchase and Sale Agreement, dated as of January
29, 2004, by and between Ashworth, Inc. and LBA Inc. (filed as Exhibit
10(w)(2) to the Company&#146;s Form&nbsp;10-Q for the quarter ended January&nbsp;31, 2004
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption of Purchase and Sale Agreement, effective
February&nbsp;24, 2004, by and between LBA Inc. and LBA Industrial Fund-Canyon,
Inc. (filed as Exhibit&nbsp;10(w)(3) to the Company&#146;s Form&nbsp;10-Q for the quarter
ended January&nbsp;31, 2004 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease dated February&nbsp;24, 2004 by and between Ashworth, Inc. and LBA
Industrial Fund-Canyon, Inc. (filed as Exhibit&nbsp;10(w)(4) to the Company&#146;s
Form&nbsp;10-Q for the quarter ended January&nbsp;31, 2004 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exchange Agreement and Supplemental Closing Instructions, dated as of
December&nbsp;3, 2003, by and between Ashworth, Inc. and Asset Preservation,
Inc. (filed as Exhibit&nbsp;10(w)(5) to the Company&#146;s Form&nbsp;10-Q for the quarter
ended January&nbsp;31, 2004 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, effective April&nbsp;1, 2004, by and
between Innovative Development Enterprises, Inc., Ashworth EDC, LLC and
Ashworth, Inc. (filed as Exhibit&nbsp;10(x)(1)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">28
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">to the Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2004 (File
No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Grant Deed, effective March&nbsp;30, 2004, by and between Innovative
Development Enterprises, Inc., Ashworth EDC, LLC. (filed as Exhibit
10(x)(2) to the Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2004
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement, effective April&nbsp;2, 2004, by and between Ashworth EDC,
LLC and Bank of America, N.A. (filed as Exhibit&nbsp;10(x)(3) to the Company&#146;s
Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2004 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory Note, effective April&nbsp;2, 2004, by and between Ashworth EDC,
LLC and Bank of America, N.A. (filed as Exhibit&nbsp;10(x)(4) to the Company&#146;s
Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2004 (File No.&nbsp;0-18553) and
incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing, effective April&nbsp;2, 2004, by and between Ashworth EDC, LLC,
PRLAP, Inc. and Bank of America, N.A. (filed as Exhibit&nbsp;10(x)(5) to the
Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30, 2004 (File No.
0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Indemnity Agreement, effective April&nbsp;2, 2004, by and
between Ashworth EDC, LLC, Ashworth, Inc. and Bank of America, N.A. (filed
as Exhibit&nbsp;10(x)(6) to the Company&#146;s Form&nbsp;10-Q for the quarter ended April
30, 2004 (File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(1)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Membership Interests Purchase Agreement, dated July&nbsp;6, 2004, by and
among Ashworth Acquisition Corp. and the selling members, identified
therein (filed as Exhibit&nbsp;99.1 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley
Co. (filed as Exhibit&nbsp;99.2 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004
(File No.&nbsp;0-18553) and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth, Inc. Guaranty of Ashworth Acquisition Corp. Promissory Note
in favor of W. C. Bradley Co. (filed as Exhibit&nbsp;99.3 to the Company&#146;s Form
8-K on July&nbsp;21, 2004 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Lease Agreement, dated July&nbsp;6, 2004, by and
between 16 Downing, LLC as Lessor and Gekko Brands, LLC as Lessee (filed
as Exhibit&nbsp;99.4 to the Company&#146;s Form&nbsp;8-K July&nbsp;21, 2004 (File No.&nbsp;0-18553)
and incorporated herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth, Inc. Guaranty of Payments under the Amended and Restated
Lease Agreement, dated July&nbsp;6, 2004, by and between 16 Downing, LLC as
Lessor and Gekko Brands, LLC as Lessee (filed as Exhibit&nbsp;99.5 to the
Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;0-18553) and incorporated
herein by reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Executive Employment Agreement by and between Gekko Brands,
LLC and certain selling members (filed as Exhibit&nbsp;99.6 to the Company&#146;s
Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as
Borrower, Union Bank of California, N.A., as Administrative Agent and
Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring
July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty Agreement dated July&nbsp;6, 2004 between Ashworth Store I, Inc.,
Ashworth Store II, Inc., Ashworth Acquisition Corp, Gekko Brands, LLC,
Kudzu, LLC and The Game, LLC as Guarantors and Union Bank of California,
N.A., as Administrative Agent on behalf of Ashworth, Inc. as the Borrower.</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of July&nbsp;6, 2004 to the Credit
Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as Pledgor, Union
Bank of California, N.A., as Administrative Agent and Lender, Bank of the
West and Columbus Bank and Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of July&nbsp;6, 2004 to the Credit
Agreement dated July&nbsp;6, 2004, between Ashworth Store I, Inc., Ashworth
Store II, Inc., Ashworth Acquisition Corp, Gekko Brands, LLC, Kudzu, LLC
and The Game, LLC as Pledgor, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed of Hypothec of Universality of Moveable Property effective as of
July&nbsp;6, 2004 to the Credit Agreement dated July&nbsp;6, 2004, between Ashworth,
Inc. as Grantor, Union Bank of California, N.A., as Administrative Agent
and Lender, Bank of the West and Columbus Bank and Trust as Lenders,
expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equitable Mortgage Over Securities effective as of July&nbsp;6, 2004 to the
Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as Mortgagor,
Union Bank of California, N.A., as Security Trustee and Beneficiary, Bank
of the West and Columbus Bank and Trust as Beneficiaries, expiring July&nbsp;6,
2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment effective as of September&nbsp;3, 2004 to the Credit
Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as Borrower, Union
Bank of California, N.A., as Administrative Agent and Lender, Bank of the
West and Columbus Bank and Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth, Inc. Code of Business Conduct and Ethics adopted October&nbsp;17,
2003 (filed as Exhibit&nbsp;14 to the Company&#146;s Form&nbsp;10-K for the fiscal year
ended October&nbsp;31, 2003 (File No.&nbsp;0-18553) and incorporated herein by
reference).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as Adopted Pursuant to
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002 by Randall L. Herrel, Sr.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as Adopted Pursuant to
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002 by Terence W. Tsang.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as Adopted Pursuant to
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 by Randall L. Herrel, Sr.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as Adopted Pursuant to
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 by Terence W. Tsang.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit pursuant to Item 15(c) of Form 10-K and applicable rules of the
Securities and Exchange Commission.


<P align="left" style="font-size: 10pt">&#134; Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.



<P align="left" style="font-size: 10pt">(b)&nbsp;Reports on Form&nbsp;8-K:




<P align="left" style="margin-left:3%; font-size: 10pt">On June&nbsp;5, 2004, the Company filed a report on Form 8-K
dated June&nbsp;5, 2004 furnishing the press release reporting the
results of operations for the second quarter fiscal 2004 and first
six months ended April&nbsp;30, 2004.



<P align="left" style="margin-left:3%; font-size: 10pt">On July&nbsp;7, 2004, the Company filed a report on Form 8-K
dated July&nbsp;7, 2004 furnishing the press release announcing a
settlement in principle to conclude a securities class action
lawsuit brought against the Company and certain current and former
directors and officers in the United States District Court for the
Southern District of California.


<P align="center" style="font-size: 10pt">30
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">On July&nbsp;7, 2004, the Company filed a report on Form 8-K
dated July&nbsp;7, 2004 furnishing the press release announcing its
acquisition of Gekko Brands, LLC, a leading designer, producer and
distributor of headwear and apparel under The Game&#174; and Kudzu&#174;
brands.



<P align="left" style="margin-left:3%; font-size: 10pt">On July&nbsp;21, 2004, the Company filed a report on Form 8-K
dated July&nbsp;7, 2004 discussing its acquisition of all of the
membership interests in Gekko Brands, LLC, pursuant to that
certain Membership Interests Purchase Agreement entered into on
July&nbsp;6, 2004, by and among Ashworth Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Ashworth, Inc. and the
selling members, identified therein.


<P align="center" style="font-size: 10pt">31
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="116"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>


<P align="left" style="font-size: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
ASHWORTH, INC</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="left" valign="top">Date: September 14, 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
By: /s/ Terence W. Tsang<BR>
<HR size="1" noshade>
Terence W. Tsang<BR>
Executive Vice President,<BR>
Chief Operating Officer,<BR>
Chief Financial Officer and<BR>
Treasurer</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">32
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="117"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>EXHIBIT INDEX</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc.
as Borrower, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and
Columbus Bank and Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty Agreement dated July&nbsp;6, 2004 between Ashworth
Store I, Inc., Ashworth Store II, Inc., Ashworth
Acquisition Corp, Gekko Brands, LLC, Kudzu, LLC and The
Game, LLC as Guarantors and Union Bank of California, N.A.,
as Administrative Agent on behalf of Ashworth, Inc. as the
Borrower.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of July&nbsp;6, 2004 to the
Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc.
as Pledgor, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and
Columbus Bank and Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective as of July&nbsp;6, 2004 to the
Credit Agreement dated July&nbsp;6, 2004, between Ashworth Store
I, Inc., Ashworth Store II, Inc., Ashworth Acquisition
Corp, Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as
Pledgor, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deed of Hypothec of Universality of Moveable Property
effective as of July&nbsp;6, 2004 to the Credit Agreement dated
July&nbsp;6, 2004, between Ashworth, Inc. as Grantor, Union Bank
of California, N.A., as Administrative Agent and Lender,
Bank of the West and Columbus Bank and Trust as Lenders,
expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equitable Mortgage Over Securities effective as of July&nbsp;6,
2004 to the Credit Agreement dated July&nbsp;6, 2004, between
Ashworth, Inc. as Mortgagor, Union Bank of California,
N.A., as Security Trustee and Beneficiary, Bank of the West
and Columbus Bank and Trust as Beneficiaries, expiring July
6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment effective as of September&nbsp;3, 2004 to the
Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc.
as Borrower, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and
Columbus Bank and Trust as Lenders, expiring July&nbsp;6, 2009.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as
Adopted Pursuant to Section&nbsp;302 of The Sarbanes-Oxley Act
of 2002 by Randall L. Herrel, Sr.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as
Adopted Pursuant to Section&nbsp;302 of The Sarbanes-Oxley Act
of 2002 by Terence W. Tsang.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as
Adopted Pursuant to Section&nbsp;906 of The Sarbanes-Oxley Act
of 2002 by Randall L. Herrel, Sr.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as
Adopted Pursuant to Section&nbsp;906 of The Sarbanes-Oxley Act
of 2002 by Terence W. Tsang.</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">33
</DIV>


</BODY>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(1)
<SEQUENCE>2
<FILENAME>a01811exv10wxzyx1y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(1)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(1)

                      REVOLVING/TERM LOAN CREDIT AGREEMENT

                            Dated as of July 6, 2004

                                      among

                                 ASHWORTH, INC.,

                                  as Borrower,

                         UNION BANK OF CALIFORNIA, N.A.,
                             as Administrative Agent

                                       and

                         The Other Lenders Party Hereto

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
ARTICLE I.        DEFINITIONS AND ACCOUNTING TERMS........................................................     1

         1.01     Defined Terms...........................................................................     1

         1.02     Other Interpretive Provisions...........................................................    14

         1.03     Accounting Terms........................................................................    15

         1.04     Rounding................................................................................    15

         1.05     References to Agreements and Laws.......................................................    15

         1.06     Letter of Credit Amounts................................................................    15

ARTICLE II.       THE COMMITMENTS AND CREDIT EXTENSIONS...................................................    15

         2.01     Committed Loans.........................................................................    15

         2.02     Borrowings, Conversions and Continuations of Committed Loans............................    16

         2.03     Letters of Credit.......................................................................    17

         2.04     Intentionally omitted...................................................................    22

         2.05     Prepayments.............................................................................    22

         2.06     Reduction or Termination of Commitments.................................................    22

         2.07     Repayment of Loans......................................................................    23

         2.08     Interest................................................................................    23

         2.09     Fees....................................................................................    23

         2.10     Computation of Interest and Fees........................................................    24

         2.11     Evidence of Debt........................................................................    24

         2.12     Payments Generally......................................................................    24

         2.13     Sharing of Payments.....................................................................    25

ARTICLE III.      TAXES, YIELD PROTECTION AND ILLEGALITY..................................................    26

         3.01     Taxes...................................................................................    26

         3.02     Illegality..............................................................................    27

         3.03     Inability to Determine Rates............................................................    27
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                                           <C>
         3.04     Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate
                  Committed Loans.........................................................................    28

         3.05     Funding Losses..........................................................................    28

         3.06     Prepayment of Term Loan.................................................................    28

         3.07     Matters Applicable to all Requests for Compensation.....................................    29

         3.08     Survival................................................................................    29

ARTICLE IV.       CONDITIONS PRECEDENT TO CREDIT EXTENSIONS...............................................    29

         4.01     Conditions of Initial Credit Extension..................................................    29

         4.02     Conditions to all Credit Extensions and Conversions and Continuations...................    30

ARTICLE V.        REPRESENTATIONS AND WARRANTIES..........................................................    31

         5.01     Existence, Qualification and Power, Compliance with Laws................................    31

         5.02     Authorization; No Contravention.........................................................    31

         5.03     Governmental Authorization..............................................................    31

         5.04     Binding Effect..........................................................................    31

         5.05     Financial Statements; No Material Adverse Effect........................................    31

         5.06     Litigation..............................................................................    32

         5.07     No Default..............................................................................    32

         5.08     Ownership of Property; Liens............................................................    32

         5.09     Environmental Compliance................................................................    32

         5.10     Insurance...............................................................................    32

         5.11     Taxes...................................................................................    32

         5.12     ERISA Compliance........................................................................    32

         5.13     Subsidiaries............................................................................    33

         5.14     Disclosure..............................................................................    33

         5.15     Compliance with Laws....................................................................    33

         5.16     Margin Regulations; Investment Company Act; Public Utility Holding Company Act..........    33

         5.17     Rights in Collateral; Priority of Liens.................................................    33

ARTICLE VI.       AFFIRMATIVE COVENANTS...................................................................    34
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>                                                                                                           <C>
         6.01     Financial Statements....................................................................    34

         6.02     Certificates; Other Information.........................................................    34

         6.03     Notices. Promptly notify Agent and each Lender:.........................................    35

         6.04     Payment of Obligations..................................................................    35

         6.05     Preservation of Existence, Etc. ........................................................    35

         6.06     Maintenance of Properties...............................................................    35

         6.07     Maintenance of Insurance................................................................    36

         6.08     Compliance with Laws....................................................................    36

         6.09     Books and Records.......................................................................    36

         6.10     Inspection Rights.......................................................................    36

         6.11     Use of Proceeds.........................................................................    36

         6.12     Financial Covenants.....................................................................    36

         6.13     Additional Guarantors...................................................................    37

         6.14     Collateral Records......................................................................    37

         6.15     Security Interests......................................................................    38

ARTICLE VII.      NEGATIVE COVENANTS......................................................................    38

         7.01     Liens...................................................................................    38

         7.02     Investments.............................................................................    39

         7.03     Indebtedness............................................................................    39

         7.04     Fundamental Changes.....................................................................    40

         7.05     Dispositions............................................................................    40

         7.06     Restricted Payments.....................................................................    40

         7.07     Change in Nature of Business............................................................    41

         7.08     Transactions with Affiliates............................................................    41

         7.09     Margin Regulations......................................................................    41

         7.10     Suspension of Business..................................................................    41

ARTICLE VIII.     EVENTS OF DEFAULT AND REMEDIES..........................................................    41

         8.01     Events of Default.......................................................................    41
</TABLE>

                                     -iii-
<PAGE>

<TABLE>
<S>                                                                                                           <C>
         8.02     Remedies Upon Event of Default..........................................................    43

         8.03     Application of Funds....................................................................    43

ARTICLE IX.       AGENT...................................................................................    44

         9.01     Appointment and Authorization of Agent..................................................    44

         9.02     Delegation of Duties....................................................................    44

         9.03     Liability of Agent......................................................................    44

         9.04     Reliance by Agent.......................................................................    44

         9.05     Notice of Default.......................................................................    45

         9.06     Credit Decision; Disclosure of Information by Agent.....................................    45

         9.07     Indemnification of Agent................................................................    45

         9.08     Agent in its Individual Capacity........................................................    46

         9.09     Successor Agent.........................................................................    46

         9.10     Agent May File Proofs of Claim..........................................................    46

         9.11     Guaranty Matters........................................................................    47

         9.12     Collateral Matters......................................................................    47

         9.13     Appointment of U.K. Security Trustee....................................................    48

         9.14     Agent as U.K. Security Trustee..........................................................    48

         9.15     Liens in Favor of U.K. Security Trustee.................................................    49

ARTICLE X.        MISCELLANEOUS...........................................................................    49

         10.01    Amendments, Etc. .......................................................................    49

         10.02    Notices and Other Communications; Facsimile Copies......................................    50

         10.03    No Waiver; Cumulative Remedies..........................................................    50

         10.04    Attorney Costs, Expenses and Taxes......................................................    50

         10.05    Indemnification by Borrower.............................................................    51

         10.06    Payments Set Aside......................................................................    51

         10.07    Successors and Assigns..................................................................    51

         10.08    Confidentiality.........................................................................    53

         10.09    Set-Off.................................................................................    54
</TABLE>

                                      -iv-
<PAGE>

<TABLE>
<S>                                                                                                           <C>
         10.10    Interest Rate Limitation................................................................    54

         10.11    Counterparts............................................................................    54

         10.12    Integration.............................................................................    54

         10.13    Survival of Representations and Warranties..............................................    54

         10.14    Severability............................................................................    55

         10.15    Governing Law; Submission to Jurisdiction...............................................    55

         10.16    Waiver to Right to Trial by Jury........................................................    55

         10.17    Judgment Currency.......................................................................    55
</TABLE>

                                      -v-
<PAGE>

                      REVOLVING/TERM LOAN CREDIT AGREEMENT

      This REVOLVING/TERM LOAN CREDIT AGREEMENT ("Agreement") is entered into as
of July 6, 2004, among Ashworth, Inc., a Delaware corporation ("Borrower"), each
lender from time to time party hereto (collectively, the "Lenders" and
individually, a "Lender"), and UNION BANK OF CALIFORNIA, N.A., as Agent and as
U.K. Security Trustee.

      Borrower has requested that Lenders provide a revolving and term loan
credit facility, and Lenders are willing to do so on the terms and conditions
set forth herein.

      In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:

ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS

      1.01 DEFINED TERMS. As used in this Agreement, the following terms shall
have the meanings set forth below:

      "Acquisition Co." means Ashworth Acquisition Corp., a Delaware corporation
and wholly owned Subsidiary of Borrower.

      "Administrative Agent" or "Agent" means Union Bank in its capacity as (a)
Administrative Agent under any of the Loan Documents, and (b) issuer of Letters
of Credit hereunder, as the context requires, or any successor Agent.

      "Affiliate" means, with respect to any Person, another Person that
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by or is under common Control with, the Person specified. "Control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise. Without limiting the
generality of the foregoing, a Person shall be deemed to be Controlled by
another Person if such other Person possesses, directly or indirectly, power to
vote 10% or more of the securities having ordinary voting power for the election
of directors, managing general partners or equivalent governing body of such
Person.

      "Agent Fee Letter" has the meaning specified in Section 2.09 (b)

      "Agent's Office" means Agent's address and, as appropriate, account as set
forth on Schedule 10.02, or such other address or account as Agent may from time
to time notify Borrower and Lenders.

      "Agent-Related Persons" means Agent, together with its Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.

      "Aggregate Commitments" means the Commitments of all Lenders.

      "Agreement" means this Revolving/Term Loan Credit Agreement.

      "Applicable-Rate" means, from time to time, the following percentages per
annum, based upon the ratio of average daily Funded Debt to EBITDA (the
"Financial Covenant") as set forth in the most recent Compliance Certificate
received by Agent pursuant to Section 6.02(b):

                                      -1-
<PAGE>

                                 APPLICABLE RATE

<TABLE>
<CAPTION>
                                                           Eurodollar Rate
                                                                  +
Pricing          Funded Debt to                            -----------------
 Level            EBITDA Ratio           Commitment Fee    Letters of Credit    Base Rate +
 -----            ------------           --------------    -----------------    -----------
<S>          <C>                         <C>               <C>                  <C>
   1         Less than or equal to          0.175%              1.25%             0.00%
                   1.50:1.00

   2         Less than or equal to          0.175%              1.50%             0.00%
             2:00:1.00 but greater
                than 1.50:1.00

   3         Less than or equal to           0.25%              1.75%             0.00%
             2.25:1.00 but greater
                than 2.00:1.00

   4        Greater than 2.25:1.00          0.375%              2.00%             0.25%
</TABLE>

      Any increase or decrease in the Applicable Rate resulting from a change in
the Financial Covenant shall become effective commencing on the 5th Business Day
immediately following the date a Compliance Certificate is delivered pursuant to
Section 6.02(b): provided, however, that if no Compliance Certificate is
delivered when due in accordance with such Section, then Pricing Level 4 shall
apply commencing on the 5th Business Day following the date such Compliance
Certificate was required to have been delivered until the 5th Business Day
immediately following the date a Compliance Certificate is delivered.

      "Ashworth EDC" means Ashworth EDC, LLC, a Delaware limited liability
company and wholly-owned Subsidiary of Borrower.

      "Assignment and Assumption Agreement" means an Assignment and Assumption
Agreement substantially in the form of Exhibit D.

      "Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other external counsel and, without
duplication, the allocated cost of internal legal services and all expenses and
disbursements of internal counsel.

      "Attributable Indebtedness" means, on any date, in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP.

      "Audited Financial Statements" means the audited consolidated balance
sheet of Borrower and its Subsidiaries for the fiscal year ended October 31,
2003, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for such fiscal year of Borrower and its
Subsidiaries, including the notes thereto.

      "Availability Period" means the period from and including the Closing Date
to the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination
of the commitment of each Lender to make Loans and of the obligation of Agent to
make L/C Credit Extensions pursuant to Section 8.02.

      "Back-Up L/C" means the Letter of Credit issued hereunder for the benefit
of Bank of America, N.A., which Back-Up L/C shall (i) be in the initial face
(but declining) amount of, and (ii) only support drawings made under, the
Existing Letters of Credit.

                                      -2-
<PAGE>

      "Base Rate" means the rate of interest publicly announced from time to
time by the Administrative Agent in San Francisco, California (or other
headquarters city of the Administrative Agent), as its "reference rate." The
"reference rate" is one of several base rates used by the Administrative Agent
and serves as the basis upon which effective rates of interest are calculated
for loans and other credits making reference thereto. The "reference rate" is
not necessarily the lowest base interest rate used by the Administrative Agent.
The "reference rate" is evidenced by the recording thereof after its
announcement in such internal publication or publications as the Administrative
Agent may designate. Any change in the Base Rate announced by the Administrative
Agent shall take effect at the opening of business on the day specified in the
public announcement of such change.

      "Base Rate Committed Loan" means a Committed Loan that is a Base Rate
Loan.

      "Base Rate Loan" means a Loan that bears interest based on the Base Rate.

      "BIA" means the Bankruptcy and Insolvency Act (Canada) as amended (or any
successor statute) and any rule or regulation thereunder.

      "Borrower" has the meaning specified in the introductory paragraph hereto.

      "Borrowing" means a Committed Borrowing.

      "Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized to dose under the Laws of, or are in fact
dosed in, the state where Agent's Office is located and, if such day relates to
any Eurodollar Rate Committed Loan, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the London interbank
eurodollar market.

      "Capital Lease Obligations" means all monetary obligations of a Person
under any leasing or similar arrangement which, in accordance with GAAP, is
classified as a capital lease.

      "Cash Collateralize" has the meaning specified in Section 2.03(g)

      "Cash Income Taxes" means, with respect to any fiscal period, taxes on or
measured by the income of Borrower that are paid or currently payable in Cash by
Borrower during that fiscal period.

      "CCAA" means the Companies' Creditors Arrangement Act, as amended (or any
successor statute) and any rule or regulation thereunder.

      "Change of Control" means, with respect to any Person, an event or series
of events by which:

      (a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit
plan of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group shall be deemed
to have "beneficial ownership" of all securities that such person or group has
the right to acquire (such right, an "option right"), whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 35% or more of the equity securities of such Person entitled to
vote for members of the board of directors or equivalent governing body of such
Person on a fully diluted basis (and, taking into account all such securities
that such person or group has the right to acquire pursuant to any option
right); or

      (b) during any period of 12 consecutive months, other than by reason of
removal and/or replacement of any member(s) upon death, retirement, or
disability, a majority of the members of the board of directors or other
equivalent governing body of such Person cease to be composed of individuals:
(i) who were members of that board or equivalent governing body on the first day
of such period, (ii) whose election or nomination to that board or equivalent
governing body was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a majority of
that board or equivalent governing body or (iii) whose election or nomination to
that board or other equivalent governing body was approved by

                                      -3-
<PAGE>

individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (ii) and clause (iii), any
individual whose initial nomination for, or assumption of office as, a member of
that board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors by any person or group other than a solicitation for the
election of one or more directors by or on behalf of the board of directors).

      "Closing Date" means the first date all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 10.01 (or, in
the case of Section 4.01(b), waived by the Person entitled to receive the
applicable payment).

      "Control Agreement" means a deposit account control agreement, in form and
content reasonably acceptable to Agent.

      "Controlled Accounts" means each deposit account of Borrower or any
Guarantor, other than accounts maintained with Union Bank, having a balance at
any time of Fifty Thousand Dollars ($50,000) or more, which accounts shall be
subject to Control Agreements.

      "Civil Code" means the Civil Code of Quebec, as amended (or any successor
statute) and any rule or regulation thereunder.

      "Code" means the Internal Revenue Code of 1986.

      "Collateral" shall mean any and all assets and rights and interests in or
to property of Borrower and each of the other Loan Parties, whether real or
personal, movable or immovable, tangible or intangible, in which a Lien is
granted or purported to be granted pursuant to the Collateral Documents.

      "Collateral Documents" means all agreements, instruments and documents now
or hereafter executed and delivered in connection with this Agreement pursuant
to which Liens are granted or purported to be granted to Agent in Collateral
securing all or part of the Obligations each in form and substance satisfactory
to Agent.

      "Commitment" means, as to each Lender, its obligation to (a) make
Committed Loans to Borrower pursuant to Section 2.01, and (b) purchase
participations in L/C Obligations, in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's name
on Schedule 2.01, or in the Assignment and Assumption Agreement pursuant to
which such Lender becomes a party hereto, as applicable, as such amount may be
adjusted from time to time in accordance with this Agreement.

      "Committed Borrowing" means a borrowing consisting of simultaneous
Committed Loans of the same Type and, in the case of Eurodollar Rate Committed
Loans, having the same Interest Period made by each of Lenders pursuant to
Section 2.01.

      "Committed Loan" means a Revolving Loan or the Term Loan, as applicable in
the context.

      "Committed Loan Notice" means a notice of (a) a Committed Borrowing, (b) a
conversion of Committed Loans from one Type to the other (provided, that the
Term Loan may not be converted to another Type of Loan), or (c) a continuation
of Eurodollar Rate Committed Loans, pursuant to Section 2.02(a), which, if in
writing, shall be substantially in the form of Exhibit A.

      "Compliance Certificate" means a certificate substantially in the form of
Exhibit C.

      "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

      "Control" has the meaning specified in the definition of "Affiliate".

                                      -4-
<PAGE>

      "Credit Extension" means a Borrowing, or an L/C Credit Extension.

      "Debtor Relief Laws" means the Bankruptcy Code of the United States, the
BIA, the CCAA, and all other liquidation, conservatorship, bankruptcy,
assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions, foreign or otherwise, from time
to time in effect and affecting the rights of creditors generally.

      "Default" means any event or condition that constitutes an Event of
Default or that, with the giving of any notice, the passage of time, or both,
would be an Event of Default.

      "Default Rate" means an interest rate per annum which is 3.0% higher than
the rate of interest otherwise applicable under this Agreement, in each case to
the fullest extent permitted by applicable Laws.

      "Defaulting Lender" means any Lender that (a) has failed to fund any
portion of the Committed Loans or participations in L/C Obligations required to
be funded by it hereunder within one Business Day of the date required to be
funded by it hereunder, (b) has otherwise failed to pay over to Agent or any
other Lender any other amount required to be paid by it hereunder within one
Business Day of the date when due, unless the subject of a good faith dispute,
or (c) has been deemed insolvent or become the subject of a bankruptcy or
insolvency proceeding.

      "Disposition" or "Dispose" means the sale, transfer, license, lease or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment, transfer or other disposal, with
or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

      "Dollar" and "$" mean lawful money of the United States.

      "EBITDA" means net income, less income or plus loss from discontinued
operations and extraordinary items, plus income taxes, plus interest expense,
plus depreciation, depletion, and amortization. EBITDA shall be calculated at
the end of each fiscal quarter, using the results of that quarter and each of
the three (3) immediately preceding quarters.

      "Eligible Assignee" has the meaning specified in Section 10.07(h).

      "Environmental Laws" means any and all Federal, state, provincial, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

      "Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of Borrower, any other Loan Party or any of their
respective Subsidiaries directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

      "ERISA" means the Employee Retirement Income Security Act of 1974.

      "ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with Borrower within the meaning of Section
414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).

      "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in

                                      -5-
<PAGE>

which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a cessation of operations that is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon Borrower or any ERISA Affiliate.

      "Eurodollar Base Rate" has the meaning set forth in the definition of
Eurodollar Rate.

      "Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Rate Committed Loan, a rate per annum determined by Agent pursuant to
the following formula:

                                              Eurodollar Base Rate
                 Eurodollar Rate   =   -----------------------------------------
                                       1.00 - Eurodollar Reserve Percentage

      Where,

            "Eurodollar Base Rate" means, for such Interest Period:

            (a) the rate per annum equal to the rate determined by Agent to be
      the London interbank offered rate that appears on Page 3750 of the
      Telerate screen (or any successor thereto) for deposits in Dollars (for
      delivery on the first day of such Interest Period) with a term equivalent
      to such Interest Period, determined as of approximately 11:00 a.m. (London
      time) two Business Days prior to the first day of such Interest Period, or

            (b) if the rate referenced in the preceding clause (a) does not
      appear on such page or service or such page or service shall not be
      available, the rate per annum equal to the rate determined by Agent to be
      the offered rate on such other page or other service that displays an
      average British Bankers Association Interest Settlement Rate for deposits
      in Dollars (for delivery on the first day of such Interest Period) with a
      term equivalent to such Interest Period, determined as of approximately
      11:00 a.m. (London time) two Business Days prior to the first day of such
      Interest Period, or

            (c) if the rates referenced in the preceding clauses (a) and (b) are
      not available, the rate per annum determined by Agent as the rate of
      interest at which deposits in Dollars for delivery on the first day of
      such Interest Period in same day funds in the approximate amount of the
      Eurodollar Rate Committed Loan being made, continued or converted by Union
      Bank and with a term equivalent to such Interest Period would be offered
      by Union Bank's London Branch to major banks in the London interbank
      eurodollar market at their request at approximately 4:00 p.m. (London
      time) two Business Days prior to the first day of such Interest Period.

      "Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, carried out to five
decimal places) in effect on such day, whether or not applicable to any Lender,
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System of the United States for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) applicable to any member bank of the Federal Reserve System with
respect to Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan
shall be adjusted automatically as of the effective date of any change in the
Eurodollar Reserve Percentage.

      "Eurodollar Rate Committed Loan" means a Committed Loan that bears
interest at a rate based on the Eurodollar Rate.

      "Event of Default" has the meaning specified in Section 8.01.

                                      -6-
<PAGE>

      "Existing Letters of Credit" means the Letters of Credit specified in
Schedule 2.03 hereto.

      "Federal Funds Rate" means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Union Bank
on such day on such transactions as determined by Agent.

      "Fixed Charge Coverage Ratio" means, as of the last day of any fiscal
quarter, the ratio of (a) EBITDA for the fiscal period consisting of the four
(4) fiscal quarters ended on that date minus Maintenance Capital Expenditures
made by Borrower and its Subsidiaries during such fiscal period and Cash Income
Taxes paid by Borrower and its Subsidiaries during such fiscal period, to (b)
the sum of, without duplication (i) Interest Expense of Borrower and its
Subsidiaries for such fiscal period plus (ii) the current portion of long-term
debt (including the Term Loan) of Borrower and its Subsidiaries on such date
plus (iii) the current portion of long-term lease obligations of Borrower and
its Subsidiaries on such date. For the purposes of this paragraph, the term
"Subsidiaries" shall exclude Gekko and the Gekko Subsidiaries until after the
third quarter of 2004.

      "Fixed Rate" means, with respect to the Term Loan only, a fixed rate per
annum equal to the Treasuries Rate, determined as of the date immediately prior
to the date the Term Loan is made, plus 1.50%.

      "Funded Debt" means all outstanding liabilities for borrowed money and
other interest-bearing liabilities, including current and long term liabilities
(including the outstanding Loans and L/C Obligations). Funded Debt shall be
measured as of the last day of each fiscal quarter, except that outstanding
Loans and L/C Obligations shall be calculated on the basis of the average daily
amount of Loans and L/C Obligations outstanding during each fiscal quarter.

      "GAAP" means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

      "Gekko" means GEKKO Brands, L.L.C., an Alabama limited liability company
and, concurrently with (or immediately following) the Closing Date, a
wholly-owned Subsidiary of Borrower.

      "Gekko Acquisition" means the purchase by Acquisition Co. of all the
issued and outstanding membership interests in Gekko.

      "Gekko Acquisition Documents" means the agreements, documents and
instruments pursuant to which the Gekko Acquisition is consummated.

      "Gekko Subsidiaries" means The Game, LLC and Kudzu, L.L.C., each wholly
owned Subsidiaries of Gekko.

      "Governmental Authority" means any nation or government, any state,
provincial, or other political subdivision thereof, any agency, authority,
instrumentality, regulatory body, court, administrative tribunal, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

      "Guarantors" means, collectively, Acquisition Co., Ashworth Store I, Inc.,
Ashworth Store II, Inc., Gekko and the Gekko Subsidiaries.

                                      -7-
<PAGE>

      "Guaranty" means the Guaranty made by the Guarantors in favor of Agent on
behalf of Lenders, in form and substance satisfactory to Agent.

      "Guarantee" means, as to any Person, any (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person. The amount of any Guarantee shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith. The term "Guarantee" as a verb has a corresponding meaning.

      "Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

      "Indebtedness" means, as to any Person at a particular time, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

            (a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

            (b) all direct or contingent obligations of such Person arising
under letters of credit (including standby and commercial), bankers'
acceptances, bank guaranties, surety bonds and similar instruments;

            (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than trade accounts payable in the ordinary
course of business);

            (d) indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse;

            (e) capital leases; and

            (f) all Guarantees of such Person in respect of any of the
foregoing.

      For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any capital lease as of any date
shall be deemed to be the amount of Attributable Indebtedness in respect thereof
as of such date.

      "Indemnified Liabilities" has the meaning specified in Section 10.05.

      "Indemnitees" has the meaning specified in Section 10.05.

                                      -8-
<PAGE>

      "Information" has the meaning specified in Section 10.08.

      "Interest Expense" means, with respect to any Person and as of the last
day of any fiscal period, the sum of (a) all interest, fees, charges and related
expenses (in each case as such expenses are calculated according to GAAP) paid
or payable (without duplication) for that fiscal period by that Person to a
lender in connection with borrowed money (excluding any obligations for fees,
charges and related expenses payable to the issuer of any letter of credit) or
the deferred purchase price of assets that are considered "interest expense"
under GAAP plus (b) the portion of rent paid or payable (without duplication)
for that fiscal period by that Person under Capital Lease Obligations that
should be treated as interest in accordance with Financial Accounting Standards
Board Statement No. 13

      "Interest Payment Date" means, (a) as to any Eurodollar Rate Committed
Loan, the last day of each Interest Period applicable to such Loan and the
Maturity Date; provided, however, that if any Interest Period for a Eurodollar
Rate Committed Loan exceeds three months, the respective dates that fall every
three months after the beginning of such Interest Period shall also be Interest
Payment Dates; (b) as to any Base Rate Loan, the last Business Day of each
January, April, July and October and the Maturity Date; and (c) as to the Term
Loan, each Term Loan Amortization Date.

      "Interest Period" means as to each Eurodollar Rate Committed Loan, the
period commencing on the date such Eurodollar Rate Committed Loan is disbursed
or converted to or continued as a Eurodollar Rate Committed Loan and ending on
the date one, two, three or six months thereafter, as selected by Borrower in
its Committed Loan Notice; provided that

            (a) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day unless,
such Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day;

            (b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and

            (c) no Interest Period shall extend beyond the Maturity Date.

      "Investment" means, as to any Person, any direct or indirect acquisition
or investment by such Person, whether by means of (a) the purchase or other
acquisition of capital stock or other securities of another Person, (b) a loan,
advance or capital contribution to, Guarantee or assumption of debt of, or
purchase or other acquisition of any other debt or equity participation or
interest in, another Person, including any partnership or joint venture interest
in such other Person, or (c) the purchase or other acquisition (in one
transaction or a series of transactions) of assets of another Person that
constitute a business unit. For purposes of covenant compliance, the amount of
any Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

      "IRS" means the United States Internal Revenue Service.

      "Laws" means, collectively, all international, foreign, Federal, state,
provincial, and local statutes, treaties, rules, by-laws, guidelines,
regulations, ordinances, codes and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or
administration thereof, and all applicable administrative orders, directed
duties, requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case whether or not having the force of law.

      "L/C Advance" means, with respect to each Lender, such Lenders funding of
its participation in any L/C Borrowing in accordance with its Pro Rata Share.

      "L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which has not been reimbursed on the date when made
or refinanced as a Committed Borrowing.

                                      -9-
<PAGE>

      "L/C Credit Extension" means, with respect to any Letter of Credit, the
issuance thereof or extension of the expiry date thereof, or the renewal or
increase of the amount thereof.

      "L/C Obligations" means, as at any date of determination, the aggregate
undrawn face amount of all outstanding Letters of Credit plus the aggregate of
all Unreimbursed Amounts, including all L/C Borrowings.

      "Lender" has the meaning specified in the introductory paragraph hereto
and, as the context requires, includes Agent in its capacity as issuer of
Letters of Credit hereunder.

      "Lending Office" means, as to any Lender, the office or offices of such
Lender described as such on Schedule 10.02, or such other office or offices as a
Lender may from time to time notify Borrower and Agent.

      "Letter of Credit" means any letter of credit issued hereunder and shall
include the Back-Up L/C. A Letter of Credit may be a commercial letter of credit
or a standby letter of credit.

      "Letter of Credit Application" means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by Agent.

      "Letter of Credit Expiration Date" means, (a) with respect to a commercial
Letter of Credit, the date not greater than 180 days from issuance date, not to
extend more than 90 days beyond the Maturity Date; and (b) with respect to a
standby Letter of Credit, the date not greater than 365 days from the issuance
date, not to extend more than 365 days beyond the Maturity Date.

      "Letter of Credit Sublimit" means an amount equal to $30,000,000 with
respect to commercial letters of credit, and $3,000,000 with respect to standby
letters of credit. The Letter of Credit Sublimit is part of, and not in addition
to, the Aggregate Commitments.

      "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever, choate or inchoate (including any conditional sale or other
title retention agreement, and any financing lease having substantially the same
economic effect as any of the foregoing).

      "Loan" means an extension of credit by a Lender to Borrower under Article
II in the form of a Committed Loan or the Term Loan, as applicable.

      "Loan Documents" means this Agreement, each Note, the Agent Fee Letter,
the Real Estate Collateral Documents, each Collateral Document, the Guaranty,
and such other documents as may be required hereunder.

      "Loan Parties" means, collectively, Borrower and each Person (other than
Agent, U.K. Security Trustee or any Lender) executing a Loan Document including,
without limitation, each Guarantor and each Person executing a Collateral
Document.

      "Maintenance Capital Expenditures" means the amount of capital spending by
a Person, during a period of determination, necessary to sustain such Person's
current level of sales and earnings which, in accordance with GAAP, is
classified as maintenance capital expenditures, not to exceed $5,000,000 per
annum.

      "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, liabilities
(actual and contingent), condition (financial or otherwise) or prospects of
Borrower or Borrower and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of any Loan Party to perform its obligations under any
Loan Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any Loan Party of
any Loan Document to which it is a party.

      "Maturity Date" means July 6, 2009.

      "Monthly Payment Date" means the last Business Day of each calendar month
during the term hereof.

                                      -10-
<PAGE>

      "Multiemployer Plan" means any employee benefit plan of the type described
in Section 4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes
or is obligated to make contributions, or during the preceding five plan years,
has made or been obligated to make contributions.

         "Note" means, means a promissory note made by Borrower in favor of a
Lender evidencing Loans made by such Lender, substantially in the form of
Exhibit B-1 or B-2, as applicable.

      "Obligations" means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to any Loan or Letter of Credit between any Loan Party
and any Lender or any Affiliate of any Lender, whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Laws naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding.

      "Organization Documents" means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation and operating agreement; and (c) with respect to any partnership,
joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation and any agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity.

      "Outstanding Amount" means (a) with respect to Committed Loans on any
date, the aggregate outstanding principal amount thereof after giving effect to
any borrowings and prepayments or repayments of Committed Loans occurring on
such date; and (b) with respect to any L/C Obligations on any date, the amount
of such L/C Obligations on such date after giving effect to any L/C Credit
Extension occurring on such date and any other changes in the aggregate amount
of the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of Credit or any
reductions in the maximum amount available for drawing under Letters of Credit
taking effect on such date.

      "Participant" has the meaning specified in Section 10.07(d).

      "PBA" means the Pensions Benefits Act of Ontario as amended (and any
successor statute) and any rule or regulation thereunder.

      "PBGC" means the Pension Benefit Guaranty Corporation.

      "Pension Plan" means any "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA or under the applicable laws of any other
jurisdiction, including the PBA, and is sponsored or maintained by Borrower or
any ERISA Affiliate or to which Borrower or any ERISA Affiliate contributes or
has an obligation to contribute, or in the case of a multiple employer or other
plan described in Section 4064(a) of ERISA, has made contributions at any time
during the immediately preceding five plan years.

      "Person" means any individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture or
Governmental Authority.

      "Plan" means any "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA) established by Borrower under the applicable laws of any
jurisdiction or, with respect to any such plan that is subject to Section 412 of
the Code or Title IV of ERISA, any ERISA Affiliate.

      "PPSA" means the Personal Property Security Act of Ontario (or any
successor statute) or similar legislation (including, without limitation, the
Civil Code) of any other jurisdiction the laws of which are required by

                                      -11-
<PAGE>

such legislation to be applied in connection with the issue, perfection,
enforcement, validity or effect of security interests.

      "Prepayment Fee" has the meaning set forth in Section 3.06.

      "Pro Rata Share" means, with respect to each Lender, at any time, a
fraction (expressed as a percentage), carried out to the ninth decimal place),
the numerator of which is the amount of the Commitment of such Lender at such
time and the denominator of which is the amount of the Aggregate Commitments at
such time; provided that if the commitment of each Lender to make Loans and the
obligation of Agent to make L/C Credit Extensions have been terminated pursuant
to Section 8.02, then the Pro Rata Share of each Lender shall be determined
based on the Pro Rata Share of such Lender immediately prior to such termination
and after giving effect to any subsequent assignments made pursuant to Section
10.07. The initial Pro Rata Share of each Lender is set forth opposite the name
of such Lender on Schedule 2.01 or in the Assignment and Assumption Agreement
pursuant to which such Lender becomes a party hereto, as applicable.

      "Quick Assets" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as long-term investments.

      "Real Estate Collateral Documents" means those certain Consents to Removal
of Personal Property, Landlord Waivers, Bailment Agreements, and similar or
related documents for execution with respect to Borrower's leased real property
and/or warehoused (or similar) assets.

      "Register" has the meaning set forth in Section 10.07(c).

      "Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

      "Request for Credit Extension" means (a) with respect to a Borrowing,
conversion or continuation of Committed Loans, a Committed Loan Notice, and (b)
with respect to an L/C Credit Extension, a Letter of Credit Application.

      "Required Lenders" means, as of any date of determination, Lenders having
more than 66 2/3% of the Aggregate Commitments or, if the commitment of each
Lender to make Loans and the obligation of Agent to make L/C Credit Extensions
have been terminated pursuant to Section 8.02, Lenders holding in the aggregate
more than 66 2/3% of the Total Outstandings (with the aggregate amount of each
Lender's risk participation and funded participation in L/C Obligations being
deemed "held" by such Lender for purposes of this definition); provided that the
Commitment of, and the portion of the Total Outstandings held or deemed held by,
any Defaulting Lender shall be excluded for purposes of making a determination
of Required Lenders; and provided, further, in the event two (2) or more Lenders
consolidate or merge in or with each other such that the merged, resulting
Lender's pro rata share is 66 2/3% or more of the Aggregate Commitment, or Total
Outstandings, as the case may be as set forth herein, then Required Lenders
shall mean two (2) or more Lenders holding in the aggregate more than 66 2/3% of
the Total Commitment.

      "Responsible Officer" means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Loan Party. Any
document delivered hereunder that is signed by a Responsible Officer of a Loan
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Loan Party and
such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.

      "Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other property) with respect to any capital stock or other
equity interest of Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such capital stock or other equity interest or of any option,
warrant or other right to acquire any such capital stock or other equity
interest, and excluding any distribution of stock options, or distribution of
shares of common stock upon the exercise of such stock options, to employees,
directors or consultants of Borrower or any of its Subsidiaries.

                                      -12-
<PAGE>

      "Revolving Loan" means a Loan made under the Revolving Loan Commitment,
and may be either Base Rate Committed Loans or Eurodollar Rate Committed Loans.

      "Revolving Loan Advance" means an advance made under the Revolving Loan
Commitment.

      "Revolving Loan Commitment" means $35,000,000. The respective Pro Rata
Shares of the Lenders with respect to the Revolving Loan Commitment are set
forth in Schedule 2.01.

      "Revolving Loan Note" means any of the promissory notes made by Borrower
to a Lender evidencing Revolving Loan Advances under that Lender's Pro Rata
Share of the Revolving Loan Commitment, substantially in the form of Exhibit
B-1, either as originally executed or as the same may from time to time be
supplemented, modified, amended, restated, renewed, extended or supplanted.

      "Store III" means Ashworth Store III, Inc., a wholly owned Subsidiary of
Borrower.

      "Subsidiary" of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
"Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of
Borrower, including but not limited to Gekko.

      "Tangible Net Worth" means the value of total assets (including leaseholds
and leasehold improvements and reserves against assets but excluding goodwill,
patents, trademarks, trade names, organization expense, unamortized debt
discount and expense, capitalized or deferred research and development costs,
deferred marketing expenses, and other like intangibles, and monies due from
Affiliates, officers, directors, employees, shareholders, members or managers)
less Total Liabilities, including but not limited to accrued and deferred income
taxes.

      "Taxes" has the meaning specified in Section 3.01(a).

      "Term Loan" means the Loan made under the Term Loan Commitment, which
shall bear interest based upon the Fixed Rate.

      "Term Loan Advance" means an advance made under the Term Loan Commitment.

      "Term Loan Amortization Date" means the last Business Day of the first
full month after the Closing Date, each Monthly Payment Date thereafter
occurring prior to the Maturity Date, and the Maturity Date.

      "Term Loan Commitment" means $20,000,000. The respective Pro Rata Shares
of the Lenders with respect to the Term Loan Commitment are set forth in
Schedule 2.01.

      "Term Loan Note" means any of the promissory notes made by Borrower to a
Lender evidencing Term Loan Advances by that Lender, substantially in the form
of Exhibit B-2, either as originally executed or as the same may from time to
time be supplemented, modified, amended, restated, renewed, extended or
supplanted.

      "Termination Event" means (a) the whole or partial withdrawal of any Loan
Party from a Plan during a plan year, or (b) the filing of a notice of interest
to terminate in whole or in part a Plan or the treatment of a Plan amendment as
a termination of partial termination; or (c) the institution of proceedings by
any Governmental Authority to terminate in whole or in part or have a trustee
appointed to administer a Plan; or (d) any other event or condition which might
constitute grounds for the termination of, winding up or partial termination of
winding up or the appointment of trustee to administer, any Plan.

      "Threshold Amount" means $500,000.

                                      -13-
<PAGE>

      "Total Liabilities" means the sum of current liabilities plus long term
liabilities.

      "Total Outstandings" means the aggregate Outstanding Amount of all Loans
and all L/C Obligations.

      "Treasuries Rate" means a per annum rate of interest based on the
percentage yield on U.S. Treasury securities, plus a margin, set by Union Bank
in its discretion on the Closing Date, related to the general cost of corporate
borrowing for a term comparable to the term of the Term Loan, plus Lenders'
costs, including the cost, if any, of reserve requirements and FDIC assessments.

      "Trust Property" means all or any of the assets, rights, powers,
authorities, and discretions at any time subject to or expressed to be subject
to the security from time to time constituted by or arising pursuant to the U.K.
Security Documents or rested in the U.K. Security Trustee or given under or
pursuant to the U.K. Security Documents including all income and other sums at
any time received or receivable by the U.K. Security Trustee in respect thereof.

      "Type" means with respect to a Committed Loan, its character as a Base
Rate Committed Loan, a Eurodollar Rate Committed Loan, or the Term Loan.

      "U.K. Security Documents" means the Collateral Documents governed by
English law in terms of which the U.K. Security Trustee holds the security
thereby created for the benefit of the Agent, Administrative Agent, Union Bank,
and the Lenders and any other document from time to time granted as security for
the Obligations in favor of the U.K. Security Trustee for the benefit of the
Agent, Administrative Agent, Union Bank and the Lenders.

      "U.K. Security Trustee" means Union Bank in its capacity as security
trustee of the security created by the U.K. Security Documents.

      "Unfunded Pension Liability" means the excess of a Pension Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year, and in the case of any Pension Plan or Plan regulated by the PBA or
the applicable laws of any jurisdiction, any unfunded or solvency deficiency as
determined under the PBA or other applicable law.

      "Union Bank" means UNION BANK OF CALIFORNIA, N.A. and its successors.

      "United States" and "U.S." mean the United States of America.

      "Unreimbursed Amount" has the meaning set forth in Section 2.03(c)(i).

      1.02 OTHER INTERPRETIVE PROVISIONS. With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other
Loan Document:

            (a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.

            (b) (i) The words "herein", "hereto", "hereof" and "hereunder" and
words of similar import when used in any Loan Document shall refer to such Loan
Document as a whole and not to any particular provision thereof; (ii) Article,
Section, Exhibit and Schedule references are to the Loan Document in which such
reference appears; (iii) the term "including" is by way of example and not
limitation; and (iv) the term "documents" includes any and all instruments,
documents, agreements, certificates, notices, reports, financial statements and
other writings, however evidenced, whether in physical or electronic form.

            (c) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including;" the words "to"
and "until" each mean "to but excluding;" and the word "through" means "to and
including."

                                      -14-
<PAGE>

            (d) Section headings herein and in the other Loan Documents are
included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.

      1.03 ACCOUNTING TERMS.

            (a) All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except
as otherwise specifically prescribed herein.

            (b) If at any time any change in GAAP would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either
Borrower or the Required Lenders shall so request, Agent, Lenders and Borrower
shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of the Required Lenders); provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) Borrower shall provide to Agent and Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

      1.04 ROUNDING. Any financial ratios required to be maintained by any Loan
Party pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the result
up or down to the nearest number (with a rounding-up if there is no nearest
number).

      1.05 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly
provided herein, (a) references to Organization Documents, agreements (including
the Loan Documents) and other contractual instruments shall be deemed to include
all subsequent amendments, restatements, extensions, supplements and other
modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document; and (b) references to any Law shall include all statutory
and regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law.

      1.06 LETTER OF CREDIT AMOUNTS. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean
the maximum face amount of such Letter of Credit after giving effect to all
increases thereof contemplated by such Letter of Credit or the Letter of Credit
Application therefor, whether or not such maximum face amount is in effect at
such time.

ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS.

      2.01 LOANS.

            (a) Revolving Loans. Subject to the terms and conditions set forth
herein, at any time and from time to time on any Business Day during the
Availability Period, each Lender shall, pro rata according to that Lender's Pro
Rata Share of the Revolving Commitment, make advances (each such advance, a
"Revolving Loan Advance") to Borrower under the Revolving Commitment in such
amounts as Borrower may request in an aggregate amount not to exceed at any time
outstanding the amount of such Lender's Commitment; provided, however, that
after giving effect to any Committed Borrowing, (i) the Total Outstandings shall
not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount
of the Committed Loans of any Lender, plus such Lender's Pro Rata Share of the
Outstanding Amount of all L/C Obligations, shall not exceed such Lender's
Commitment. Within the limits of each Lender's Commitment, and subject to the
other terms and conditions hereof, Borrower may borrow under this Section
2.01(a), prepay under Section 2.05, and reborrow under this Section 2.01(a).

            (b) Term Loan. Subject to the terms and conditions set forth herein,
on the Closing Date, each Lender shall, pro rata according to that Lender's Pro
Rata Share of the Term Loan Commitment, make an advance (each such advance, a
"Term Loan Advance") to Borrower under the Term Loan Commitment such that

                                      -15-
<PAGE>

the aggregate of all such Term Loan Advances equals the Term Loan Commitment.
Amounts repaid under the Term Loan Commitment may not be reborrowed.

      2.02 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF COMMITTED LOANS.

            (a) Each Committed Borrowing, each conversion of Committed Loans
from one Type to the other, and each continuation of Eurodollar Rate Committed
Loans shall be made upon Borrowers irrevocable notice to Agent, which may be
given by telephone. Each such notice must be received by Agent not later than
11:00 a.m., Los Angeles time, (i) three Business Days prior to the requested
date of any Borrowing of, conversion to or continuation of Eurodollar Rate
Committed Loans or of any conversion of Eurodollar Rate Committed Loans to Base
Rate Committed Loans, or (ii) on the requested date of any Borrowing of Base
Rate Committed Loans. Each telephonic notice by Borrower pursuant to this
Section 2.02(a) must be confirmed promptly by delivery to Agent of a written
Committed Loan Notice, appropriately completed and signed by a Responsible
Officer of Borrower. Except as provided in Section 2.03(c), each Borrowing of,
conversion to or continuation of Eurodollar Rate Committed Loans shall be in a
principal amount of $500,000 or a whole multiple of $500,000 in excess thereof.
Each Borrowing of or conversion to Base Rate Committed Loans shall be in a
principal amount of $250,000 or a whole multiple of $250,000 in excess thereof.
Each Committed Loan Notice (whether telephonic or written) shall specify (i)
whether Borrower is requesting a Committed Borrowing, a conversion of Committed
Loans from one Type to the other (provided that the Term Loan may not be
converted to another Type of Loan), or a continuation of Eurodollar Rate
Committed Loans, (ii) the requested date of the Borrowing, conversion or
continuation, as the case may be (which shall be a Business Day), (iii) the
principal amount of Committed Loans to be borrowed, converted or continued, (iv)
the Type of Committed Loans to be borrowed or to which existing Committed Loans
are to be converted, and (v) if applicable, the duration of the Interest Period
with respect thereto. If Borrower fails to specify a Type of Committed Loan in a
Committed Loan Notice or if Borrower fails to give a timely notice requesting a
conversion or continuation, then the applicable Committed Loans shall be made,
or converted to, Base Rate Loans. Any such automatic conversion to Base Rate
Loans shall be effective as of the last day of the Interest Period then in
effect with respect to the applicable Eurodollar Rate Committed Loans. If
Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar
Rate Committed Loans in any such Committed Loan Notice, but fails to specify an
Interest Period, it will be deemed to have specified an Interest Period of one
month.

            (b) Following receipt of a Committed Loan Notice, Agent shall
promptly notify each Lender of the amount of its Pro Rata Share of the
applicable Committed Loans, and if no timely notice of a conversion or
continuation is provided by Borrower, Agent shall notify each Lender of the
details of any automatic conversion to Base Rate Loans described in the
preceding subsection. In the case of a Committed Borrowing, each Lender shall
make the amount of its Committed Loan available to Agent in immediately
available funds at Agent's Office not later than 1:00 p.m., Los Angeles time, on
the Business Day specified in the applicable Committed Loan Notice. Upon
satisfaction of the applicable conditions set forth in Section 4.02 (and, if
such Borrowing is the initial Credit Extension, Section 4.01), Agent shall make
all funds so received available to Borrower in like funds as received by Agent
either by (i) crediting the account of Borrower on the books of Union Bank with
the amount of such funds or (ii) wire transfer of such funds, in each case in
accordance with instructions provided to (and reasonably acceptable to) Agent by
Borrower; provided, however, that if, on the date of the Committed Loan Notice
with respect to such Borrowing is given by Borrower there are L/C Borrowings
outstanding, then the proceeds of such Borrowing shall be applied, first, to the
payment in full of any such L/C Borrowings, and second, to Borrower as provided
above.

            (c) Except as otherwise provided herein, a Eurodollar Rate Committed
Loan may be continued or converted only on the last day of an Interest Period
for such Eurodollar Rate Committed Loan. During the existence of a Default, no
Loans may be requested as, converted to or continued as Eurodollar Rate
Committed Loans without the consent of the Required Lenders, and the Required
Lenders may demand that any or all of the then outstanding Eurodollar Rate
Committed Loans be converted immediately to Base Rate Committed Loans and
Borrower agrees to pay all amounts due under Section 3.05 in accordance with the
terms thereof due to any such conversion.

                                      -16-
<PAGE>

            (d) Agent shall promptly notify Borrower and Lenders of the interest
rate applicable to any Interest Period for Eurodollar Rate Committed Loans upon
determination of such interest rate. The determination of the Eurodollar Rate by
Agent shall be conclusive in the absence of manifest error.

            (e) After giving effect to all Committed Borrowings, all conversions
of Committed Loans from one Type to the other, and all continuations of
Committed Loans as the same Type, there shall not be more than six Interest
Periods in effect with respect to Committed Loans.

      2.03 LETTERS OF CREDIT.

            (a) The Letter of Credit Commitment.

                  (i) Subject to the terms and conditions set forth herein, (A)
      Agent agrees, in reliance upon the agreements of the other Lenders set
      forth in this Section 2.03: (1) from time to time on any Business Day
      during the period from the Closing Date until the Letter of Credit
      Expiration Date, to issue Letters of Credit for the account of Borrower
      [or certain Subsidiaries], and to amend [or renew] Letters of Credit
      previously issued by it, in accordance with subsection (b) below, and (2)
      to honor drafts under the Letters of Credit; and (B) Lenders severally
      agree to participate in Letters of Credit issued for the account of
      Borrower; provided that Agent shall not be obligated to make any L/C
      Credit Extension with respect to any Letter of Credit, and no Lender shall
      be obligated to participate in, any Letter of Credit if as of the date of
      such L/C Credit Extension, (x) the Total Outstandings would exceed the
      Aggregate Commitments, (y) the aggregate Outstanding Amount of the
      Committed Loans of any Lender, plus such Lender's Pro Rata Share of the
      Outstanding Amount of all L/C Obligations would exceed-such Lenders
      Commitment, or (z) the Outstanding Amount of the L/C Obligations would
      exceed the Letter of Credit Sublimit. Within the foregoing limits, and
      subject to the terms and conditions hereof, (x) Borrower's ability
      to-obtain-Letters-of Credit shall be fully revolving, and accordingly
      Borrower may, during the foregoing period, obtain Letters of Credit to
      replace Letters of Credit that have expired or that have been drawn upon
      and reimbursed, and (y) on the Closing Date, Agent shall issue the Back-Up
      L/C.

                  (ii) Agent shall be under no obligation to issue any Letter of
      Credit if:

                        (A) any order, judgment or decree of any Governmental
            Authority or arbitrator shall by its terms purport to enjoin or
            restrain Agent from issuing such Letter of Credit, or any Law
            applicable to Agent or any request or directive (whether or not
            having the force of law) from any Governmental Authority with
            jurisdiction over Agent shall prohibit, or request that Agent
            refrain from, the issuance of letters of credit generally or such
            Letter of Credit in particular or shall impose upon Agent with
            respect to such Letter of Credit any restriction, reserve or capital
            requirement (for which Agent is not otherwise compensated hereunder)
            not in effect on the Closing Date, or shall impose upon Agent any
            unreimbursed loss, cost or expense which was not applicable on the
            Closing Date and which Agent in good faith deems material to it;

                        (B) subject to Section 2.03(b)(iv), the expiry date of
            such requested Letter of Credit would occur more than twelve months
            after the date of issuance or last renewal, unless the Required
            Lenders have approved such expiry date;

                        (C) the expiry date of such requested standby Letter of
            Credit would occur after the Maturity Date, unless Borrower shall,
            on or before, the Maturity Date, Cash Collateralize (as defined in
            Section 2.03(g) hereof), the Outstanding Amount of such Letter of
            Credit;

                        (D) the issuance of such Letter of Credit would violate
            one or more policies of Agent; or

                        (E) such Letter of Credit is in an initial amount less
            than $10,000, in the case of a commercial Letter of Credit, or
            $50,000, in the case of a standby Letter of Credit, or is to be
            denominated in a currency other than Dollars.

                                      -17-
<PAGE>

                  (iii) Agent shall be under no obligation to amend any Letter
      of Credit if (A) Agent would have no obligation at such time to issue such
      Letter of Credit in its amended form under the terms hereof, or (B) the
      beneficiary of such Letter of Credit does not accept the proposed
      amendment to such Letter of Credit.

                  (iv) Each commercial Letter of Credit will require drafts
      payable at sight or up to 60 days after sight.

            (b) Procedures for Issuance and Amendment of Letters of Credit:
Auto-Renewal Letters of Credit.

                  (i) Each Letter of Credit shall be issued or amended, as the
      case may be, upon the request of Borrower delivered to Agent in the form
      of a Letter of Credit Application, appropriately completed and signed by a
      Responsible Officer of Borrower. Such Letter of Credit Application must be
      received by Agent not later than 11:00 a.m., Los Angeles time, at least
      two Business Days (or such later date and time as Agent may agree in a
      particular instance in its sole discretion) prior to the proposed issuance
      date or date of amendment, as the case may be.

                  (ii) Promptly after receipt of any Letter of Credit
      Application by Agent at the address set forth in Schedule 10.02 for
      receiving Letter of Credit Applications and related correspondence, if the
      requested issuance or amendment is permitted in accordance with the terms
      hereof, then, subject to the terms and conditions hereof, Agent shall, on
      the requested date, issue a Letter of Credit for the account of Borrower
      or applicable Subsidiary or enter into the applicable amendment, as the
      case may be, in each case in accordance with Agent's usual and customary
      business practices. Immediately upon the issuance of each Letter of
      Credit, each Lender shall be deemed to, and hereby irrevocably and
      unconditionally agrees to, purchase from Agent a risk participation in
      such Letter of Credit in an amount equal to the product of such Lender's
      Pro Rata Share times the amount of such Letter of Credit

                  (iii) Promptly after its delivery of any Letter of Credit or
      any amendment to a Letter of Credit to an advising bank with respect
      thereto or to the beneficiary thereof, Agent will also deliver to Borrower
      a true and complete copy of such Letter of Credit or amendment.

                  (iv) If Borrower so requests in any applicable Letter of
      Credit Application, Agent may, in it sole and absolute discretion, agree
      to issue a Letter of Credit that has automatic renewal provisions (each,
      an "Auto-Renewal Letter of Credit"); provided that any such Auto-Renewal
      Letter of Credit must permit Agent to prevent any such renewal at least
      once in each twelve-month period (commencing with the date of issuance of
      such Letter of Credit) by giving prior notice to the beneficiary thereof
      not later than a day (the "Nonrenewal Notice Date") in each such
      twelve-month period to be agreed upon at the time such Letter of Credit is
      issued. Unless otherwise directed by Agent, Borrower shall not be required
      to make a specific request to Agent for any such renewal. Once an
      Auto-Renewal Letter of Credit has been issued, Lenders shall be deemed to
      have authorized (but may not require) Agent to permit the renewal of such
      Letter of Credit at any time to an expiry date not later than the Letter
      of Credit Expiration Date; provided, however, that Agent shall not permit
      any such renewal if (A) Agent has determined that it would have no
      obligation at such time to issue such Letter of Credit in its renewed form
      under the terms hereof (by reason of Section 2.03a(ii) or otherwise), or
      (B) it has received notice (which may be by telephone or in writing) at
      least five (5) Business Days before the Nonrenewal Notice Date (1) from
      the Required Lenders that they have elected not to permit such renewal or
      (2) from any Lender or Borrower that one or more of the applicable
      conditions specified in Section 4.02 is not then satisfied.
      Notwithstanding anything to the contrary contained herein, (x) Agent shall
      have no obligation to permit the renewal of any Auto Renewal Letter of
      Credit at any time, and (y) the Back-Up L/C shall have an expiry date not
      later than the last expiry date of any of the Existing Letters of Credit.

            (c) Drawings and Reimbursements; Funding of Participations.

                  (i) Upon receipt from the beneficiary of any Letter of Credit
      of any notice of drawing under such Letter of Credit, Agent shall notify
      Borrower thereof. Not later than 10:00 a.m., Los Angeles

                                      -18-
<PAGE>

      time, on the date of any payment by Agent under a Letter of Credit (each
      such date, an "Honor Date")(or the next succeeding Business Day if notice
      of drawing was received by Borrower after 10:00 a.m., Los Angeles time, on
      the Honor Date), Borrower shall reimburse Agent in an amount equal to the
      amount of such drawing. If Borrower fails to so reimburse Agent by such
      time, Agent shall promptly notify each Lender of the Honor Date, the
      amount of the unreimbursed drawing (the "Unreimbursed Amount"), and the
      amount of such Lender's Pro Rata Share thereof. In such event, Borrower
      shall be deemed to have requested a Committed Borrowing of Base Rate Loans
      to be disbursed on the Honor Date in an amount equal to the Unreimbursed
      Amount, without regard to the minimum and multiples specified in Section
      2.02 for the principal amount of Base Rate Loans, but subject to the
      amount of the unutilized portion of the Aggregate Commitments and the
      conditions set forth in Section 4.02 (other than the delivery of a
      Committed Loan Notice). Any notice given by Agent pursuant to this Section
      2.03(c)(i) may be given by telephone if immediately confirmed in writing;
      provided that the lack of such an immediate confirmation shall not affect
      the conclusiveness or binding effect of such notice.

                  (ii) Each Lender (including Agent in its capacity as a Lender)
      shall upon any notice pursuant to Section 2.03(c)(i) make funds available
      to Agent at Agent's Office in an amount equal to its Pro Rata Share of the
      Unreimbursed Amount not later than 1:00 p.m., Los Angeles time, on the
      Business Day specified in such notice by Agent, whereupon, subject to the
      provisions of Section 2.03(c)(iii), each Lender that so makes funds
      available shall be deemed to have made a Base Rate Committed Loan to
      Borrower in such amount.

                  (iii) With respect to any Unreimbursed Amount that is not
      fully refinanced by a Committed Borrowing of Base Rate Loans because the
      conditions set forth in Section 4.02 cannot be satisfied or for any other
      reason, Borrower shall be deemed to have incurred from Agent an L/C
      Borrowing in the amount of the Unreimbursed Amount that is not so
      refinanced, which L/C Borrowing shall be due and payable on demand
      (together with interest) and shall bear interest at the Default Rate. In
      such event, each Lenders payment to Agent pursuant to Section 2.03(c)(ii)
      shall be deemed payment in respect of its participation in such L/C
      Borrowing and shall constitute an L/C Advance from such Lender in
      satisfaction of its participation obligation under this Section 2.03.

                  (iv) Until each Lender funds its Committed Loan or L/C Advance
      pursuant to this Section 2.03(c) to reimburse Agent for any amount drawn
      under any Letter of Credit, interest in respect of such Lender's Pro Rata
      Share of such amount shall be solely for the account of Agent

                  (v) Each Lender's obligation to make Committed Loans or L/C
      Advances to reimburse Agent for amounts drawn under Letters of Credit, as
      contemplated by this Section 2.03(c), shall be absolute and unconditional
      and shall not be affected by any circumstance, including (A) any set-off,
      counterclaim, recoupment, defense or other right which such Lender may
      have against Agent, Borrower or any other Person for any reason
      whatsoever, (B) the occurrence or continuance of a Default; or (C) any
      other occurrence, event or condition, whether or not similar to any of the
      foregoing. No such making of an L/C Advance shall relieve or otherwise
      impair the obligation of Borrower to reimburse Agent for the amount of any
      payment made by Agent under any Letter of Credit, together with interest
      as provided herein.

                  (vi) If any Lender fails to make available to Agent any amount
      required to be paid by such Lender pursuant to the foregoing provisions of
      this Section 2.03(c) by the time specified in Section 2.03(c)(ii), Agent
      shall be entitled to recover from such Lender, on demand, such amount with
      interest thereon for the period from the date such payment is required to
      the date on which such payment is immediately available to Agent at a rate
      per annum equal to the Federal Funds Rate from time to time in effect A
      certificate of Agent submitted to any Lender with respect to any amounts
      owing under this clause (vi) shall be conclusive absent manifest error.

            (d) Repayment of Participations.

                  (i) At any time after Agent has made a payment under any
      Letter of Credit and has received from any Lender such Lender's L/C
      Advance in respect of such payment in accordance with

                                      -19-
<PAGE>

      Section 2.03(c), if Agent receives any payment in respect of the related
      Unreimbursed Amount or interest thereon (whether directly from Borrower or
      otherwise, including proceeds of Cash Collateral applied thereto by
      Agent), Agent will distribute to such Lender its Pro Rata Share thereof
      (appropriately adjusted, in the case of interest payments, to reflect the
      period of time during which such Lender's L/C Advance was outstanding) in
      the same funds as those received by Agent

                  (ii) If any payment received by Agent pursuant to Section
      2.03(c)(i) is required to be returned under any of the circumstances
      described in Section 10.06 (including pursuant to any settlement entered
      into by Agent in its discretion, each Lender shall pay to Agent its Pro
      Rata Share thereof on demand of Agent, plus interest thereon from the date
      of such demand to the date such amount is returned by such Lender, at a
      rate per annum equal to the Federal Funds Rate from time to time in
      effect.

            (e) Obligations Absolute. The obligation of Borrower to reimburse
Agent for each drawing under each Letter of Credit, and to repay each L/C
Borrowing, shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including the following:

                  (i) any lack of validity or enforceability of such Letter of
      Credit, this Agreement, or any other agreement or instrument relating
      thereto;

                  (ii) the existence of any claim, counterclaim, set-off,
      defense or other right that Borrower may have at any time against any
      beneficiary or any transferee of such Letter of Credit (or any Person for
      whom any such beneficiary or any such transferee may be acting), Agent or
      any other Person, whether in connection with this Agreement, the
      transactions contemplated hereby or by such Letter of Credit or any
      agreement or instrument relating thereto, or any unrelated transaction;

                  (iii) any draft, demand, certificate or other document
      presented under such Letter of Credit proving to be forged, fraudulent,
      invalid or insufficient in any respect or any statement therein being
      untrue or inaccurate in any respect; or any loss or delay in the
      transmission or otherwise of any document required in order to make a
      drawing under such Letter of Credit;

                  (iv) any payment by Agent under such Letter of Credit against
      presentation of a draft or certificate that does not strictly comply with
      the terms of such Letter of Credit in the absence of gross negligence or
      willful misconduct by Agent; or any payment made by Agent under such
      Letter of Credit to any Person purporting to be a trustee in bankruptcy,
      debtor-in possession, assignee for the benefit of creditors, liquidator,
      receiver or other representative of or successor to any beneficiary or any
      transferee of such Letter of Credit, including any arising in connection
      with any proceeding under any Debtor Relief Law; or

                  (v) any other circumstance or happening whatsoever, whether or
      not similar to any of the foregoing, including any other circumstance that
      might otherwise constitute a defense available to, or a discharge of,
      Borrower.

                  Borrower shall promptly examine a copy of each Letter of
      Credit and each amendment thereto that is delivered to it and, in the
      event of any claim of noncompliance with Borrower's instructions or other
      irregularity, Borrower will promptly notify Agent Borrower shall be
      conclusively deemed to have waived any such claim against Agent and its
      correspondents unless such notice is given as aforesaid.

            (f) Role of Agent. Each Lender and Borrower agree that, in paying
any drawing under a Letter of Credit, Agent shall not have any responsibility to
obtain any document (other than any sight draft, certificates and documents
expressly required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document None of Agent any Agent-Related Person
nor any of the respective correspondents, participants or assignees of Agent
shall be liable to any Lender for (i) any action taken or omitted in connection
herewith at the request or with the approval of Lenders or the Required Lenders,
as applicable; (ii) any action taken or omitted in the absence of gross
negligence or willful misconduct; or (iii) the due execution, effectiveness,
validity or enforceability of any

                                      -20-
<PAGE>

document or instrument related to any Letter of Credit or Letter of Credit
Application. Borrower hereby assumes all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude Borrower's pursuing such rights and remedies as it may have against the
beneficiary or transferee at law or under any other agreement None of Agent any
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of Agent shall be liable or responsible for any of the matters
described in clauses (i) through (v) of Section 2.03(e); provided, however, that
anything in such clauses to the contrary notwithstanding, Borrower may have a
claim against Agent and Agent may be liable to Borrower, to the extent, but only
to the extent, of any direct, as opposed to consequential or exemplary, damages
suffered by Borrower which Borrower proves were caused by Agents willful
misconduct or gross negligence or Agent's willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of
such Letter of Credit In furtherance and not in limitation of the foregoing,
Agent may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary, and Agent shall not be responsible for the validity
or sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.

            (g) Cash Collateral. Upon the request of Agent, (i) if Agent has
honored any full or partial drawing request under any Letter of Credit and such
drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit
Expiration Date, any Letter of Credit may for any reason remain outstanding and
partially or wholly undrawn, Borrower shall immediately Cash Collateralize the
then Outstanding Amount of all L/C Obligations (in an amount equal to such
Outstanding Amount determined as of the date of such L/C Borrowing or the Letter
of Credit Expiration Date, as the case may be). For purposes hereof, "Cash
Collateralize" means to pledge and deposit with or deliver to Agent, for the
benefit of Agent, as issuer of Letters of Credit and Lenders, as collateral for
the L/C Obligations, cash or deposit account balances pursuant to documentation
in form and substance satisfactory to Agent (which documents are hereby
consented to by Lenders). Derivatives of such term have corresponding meanings.
Borrower hereby grants to Agent, for the benefit of Agent as issuer of Letters
of Credit and Lenders, a security interest in all such cash, deposit accounts
and all balances therein and all proceeds of the foregoing. Cash collateral
shall be maintained in blocked, non-interest bearing deposit accounts at Union
Bank.

            (h) Applicability of ISP98 and UCP. Unless otherwise expressly
agreed by Agent and Borrower when a Letter of Credit is issued (including any
such agreement applicable to an Existing Letter of Credit), (i) the rules of the
"International Standby Practices 1998" published by the Institute of
International Banking Law & Practice (or such later version thereof as may be in
effect at the time of issuance) shall apply to each standby Letter of Credit,
and (ii) the rules of the Uniform Customs and Practice for Documentary Credits,
as most recently published by the International Chamber of Commerce (the "ICC")
at the time of issuance (including the ICC decision published by the Commission
on Banking Technique and Practice on April 6, 1998 regarding the European single
currency (euro)) shall apply to each commercial Letter of Credit.

            (i) Letter of Credit Fees. Borrower shall pay to Agent for the
account of each Lender in accordance with its Pro Rata Share a letter of credit
fee for each standby Letter of Credit equal to the Applicable Rate times the
daily maximum amount available to be drawn under such Letter of Credit (whether
or not such maximum amount is then in effect under such Letter of Credit). Such
letter of credit fees shall be computed on a quarterly basis in arrears. Such
letter of credit fees shall be due and payable on the last Business Day of each
January, April, July and October, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration
Date and thereafter on demand. If there is any change in the Applicable Rate
during any quarter, the actual daily amount of each standby Letter of Credit
shall be computed and multiplied by the Applicable Rate separately for each
period during such quarter that such Applicable Rate was in effect

            (j) Fronting Fee and Documentary and Processing Charges Payable to
Agent. Borrower shall pay directly to Agent for its own account a fronting fee
with respect to each standby Letter of Credit equal to 1/8 of 1% per annum of
the daily maximum amount available to be drawn thereunder (whether or not such
maximum amount is then in effect under such Letter of Credit), due and payable
quarterly in arrears on the last Business Day of each January, April, July and
October, commencing with the first such date to occur after the issuance of such
Letter of Credit, and on the Letter of Credit Expiration Date. In addition,
Borrower shall pay

                                      -21-
<PAGE>

directly to Agent for its own account the customary issuance, presentation,
amendment and other processing fees, and other standard costs and charges, of
Agent relating to Letters of Credit as from time to time in effect, as disclosed
by the Agent in writing to the Borrower from time to time. Such customary fees
and standard costs and charges are due and payable on demand and are
nonrefundable. Borrower shall pay to the Agent, for the benefit of the Lenders,
on a pro rata basis, with respect to commercial Letters of Credit issued after
the date of this Agreement, quarterly in arrears, (x) .09% of the stated amount
of each newly issued commercial Letter of Credit (provided the issuance fee paid
by Borrower to the Agent exceeds $125); and (y) in the event that the stated
amount of any commercial Letter of Credit is subsequently increased by
amendment, .09% of the amount of such increase (provided that the amendment fee
paid by Borrower to Agent exceeds $100).

            (k) Conflict with Letter of Credit Application. In the event of any
conflict between the terms hereof and the terms of any Letter of Credit
Application, the terms hereof shall control.

      2.04 INTENTIONALLY OMITTED.

      2.05 PREPAYMENTS.

            (a) Upon notice to Agent, the Borrower may, at any time or from time
to time voluntarily prepay Committed Loans in whole or in part without premium
or penalty; provided that (i) such notice must be received by Agent not later
than 11:00 a.m., Los Angeles time, (A) three Business Days prior to any date of
prepayment of Eurodollar Rate Committed Loans, (B) on the date of prepayment of
Base Rate Committed Loans, and (C) five Business Days prior to any date of
prepayment of the Term Loan; (ii) any prepayment of Eurodollar Rate Committed
Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof; and (iii) any prepayment of Base Rate Committed
Loans or the Term Loan shall be in a principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof, or, in each case, if less, the entire
principal amount thereof then outstanding. Each such notice shall specify the
date and amount of such prepayment and the Type(s) of Committed Loans to be
prepaid. Agent will promptly notify each Lender of its receipt of each such
notice, and of the amount of such Lender's Pro Rata Share of such prepayment If
such notice is given by Borrower, Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein. Any prepayment of a Eurodollar Rate Committed Loan shall be
accompanied by all accrued interest thereon, together with any additional
amounts required pursuant to Section 3.05. Any prepayment of the Term Loan shall
be accompanied by all accrued interest thereon, together with any additional
amounts required pursuant to Section 3.06. Each such prepayment shall be applied
to the Committed Loans of Lenders in accordance with their respective Pro Rata
Shares.

            (b) If for any reason the Total Outstandings at any time exceed the
Aggregate Commitments then in effect, Borrower shall immediately prepay Loans
and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to
such excess;

      2.06 REDUCTION OR TERMINATION OF COMMITMENTS. Upon notice to Agent, the
Borrower may terminate the Aggregate Commitments, or from time to time
permanently reduce the Aggregate Commitments and the Borrower shall permanently
reduce the Aggregate Commitments in an amount equal to 100% of the net cash
proceeds from the issuance of equity by the Borrower or any of its Subsidiaries
(excluding proceeds from the exercise of stock options by employees, directors
and consultants of the Borrower or any Subsidiary); provided that (i) any such
notice shall be received by Agent not later than 11:00 a.m., five Business Days
prior to the date of termination or reduction, (ii) any such partial reduction
shall be in an aggregate amount of $5,000,000 or any whole multiple of
$1,000,000 in excess thereof, (iii) Borrower shall not terminate or reduce the
Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments and (iv) if, after giving effect to any reduction of the Aggregate
Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate
Commitments, such Sublimit shall be automatically reduced by the amount of such
excess. Agent will promptly notify Lenders of any such notice of termination or
reduction of the Aggregate Commitments. Once reduced in accordance with this
Section, the Aggregate Commitments may not be increased. Any reduction of the
Aggregate Commitments shall be applied to the Commitment of each Lender
according to its Pro Rata Share. All commitment fees accrued until the effective
date of any termination of the Aggregate Commitments shall be paid on the
effective date of such termination.

                                      -22-
<PAGE>

      2.07 REPAYMENT OF LOANS.

            (a) Revolving Loans. Borrower shall repay to Lenders on the Maturity
Date the aggregate principal amount of Revolving Loans outstanding on such date.

            (b) Term Loan. Borrower shall repay to Lenders on each Term Loan
Amortization Date equal installments of principal in the amount of $333,333.33,
plus all accrued interest, on account of the Term Loan.

      2.08 INTEREST.

            (a) Subject to the provisions of subsection (b) below, (i) each
Eurodollar Rate Committed Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each
Base Rate Committed Loan shall bear interest on the outstanding principal amount
thereof from the applicable borrowing date at a rate per annum equal to the Base
Rate plus the Applicable Rate; and (iii) the Term Loan shall bear interest on
the outstanding principal amount thereof from the date the Term Loan is made at
a rate per annum equal to the Fixed Rate.

            (b) If any amount payable by Borrower under any Loan Document is not
paid when due (without regard to any applicable grace periods), whether at
stated maturity by acceleration or otherwise, such amount shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws. Furthermore,
while any Event of Default exists, Borrower shall pay interest on the principal
amount of all outstanding Obligations at a fluctuating interest rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand. The Agent
shall notify the Borrower of the effective date of the Default Rate.

Interest on each Loan shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

      2.09 FEES. In addition to certain fees described in subsections (i) and
(j) of Section 2.03

            (a) Commitment Fee. Borrower shall pay to Agent for the account of
each Lender in accordance with its Pro Rata Share, a commitment fee equal to the
Applicable Rate times the actual daily amount by which the Aggregate Commitments
exceed the sum of (i) the Outstanding Amount of Committed Loans and (ii) the
Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all
times during the Availability Period, including at any time during which one or
more conditions in Article IV is not met, and shall be due and payable quarterly
in arrears on the last Business Day of each January, April, July and October,
commencing with the first such date to occur after the Closing Date, and on the
Maturity Date. The commitment fee shall be calculated quarterly in arrears, and
if there is any change in the Applicable Rate during any quarter, the actual
daily amount shall be computed and multiplied by the Applicable Rate separately
for each period during such quarter that such Applicable Rate was in effect.

            (b) Agency Fees. Borrower shall pay certain fees to Agent for
Agent's own account, in the amounts and at the times specified in the letter
agreement, dated June 30, 2004 (the "Agent Fee Letter"), between Borrower and
Agent. Such fees shall be fully earned when paid and shall be nonrefundable for
any reason whatsoever.

            (c) Lenders' Upfront Fee. On the Closing Date, Borrower shall pay to
Agent, for the account of each Lender in accordance with their respective Pro
Rata Shares, an upfront fee in the amount specified in the Agent Fee Letter.
Such upfront fees are for the credit facilities committed by Lenders under this
Agreement and are fully earned on the date paid. The upfront fee paid to each
Lender is solely for its own account and is nonrefundable for any reason
whatsoever.

                                      -23-
<PAGE>

            (d) Administration Fee. On the Closing Date and each anniversary
thereafter, Borrower shall pay to Agent for Agent's own account, an
administration fee in the amount set forth in the Agent Fee Letter.

      2.10 COMPUTATION OF INTEREST AND FEES. All computations of interest for
Base Rate Loans when the Base Rate is determined by Union Bank's prime rate
shall be made on the basis of a year of 365 or 366 days, as the case may be. All
other computations of interest and all fees shall be made on the basis of a year
of 360 days and the actual number of days elapsed, (which results in more fees
or interest, as applicable, being paid than if computed on the basis of a 365
day year). Interest shall accrue on each Loan for the day on which the Loan is
made, and shall not accrue on a Loan, or any portion thereof, for the day on
which the Loan or such portion is paid, provided that any Loan that is repaid on
the same day on which it is made shall, subject to Section 2.12(a), bear
interest for one day.

      2.11 EVIDENCE OF DEBT. (a) The Credit Extensions made by each Lender shall
be evidenced by one or more accounts or records maintained by such Lender and by
Agent in the ordinary course of business. The accounts or records maintained by
Agent and each Lender shall be conclusive absent manifest error of the amount of
the Credit Extensions made by Lenders to Borrower and the interest and payments
thereon. Any failure to so record or any error in doing so shall not, however,
limit or otherwise affect the obligation of Borrower hereunder to pay any amount
owing with respect to the Obligations. In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
Agent in respect of such matters, the accounts and records of Agent shall
control in the absence of manifest error. Upon the request of any Lender made
through Agent, Borrower shall execute and deliver to such Lender (through Agent)
a Note, which shall evidence, such Lender's Loans, in addition to such accounts
or records. Each Lender may attach schedules to its Note and endorse thereon the
date, Type (if applicable), amount and maturity of the applicable Loans and
payments with respect thereto. (b) In addition to the accounts and records
referred to in subsection (a), each Lender and Agent shall maintain in
accordance with its usual practice accounts or records evidencing the purchases
and sales by such Lender of participations in Letters of Credit In the event of
any conflict between the accounts and records maintained by Agent and the
accounts and records of any Lender in respect of such matters, the accounts and
records of Agent shall control in the absence of manifest error.

      2.12 PAYMENTS GENERALLY.

            (a) (i) All payments to be made by Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by Borrower
hereunder shall be made to Agent, for the account of the respective Lenders to
which such payment is owed, at Agent's Office in Dollars and in immediately
available funds not later than 12:00 noon, Los Angeles time, on the date
specified herein. Agent will promptly distribute to each Lender its Pro Rata
Share (or other applicable share as provided herein) of such payment in like
funds as received by wire transfer to such Lenders Lending Office. All payments
received by Agent after 12:00 noon, Los Angeles time, shall be deemed received
on the next succeeding Business Day and any applicable interest or fee shall
continue to accrue.

                  (i) On each date when the payment of any principal, interest
      or fees are due hereunder or under any Note, Borrower agrees to maintain
      on deposit in an ordinary checking account maintained by Borrower with
      Agent (as such account shall be designated by Borrower in a written notice
      to Agent from time to time, the "Borrower Account") an amount sufficient
      to pay such principal, interest or fees in full on such date. Borrower
      hereby authorizes Agent (A) to deduct automatically all principal,
      interest or fees when due hereunder or under any Note from Borrower
      Account, and (B) if and to the extent any payment of principal, interest
      or fees under this Agreement or any Note is not made when due to deduct
      any such amount from any or all of the accounts of Borrower maintained at
      Agent. Agent agrees to provide written notice to Borrower of any automatic
      deduction made pursuant to this Section 2.12(a)(ii) showing in reasonable
      detail the amounts of such deduction. Lenders agree to reimburse Borrower
      based on their Pro Rata Share for any amounts deducted from such accounts
      in excess of amount due hereunder and under any other Loan Documents.

            (b) If any payment to be made by Borrower shall come due on a day
other than a Business Day, payment shall be made on the next following Business
Day, and such extension of time shall be reflected in computing interest or
fees, as the case may be.

                                      -24-
<PAGE>

            (c) Unless Borrower or any Lender has notified Agent, prior to the
date any payment is required to be made by it to Agent hereunder, that Borrower
or such Lender, as the case may be, will not make such payment, Agent may assume
that Borrower or such Lender, as the case may be, has timely made such payment
and may (but shall not be so required to), in reliance thereon, make available a
corresponding amount to the Person entitled thereto. If and to the extent that
such payment was not in fact made to Agent in immediately available funds, then:

                  (i) if Borrower failed to make such payment, each Lender shall
      forthwith on demand repay to Agent the portion of such assumed payment
      that was made available to such Lender in immediately available funds,
      together with interest thereon in respect of each day from and including
      the date such amount was made available by Agent to such Lender to the
      date such amount is repaid to Agent in immediately available funds, at the
      Federal Funds Rate from time to time in effect; and

                  (ii) if any Lender failed to make such payment, such Lender
      shall forthwith on demand pay to Agent the amount thereof in immediately
      available funds, together with interest thereon for the period from the
      date such amount was made available by Agent to Borrower to the date such
      amount is recovered by Agent (the "Compensation Period") at a rate per
      annum equal to the Federal Funds Rate from time to time in effect. If such
      Lender pays such amount to Agent, then such amount shall constitute such
      Lenders Committed Loan included in the applicable Borrowing. If such
      Lender does not pay such amount forthwith upon Agent's demand therefor,
      Agent may make a demand therefor upon Borrower, and Borrower shall pay
      such amount to Agent, together with interest thereon for the Compensation
      Period at a rate per annum equal to the rate of interest applicable to the
      applicable Borrowing. Nothing herein shall be deemed to relieve any Lender
      from its obligation to fulfill its Commitment or to prejudice any rights
      which Agent or Borrower may have against any Lender as a result of any
      default by such Lender hereunder.

      A notice of Agent to any Lender or Borrower with respect to any amount
owing under this subsection (c) shall be conclusive, absent manifest error.

            (d) If any Lender makes available to Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to Borrower by Agent because the
conditions to the applicable Credit Extension set forth in Article IV are not
satisfied or waived in accordance with the terms hereof, Agent shall return such
funds (in like funds as received from such Lender) to such Lender, without
interest.

            (e) The obligations of Lenders hereunder to make Committed Loans and
to fund participations in Letters of Credit are several and not joint. The
failure of any Lender to make any Committed Loan or to fund any such
participation on any date required hereunder shall not relieve any other Lender
of its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Committed Loan or
purchase its participation.

            (f) Nothing herein shall be deemed to obligate any Lender to obtain
the funds for any Loan in any particular place or manner or to constitute a
representation by any Lender that it has obtained or will obtain the funds for
any Loan in any particular place or manner.

      2.13 SHARING OF PAYMENTS. If, other than as expressly provided elsewhere
herein, any Lender shall obtain on account of Committed Loans made by it, or the
participations in L/C Obligations held by it, any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated hereunder) thereof,
such Lender shall immediately (a) notify Agent of such fact, and (b) purchase
from the other Lenders such participations in the Committed Loans made by them
and/or such subparticipations in the participations in L/C Obligations held by
them, as the case may be, as shall be necessary to cause such purchasing Lender
to share the excess payment in respect of such Committed Loans or such
participations, as the case may be, pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender under any of the circumstances described in
Section 10.06 (including pursuant to any settlement entered into by the
purchasing Lender in its discretion), such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing

                                      -25-
<PAGE>

Lender the purchase price paid therefor, together with an amount equal to such
paying Lender's ratable share (according to the proportion of (i) the amount of
such paying Lenders required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered, without
further interest thereon. Borrower agrees that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.09) with respect to such participation as fully as if such Lender
were the direct creditor of Borrower in the amount of such participation. Agent
will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in each
case notify Lenders following any such purchases or repayments. Each Lender that
purchases a participation pursuant to this Section shall from and after such
purchase have the right to give all notices, requests, demands, directions and
other communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased.

ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY

      3.01 TAXES.

            (a) Any and all payments by Borrower to or for the amount of Agent
or any Lender under any Loan Document shall be made free and clear of and
without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of Agent and each
Lender, taxes imposed on or measured by its overall net income, and franchise
taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the Laws of which Agent or such Lender, as
the case may be, is organized or maintains a lending office (all such
non-excluded taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, and liabilities being hereinafter referred to
as "Taxes"). If Borrower shall be required by any Laws to deduct any Taxes, or
the Agent or any Lender shall be liable to remit any Taxes, in either case from
or in respect of any sum payable under any Loan Document to Agent or any Lender,
(i) the sum payable shall be increased as necessary so that after making all
required deductions or remittance (including deductions applicable to additional
sums payable under this Section), each of Agent and such Lender receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions, (iii) Borrower shall pay to the extent
required of it the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable Laws, and (iv) within 30 days
after the date of such payment, Borrower shall furnish to Agent (which shall
forward the same to such Lender) the original or a certified copy of a receipt
evidencing payment thereof.

            (b) In addition, Borrower agrees to pay any and all present or
future stamp, court or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made under any Loan
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as "Other Taxes").

            (c) If Borrower shall be required to deduct or pay any Taxes or
Other Taxes, or the Agent or any Lender shall be liable to remit any Taxes, in
either case from or in respect of any sum payable under any Loan Document to
Agent or any Lender, Borrower shall also pay to Agent or to such Lender, at the
time interest is paid, such additional amount that Agent or such Lender
specifies is necessary to preserve the after-tax yield (after factoring in all
taxes, including taxes imposed on or measured by net income) that Agent or such
Lender would have received if such Taxes or Other Taxes had not been imposed.

            (d) Borrower agrees to indemnify Agent and each Lender for (i) the
full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this Section) paid by
or assessable against Agent and/or such Lender (including any amounts required
to be remitted by it or them on account of withholding taxes), (ii) amounts
payable under Section 3.01(a) or Section 3.01(c) and (iii) any liability
(including additions to tax, penalties, interest and expenses, including from
any failure by Agent or any Lender to make any remittance provided such failure
was inadvertent) arising therefrom or with respect thereto, in each case whether
or not such Taxes or Other Taxes were correctly or

                                      -26-
<PAGE>

legally imposed or asserted by the relevant Governmental Authority. Payment
under this subsection (d) shall be made within 30 days after the date Lender or
Agent makes a demand therefor.

            (e) Each Lender that is not a United States person under Section
7701(a)(30) of the Code, on or prior to the date of its execution and delivery
of this Credit Agreement in the case of each Lender listed on the signature
pages hereof and on or prior to the date on which it becomes a Lender in the
case of each other Lender, and from time to time thereafter if requested in
writing by the Borrower or the Agent (but only so long as such Lender remains
lawfully able to do so), shall provide the Borrower and the Agent with (i)
Internal Revenue Service Form W-8 BEN or W-8 ECI, as appropriate, or any
successor form prescribed by the internal Revenue Service, certifying that such
Lender is entitled to benefits under an income tax treaty to which the United
States is a party which reduces to zero the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Credit
Agreement is effectively connected with the conduct of a trade or business in
the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and/or (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled to an exemption
from tax on payments pursuant to this Credit Agreement or any of the other
Credit Documents.

            (f) For any period with respect to which a Lender has failed to
provide the Borrower and the Agent with the appropriate form pursuant to Section
3.01 (e) (unless such failure is due to a change in treat, law, or regulation
occurring subsequent to the date on which a form originally was required to be
provided), such Lender shall not be entitled to indemnification under Section
3.01(a) or 3.01(b) with respect to Taxes imposed by the United States; provided,
however, that should a Lender, which is otherwise exempt from withholding tax,
become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes.

            (g) If any Loan Party is required to pay additional amounts to or
for the account of any Lender pursuant to this Section 3.01, then such Lender
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.

      3.02 ILLEGALITY. If any Lender reasonably determines that any Law has made
it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund Eurodollar Rate Committed Loans, or to determine or charge interest rates
based upon the Eurodollar Rate, then, on notice thereof by such Lender to
Borrower through Agent, any obligation of such Lender to make or continue
Eurodollar Rate Committed Loans or to convert Base Rate Committed Loans to
Eurodollar Rate Committed Loans shall be suspended until such Lender notifies
Agent and Borrower that the circumstances giving rise to such determination no
longer exist. Upon receipt of such notice, Borrower shall, upon demand from such
Lender (with a copy to Agent), prepay or, if applicable, convert all Eurodollar
Rate Committed Loans of such Lender to Base Rate Loans, either on the last day
of the Interest Period therefor, if such Lender may lawfully continue to
maintain such Eurodollar Rate Committed Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such Eurodollar Rate Committed
Loans. Upon any such prepayment or conversion, Borrower shall also pay accrued
interest on the amount so prepaid or converted and all amounts due under Section
3.05 in accordance with the terms thereof due to such prepayment or conversion.
Each Lender agrees to designate a different Lending Office if such designation
will avoid the need for such notice and will not, in the good faith judgment of
such Lender, otherwise be materially disadvantageous to such Lender.

      3.03 INABILITY TO DETERMINE RATES. If Agent determines in connection with
any request for a Eurodollar Rate Committed Loan or a conversion to or
continuation thereof for any reason that (a) Dollar deposits are not being
offered to banks in the London interbank eurodollar market for the applicable
amount and Interest Period of such Eurodollar Rate Committed Loan, (b) adequate
and reasonable means do not exist for determining the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Committed
Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Committed Loan does not adequately and fairly
reflect the cost to Lenders of funding such Eurodollar Rate Committed Loan,
Agent will promptly so notify Borrower and all Lenders. Thereafter, the
obligation of Lenders to

                                      -27-
<PAGE>

make or maintain Eurodollar Rate Committed Loans shall be suspended until Agent
revokes such notice. Upon receipt of such notice, Borrower may revoke any
pending request for a Borrowing of, conversion to or continuation of Eurodollar
Rate Committed Loans or, failing that, will be deemed to have converted such
request into a request for a Committed Borrowing of Base Rate Loans in the
amount specified therein.

      3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY; RESERVES ON
EURODOLLAR RATE COMMITTED LOANS.

            (a) If any Lender determines that as a result of the introduction of
or any change in or in the interpretation of any Law, or such Lenders compliance
therewith, there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining Eurodollar Rate Committed Loans or (as
the case may be) issuing or participating in Letters of Credit, or a reduction
in the amount received or receivable by such Lender in connection with any of
the foregoing (excluding for purposes of this subsection (a) any such increased
costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to
which Section 3.01 shall govern), (ii) changes in the basis of taxation of
overall net income or overall gross income by the United States or any foreign
jurisdiction or any political subdivision of either thereof under the Laws of
which such Lender is organized or has its Lending Office, and (iii) reserve
requirements utilized, as to Eurodollar Rate Committed Loans, in the
determination of the Eurodollar Rate), then from time to time upon demand of
such Lender (with a copy of such demand to Agent), Borrower shall pay to such
Lender such additional amounts as will compensate such Lender for such increased
cost or reduction. Each Lender agrees to designate a different Lending Office if
such designation will avoid the need for such notice and will not, in the good
faith judgment of such Lender, otherwise be materially disadvantageous to such
Lender.

            (b) If any Lender determines that the introduction of any Law
regarding capital adequacy or any change therein or in the interpretation
thereof, or compliance by such Lender (or its Lending Office) therewith, has the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lenders obligations
hereunder (taking into consideration its policies with respect to capital
adequacy and such Lender's desired return on capital), then from time to time
upon demand of such Lender (with a copy of such demand to Agent), Borrower shall
pay to such Lender such additional amounts as will compensate such Lender for
such reduction.

      3.05 FUNDING LOSSES. Upon demand of any Lender (with a copy to Agent) from
time to time, Borrower shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:

            (a) any continuation, conversion, payment or prepayment of any Loan
other than a Base Rate Loan or the Term Loan on a day other than the last day of
the Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise); or

            (b) any failure by Borrower (for a reason other than the failure of
such Lender to make a Loan) to prepay, borrow, continue or convert any Loan
other than a Base Rate Loan or the Term Loan on the date or in the amount
notified by Borrower,

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.
Borrower shall also pay any customary administrative fees charged by such Lender
in connection with the foregoing.

For purposes of calculating amounts payable by Borrower to Lenders under this
Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate
Committed Loan made by it at the Eurodollar Base Rate used in determining the
Eurodollar Rate for such Loan by a matching deposit or other borrowing in the
London interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such Eurodollar Rate Committed Loan was in fact so
funded.

      3.06 PREPAYMENT OF TERM LOAN. In the event Borrower prepays the Term Loan,
whether voluntarily, by acceleration or otherwise, in addition to all other
amounts due hereunder, Borrower shall promptly pay each

                                      -28-
<PAGE>

Lender according to such Lender's Pro Rata Share of the Term Loan Commitment, a
prepayment fee (the "Prepayment Fee"). The Prepayment Fee shall be an amount
equal to the present value of the product of: (i) the difference (but not less
than zero) between (a) the Treasuries Rate applicable to the principal amount of
the Term Loan which is being prepaid, and (b) the return which Lenders could
obtain if they used the amount of such prepayment of principal to purchase at
bid price regularly quoted securities issued by the United States having a
maturity date most closely coinciding with the Maturity Date and such securities
were held by Lenders until the Maturity Date (the "Yield Rate"); (ii) a
fraction, the numerator of which is the number of days in the period between the
date of prepayment and the Maturity Date and the denominator of which is 360;
and (iii) the amount of the principal so prepaid (except in the event that
principal payments are required and have been made as scheduled under the terms
of the Term Loan, then an amount equal to the lesser of (A) the amount prepaid
or (B) 50% of the sum of (1) the amount prepaid and (2) the amount of principal
scheduled under the terms of the Term Loan at the Maturity Date). As used
herein, "present value" is determined by discounting the above product to
present value using the Yield Rate as the annual discount factor.

      3.07 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION. A certificate of
Agent or any Lender claiming compensation under this Article III and setting
forth the calculation of the additional amount or amounts to be paid to it
hereunder shall be delivered with any such claim and shall be conclusive in the
absence of manifest error. In determining such amount, Agent or such Lender may
use any reasonable averaging and attribution methods.

      3.08 SURVIVAL. All of Borrowers obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.

ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

      4.01 CONDITIONS OF INITIAL CREDIT EXTENSION. The obligation of each Lender
to make its initial Credit Extension hereunder is subject to satisfaction of the
following conditions precedent:

            (a) Agent's receipt of the following, each of which shall be
originals or facsimiles (followed promptly by originals) unless otherwise
specified, each property executed by a Responsible Officer of the signing Loan
Party, each dated the Closing Date (or, in the case of certificates of
governmental officials, a recent date before the Closing Date) and each in form
and substance satisfactory to Agent and its legal counsel:

                  (i) executed counterparts of this Agreement, all Collateral
      Documents and the Guaranty, sufficient in number for distribution to
      Agent, each Lender and Borrower;

                  (ii) a Note executed by Borrower in favor of each Lender
      requesting a Note;

                  (iii) fully executed copies of the Gekko Acquisition
      Documents;

                  (iv) such certificates of resolutions or other action,
      incumbency certificates and/or other certificates of Responsible Officers
      of each Loan Party as Agent may require evidencing the identity, authority
      and capacity of each Responsible Officer thereof authorized to act as a
      Responsible Officer in connection with this Agreement and the other Loan
      Documents to which such Loan Party is a party;

                  (v) such documents and certificates as Agent may reasonably
      require to evidence that each Loan Party is duly organized or formed and
      that Borrower and each Guarantor is, validly existing, in good standing
      and qualified to engage in business in each jurisdiction (including the
      provinces of Canada) where its ownership, lease or operation of properties
      or the conduct of its business requires such qualification, except to the
      extent that failure to do so could not reasonably be expected to have a
      Material Adverse Effect;

                  (vi) an opinion of counsel to the Loan Parties acceptable to
      Agent, addressed to Agent and each Lender, as to such matters concerning
      the Loan Parties and the Loan Documents in form and substance satisfactory
      to Agent; provided, however, that no opinion of counsel shall be required
      in

                                      -29-
<PAGE>

      respect of any documents that are governed by any law other than the
      Federal laws of the United States of America, the laws of the State of
      California and the laws of the United Kingdom.

                  (vii) a certificate signed by a Responsible Officer of
      Borrower certifying (A) that the conditions specified in Sections 4.02(a)
      and (b) have been satisfied, (B) that there has been no event or
      circumstance since January 31, 2004 that has had or could reasonably be
      expected to have a Material Adverse Effect, and (C) a calculation of the
      financial covenants set forth in Section 6.12 as of the last day of the
      fiscal quarter of Borrower most recently ended prior to the Closing Date;

                  (viii) evidence that all insurance required to be maintained
      pursuant to the Loan Documents has been obtained and is in effect; and

                  (ix) such other assurances, certificates, documents, consents
      evidence of perfection of all Liens securing the Obligations(in the
      applicable province of Canada, under the PPSA or similar statute, in the
      United Kingdom, and in each applicable state of the U. S.) and opinions as
      the Agent or the Required Lenders reasonably may require.

            (b) Any fees required to be paid on or before the Closing Date shall
have been paid.

            (c) Unless waived by Agent, Borrower shall have paid all Attorney
Costs of Agent to the extent invoiced prior to or on the Closing Date, plus such
additional amounts of Attorney Costs as shall constitute its reasonable estimate
of Attorney Costs incurred or to be incurred by it through the dosing
proceedings (provided that such estimate shall not thereafter preclude a final
settling of accounts between Borrower and Agent).

            (d) The Closing Date shall have occurred on or before July 6, 2004.

            (e) Agent shall have received, in form and substance satisfactory to
it, such other assurances, certificates, documents or consents related to the
foregoing as Agent or the Required Lenders reasonably may require; provided,
however, that Agent shall have received, on or before forty-five (45) days from
the Closing Date, the fully executed (i) Real Estate Collateral Documents, and
(ii) Control Agreements with respect to the Controlled Accounts.

      4.02 CONDITIONS TO ALL CREDIT EXTENSIONS AND CONVERSIONS AND
CONTINUATIONS. The obligation of each Lender to honor any Request for Credit
Extension is subject to the following conditions precedent:

            (a) The representations and warranties of Borrower and each other
Loan Party contained in Article V or any other Loan Document, or which are
contained in any document furnished at any time under or in connection herewith,
shall be true and correct on and as of the date of such Credit Extension,
conversion or continuation, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they shall be
true and correct as of such earlier date, and except that for purposes of this
Section 4.02, the representations and warranties contained in subsections (a)
and (b) of Section 5.05 shall be deemed to refer to the most recent statements
furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.

            (b) No Default shall exist, or would result from such proposed
Credit Extension, conversion or continuation.

            (c) Agent shall have received a Request for Credit Extension in
accordance with the requirements hereof.

            (d) Agent shall have received, in form and substance satisfactory to
it, such other assurances, certificates, documents or consents related to the
foregoing as Agent or the Required Lenders reasonably may require.

                                      -30-
<PAGE>

      Each Request for Credit Extension submitted by Borrower shall be deemed to
be a representation and warranty that the conditions specified in Sections
4.02(a) and (b) have been satisfied on and as of the date of the applicable
Credit Extension.

ARTICLE V. REPRESENTATIONS AND WARRANTIES

      Borrower represents and warrants to Agent, the U.K. Security Trustee and
Lenders that:

      5.01 EXISTENCE, QUALIFICATION AND POWER, COMPLIANCE WITH LAWS. Each Loan
Party (a) is duly organized or formed, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or organization, (b) has
all requisite power and authority and all requisite governmental licenses,
authorizations, consents and approvals to (i) own its assets and carry on its
business and (ii) execute, deliver, and perform its obligations under the Loan
Documents to which it is a party, and (c) is duly qualified and is licensed and
in good standing under the Laws of each jurisdiction (including the provinces of
Canada) where its ownership, lease or operation of properties or the conduct of
its business requires such qualification or licenses, except in each case
referred to in clause (b)(i) or (c), to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect.

      5.02 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is
party, have been duly authorized by all necessary corporate or other
organizational action, and do not and will not (a) contravene the terms of any
of such Person's Organization Documents; (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, (i) any material
Contractual Obligation to which such Person is a party or (ii) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or its property is subject; or (c) violate any Law.

      5.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document except for
filings related to perfection of Liens.

      5.04 BINDING EFFECT. This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered
by each Loan Party that is party thereto. This Agreement constitutes, and each
other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms.

      5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT.

            (a) The Audited Financial Statements (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; and (iii) show all material indebtedness and other liabilities,
direct or contingent, of Borrower and its Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Indebtedness.

            (b) The unaudited consolidated financial statements of Borrower and
its Subsidiaries dated April 30, 2004, and the unaudited financial statements of
Gekko dated May 31, 2004, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal quarter ended on
that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; and (ii) fairly present the financial condition of Borrower and its
Subsidiaries (and as such relate to Gekko, Gekko) as of the date thereof and
their results of operations for the period covered thereby, subject in the case
of clauses (i) and (ii), to the absence of footnotes and to normal year-end
audit adjustments.

                                      -31-
<PAGE>

            (c) Since January 31, 2004, there has been no event or circumstance,
either individually or in the aggregate, that has had or could reasonably be
expected to have a Material Adverse Effect.

      5.06 LITIGATION. Except as specifically disclosed in Schedule 5.06 hereto,
there are no actions, suits, proceedings, claims or disputes pending or, to the
knowledge of Borrower, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against Borrower or any
of its Subsidiaries or against any of their properties or revenues that (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby, and, if arising after the Closing
Date, in which there is a reasonably possibility of an adverse result or (b)
either individually or in the aggregate, if determined adversely, could
reasonably be expected to have a Material Adverse Effect.

      5.07 NO DEFAULT. Neither Borrower nor any Subsidiary is in default under
or with respect to any Contractual Obligation that could either individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect. No
Default has occurred and is continuing or would result from the consummation of
the transactions contemplated by this Agreement or any other Loan Document.

      5.08 OWNERSHIP OF PROPERTY; LIENS. Each of Borrower and each Subsidiary
has good record and marketable title in fee simple to, or valid leasehold
interests in, all real property necessary in the ordinary conduct of its
business, except for such defects in title as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect The property
of Borrower and its Subsidiaries is subject to no Liens, other than Liens
permitted by Section 7.01.

      5.09 ENVIRONMENTAL COMPLIANCE. Borrower and its Subsidiaries conduct in
the ordinary course of business a review of the effect of existing Environmental
Laws and claims alleging potential liability or responsibility for violation of
any Environmental Law on their respective businesses, operations and properties,
and as a result thereof Borrower has reasonably concluded that, except as
specifically disclosed in Schedule 5.09 hereto, such Environmental Laws and
claims could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

      5.10 INSURANCE. The properties of Borrower and its Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates
of Borrower, in such amounts, after giving effect to any self-insurance
compatible with the following standards, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where Borrower or the applicable
Subsidiary operates.

      5.11 TAXES. Borrower and its Subsidiaries have filed all Federal, state,
provincial, municipal and other material tax returns and reports required to be
filed, and have paid all Federal, state, provincial, municipal and other
material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.

      5.12 ERISA COMPLIANCE.

            (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, the PBA and other Federal, state, or
provincial Laws, as applicable. Each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the IRS or an application for such a letter is currently being processed by the
IRS with respect thereto and, to the best knowledge of Borrower, nothing has
occurred which would prevent, or cause the loss of, such qualification. Borrower
and each ERISA Affiliate have made all required contributions to each Plan when
due, and no application for a funding waiver or an extension of any amortization
period has been made with respect to any Plan.

            (b) There are no pending or, to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could reasonably be expected

                                      -32-
<PAGE>

to have a Material Adverse Effect There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan that
has resulted or could reasonably be expected to result in a Material Adverse
Effect.

            (c) (i) No ERISA Event has occurred or is reasonably expected to
occur, (ii) no Pension Plan has any material Unfunded Pension Liability; (iii)
neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA and
liabilities immaterial in amount); (iv) neither Borrower nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any material liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Sections 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; (v) neither Borrower nor any ERISA Affiliate
has engaged in a transaction that could be subject to Sections 4069 or 4212(c)
of ERISA; and (vi) no Lien has arisen, choate or inchoate, in respect of the
Borrower or its property in connection with any Plan (save for contributions not
yet due).

      5.13 SUBSIDIARIES. As of the Closing Date, Borrower has no Subsidiaries
other than those specifically disclosed in Part (a) of Schedule 5.13 and has no
equity investments in any other corporation or entity other than those
specifically disclosed in Part (b) of Schedule 5.13.

      5.14 DISCLOSURE. Borrower has disclosed to Agent and Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. No report, financial statement, certificate or other
information furnished (whether in writing or orally) by or on behalf of any Loan
Party in connection with any Loan Document to Agent or any Lender in connection
with the transactions contemplated hereby and the negotiation of this Agreement
or delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state (when
included with all other information so furnished) any material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

      5.15 COMPLIANCE WITH LAWS. Borrower, each Subsidiary and each other Loan
Party is in compliance in all material respects with the requirements of all
Laws and all orders, writs, injunctions and decrees applicable to it or to its
properties, except in such instances in which (a) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

      5.16 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT.

            (a) Borrower is not engaged and will not engage, principally or as
one of its important activities, in the business of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the FRB), or
extending credit for the purpose of purchasing or carrying margin stock.

            (b) None of Borrower, any Person Controlling Borrower, or any
Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a `holding company," within the meaning of the Public Utility Holding Company
Act of 1935, or (ii) is or is required to be registered as an "investment
company" under the Investment Company Act of 1940.

      5.17 RIGHTS IN COLLATERAL; PRIORITY OF LIENS. Upon the proper filing of
UCC and PPSA financing statements or other equivalent registration forms, as the
case may be, and the taking of the other actions required by the Required
Lenders (including registration of the U.K. Security Documents at the U.K.
companies registry), the Liens granted pursuant to the Collateral Documents will
constitute valid and enforceable first, prior and perfected Liens on the
Collateral in favor of Agent, or in the case of the U.K. Security Documents, the
U.K. Security Trustee, in each case, for the ratable benefit of Agent and
Lenders subject only to Liens permitted under Section 7.01.

                                      -33-
<PAGE>

ARTICLE VI. AFFIRMATIVE COVENANTS

      So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, Borrower shall, and shall (except in the case of the
covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11) cause each Subsidiary
to:

      6.01 FINANCIAL STATEMENTS. Deliver to Agent a sufficient number of copies
for delivery by Agent to each Lender, of the following, in form and detail
satisfactory to Agent and the Required Lenders:

            (a) as soon as available, but in any event within 90 days after the
end of each fiscal year of Borrower, a consolidated balance sheet of Borrower
and its Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such fiscal year (including, without limitation, reports relating to
Callaway sales), setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and prepared in accordance
with GAAP, audited and accompanied by a report and opinion of an independent
certified public accountant of nationally recognized standing reasonably
acceptable to the Required Lenders, which report and opinion shall be prepared
in accordance with generally accepted auditing standards and shall not be
subject to any "going concern" or like qualification or exception or any
qualification or exception as to the scope of such audit;

            (b) as soon as available, but in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of Borrower,
a consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated statements of income or
operations, and cash flows for such fiscal quarter and for the portion of
Borrowers fiscal year then ended (including, without limitation, reports
relating to Calloway sales) setting forth in each case in comparative form the
figures for the corresponding fiscal quarter of the previous fiscal year and the
corresponding portion of the previous fiscal year, all in reasonable detail and
certified by a Responsible Officer of Borrower as fairly presenting the
financial condition, results of operations, and cash flows of Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.

      6.02 CERTIFICATES; OTHER INFORMATION. Deliver to Agent a sufficient number
of copies for delivery to each Lender, of the following, in form and detail
satisfactory to Agent and the Required Lenders;

            (a) concurrently with the delivery of the financial statements
referred to in Section 6.01(a), a certificate of its independent certified
public accountants stating that in making the examination necessary for its
certification of such financial statements no knowledge was obtained of any
Default arising under Section 6.12 or, if any such Default shall exist, stating
the nature and status of such event;

            (b) concurrently with the delivery of the financial statements
referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate
signed by a Responsible Officer of Borrower;

            (c) promptly after any request by Agent or any Lender, copies of any
audit reports, management letters or recommendations submitted to the board of
directors (or the audit committee of the board of directors) of Borrower by
independent accountants in connection with the accounts or books of Borrower or
any Subsidiary, or any audit of any of them;

            (d) promptly after the same are available, and in any event within
15 days of filing; copies of each annual report, proxy or financial statement or
other report or communication sent to the stockholders of Borrower, and copies
of all annual, regular, periodic and special reports and registration statements
which Borrower may file or be required to file with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, and
not otherwise required to be delivered to Agent pursuant hereto;

            (e) within 30 days of the Borrowers fiscal year end, the Borrower's
financial projections or budget by quarter for the following fiscal year, and

                                      -34-
<PAGE>

            (f) promptly, such additional information regarding the business,
financial or corporate affairs of Borrower or any Subsidiary, or compliance with
the terms of the Loan Documents, as Agent or any Lender may from time to time
reasonably request.

      6.03 NOTICES. PROMPTLY NOTIFY AGENT AND EACH LENDER:

            (a) of the occurrence of any Default;

            (b) any lawsuit in which there is a reasonable possibility of a
settlement or adverse result of greater than Five Hundred Thousand Dollars
($500,000) against the Borrower or any Subsidiary;

            (c) any dispute, litigation, investigation, proceeding or suspension
between Borrower or any Subsidiary and any Governmental Authority;

            (d) the commencement of, or any material development in, any
litigation or proceeding affecting Borrower or any Subsidiary, including
pursuant to any applicable Environmental Laws;

            (e) the occurrence of any ERISA Event or Termination Event; and

            (f) of any material change in accounting policies or financial
reporting practices by Borrower or any Subsidiary.

            (g) any actual contingent liabilities of Borrower or any Subsidiary
and any such contingent liabilities which are reasonably foreseeable, where such
liabilities would not be included in the financial statements referenced in
Sections 6.01(a) and (b) and are in excess of One Million Dollars ($1,000,000)
in the aggregate.

      Each notice pursuant to this Section shall be accompanied by a statement
of a Responsible Officer of Borrower setting forth details of the occurrence
referred to therein and stating what action Borrower has taken and proposes to
take with respect thereto. Each notice pursuant to Section 6.03(a) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.

      6.04 PAYMENT OF OBLIGATIONS. Pay and discharge as the same shall become
due and payable, all its obligations and liabilities, including (a) all tax
liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by Borrower or such Subsidiary; (b) all other lawful claims which, if
unpaid, would by law become a Lien upon its property that is not permitted under
Section 7.01; and (c) all Indebtedness, as and when due and payable, which, if
unpaid, would constitute an Event of Default under Section 8.01 (e) but subject
to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.

      6.05 PRESERVATION OF EXISTENCE, ETC. (a) Preserve, renew and maintain in
full force and effect its legal existence and good standing under the Laws of
the jurisdiction of its organization, except in a transaction permitted by
Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (c) preserve
or renew all of its registered patents, trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.

      6.06 MAINTENANCE OF PROPERTIES. (a) Maintain, preserve and protect all of
its material properties and equipment necessary in the operation of its business
in good working order and condition, ordinary wear and tear excepted; (b) make
all necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.

                                      -35-
<PAGE>

      6.07 MAINTENANCE OF INSURANCE. Maintain with financially sound and
reputable insurance companies not Affiliates of Borrower, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts (after giving effect to any self-insurance compatible
with the following standards) as are customarily carried under similar
circumstances by such other Persons and providing for not less than 30 days'
prior notice to Agent of termination, lapse or cancellation of such insurance.

      6.08 COMPLIANCE WITH LAWS. Comply in all material respects with the
requirements of all Laws, and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted; or (b)
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.

      6.09 BOOKS AND RECORDS.

            (a) Maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied shall be made
of all financial transactions and matters involving the assets and business of
Borrower or such Subsidiary, as the case may be; and (b) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over Borrower or such
Subsidiary, as the case may be. Borrower shall maintain at all times books and
records pertaining to the Collateral in such detail, form and scope as Agent or
any Lender shall reasonably require.

      6.10 INSPECTION RIGHTS. Permit representatives and independent contractors
of Agent and each Lender to visit and inspect any of its properties, to examine
its corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss on a confidential basis its affairs,
finances and accounts with its directors, officers, and independent public
accountants, all at the expense of Borrower and at such reasonable times during
normal business hours and as often as may be reasonably desired, upon seven days
advance written notice to Borrower, provided, however, that when a Default
exists Agent or any Lender (or any of their respective representatives or
independent contractors) may do any of the foregoing at the expense of Borrower
at any time during normal business hours and without advance notice.

      6.11 USE OF PROCEEDS. Use the proceeds of the Credit Extensions to
refinance existing indebtedness to Bank of America, N.A., Union Bank and Bank of
the West, to consummate the Gekko Acquisition, to provide working capital, for
the issuance of Letters of Credit, for capital expenditures and for other
general corporate purposes not in contravention of any Law or of any Loan
Document.

      6.12 FINANCIAL COVENANTS.

            (a) Tangible Net Worth. Maintain on a consolidated basis Tangible
Net Worth equal to at least the sum of the following:

                  (i) Seventy Four Million Dollars ($74,000,000); plus

                  (ii) the sum of 90% of net income after income taxes (without
      subtracting losses) earned in each quarterly accounting period commencing
      after April 30, 2004; plus

                  (iii) the net proceeds from any equity securities issued after
      the date of this Agreement.

            (b) EBITDA. Maintain on a consolidated basis EBITDA (determined on a
rolling four quarter basis) equal to at least the amounts indicated for each
period specified below:

                                      -36-
<PAGE>

<TABLE>
<CAPTION>
      Period                                  Amounts
      ------                                  -------
<S>                                          <C>
From April 30, 2004
through October 30, 2004                     $16,500,000

From October 31, 2004
through October 30, 2005                     $19,000,000

From October 31, 2005
through October 30, 2006                     $22,000,000

From October 31, 2006
through October 30, 2007                     $23,000,000

From October 31, 2007
through October 30, 2008                     $25,500,000

From October 31, 2008
and thereafter                               $27,000,000
</TABLE>

            (c) Quick Ratio. Maintain at all times on a consolidated basis a
ratio of Quick Assets to current liabilities (including the Outstanding Amount
of Loans and L/C Obligations) of at least 1.00:1.00, except for the fiscal
quarters ending January 31 and April 30, as to which the ratio of Quick Assets
to current liabilities (including the Outstanding Amount of Loans and L/C
Obligations) shall be at least 0.75:1.00.

            (d) Lease and Rental Expense. Not to permit the aggregate payments
due in any fiscal year under all operating leases for personal property in
connection with the Borrower's new distribution center located in Oceanside,
California, to exceed One Million Nine Hundred Fifty Thousand Dollars
($1,950,000).

            (e) Capital Expenditures. Not to spend or incur obligations
(including the total amount of any capital leases) to acquire fixed assets for
more than Five Million Dollars ($5,000,000) in any single fiscal year on a
consolidated basis; provided, an additional Twenty Million Dollars ($20,000,000)
may be incurred during Fiscal Year 2004 for the acquisition of real property and
equipment in connection with the Borrower's new distribution center located in
Oceanside, California.

            (f) Clean Down Period. Reduce the amount of the Revolving Loan
outstanding under this Agreement to not more than Fifteen Million Dollars
($15,000,000) for a period of at least thirty (30) consecutive days during each
12-month fiscal year period, commencing with fiscal year 2004 and continuing
each fiscal year thereafter.

            (g) Fixed Charge Coverage Ratio. Not to permit the Fixed Charge
Coverage Ratio as of the last day of any fiscal quarter to be less than (i) 1.10
to 1.00 for the quarter ending July 31, 2004, and (ii) 1.25 to 1.00 thereafter.

      6.13 ADDITIONAL GUARANTORS. Notify Agent at the time that any Person
becomes a Subsidiary, and promptly thereafter (and in any event within 30 days),
cause such Person to (a) become a Guarantor by executing and delivering Agent a
counterpart of the Guaranty or such other document as Agent shall deem
appropriate for such purpose, and (b) deliver to Agent documents of the types
referred to in clauses (iii) and (iv) of Section 4.01(a) and favorable opinions
of counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to in
clause (a)), all in form, content and scope reasonably satisfactory to Agent.
Notwithstanding the foregoing, as of the Closing Date, Ashworth EDC shall not be
a Guarantor; provided that Borrower shall use its best efforts to cause Ashworth
EDC to become a Guarantor hereunder within forty-five (45) days of the Closing
Date.

      6.14 COLLATERAL RECORDS. Borrower agrees to execute and deliver promptly,
and to cause each other Loan Party to execute and deliver promptly, to Agent,
from time to time, solely for Agent's convenience in maintaining a record of the
Collateral, such written statements and schedules as Agent may reasonably
require designating, identifying or describing the Collateral. The failure by
Borrower or any other Loan Party, however, to

                                      -37-
<PAGE>

promptly give Agent such statements or schedules shall not affect, diminish,
modify or otherwise limit the Liens on the Collateral granted pursuant to the
Collateral Documents.

      6.15 SECURITY INTERESTS. Borrower shall, and shall cause each other Loan
Party to, defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein. Borrower shall, and shall
cause each other Loan Party to, comply with the requirements of all state,
provincial and federal laws in order to grant to Agent or, as the case may be,
the U.K. Security Trustee and Lenders valid and perfected first priority
security interests in the Collateral, with perfection, in the case of any
investment property or deposit account, being effected by giving Agent or, as
the case may be, the U.K. Security Trustee control of such investment property
or deposit account, rather than by the filing of a UCC or PPSA financing
statement (or other equivalent registration form, as the case may be) with
respect to such investment property. Agent is hereby authorized by Borrower to
file any UCC or PPSA financing statements (or other equivalent registration
form, as the case may be) covering the Collateral whether or not Borrower's
signatures appear thereon. Borrower shall, and shall cause each other Loan
Party, to do whatever Agent or U.K. Security Trustee may reasonably request,
from time to time, to effect the purposes of this Agreement and the other Loan
Documents, including filing notices of liens, UCC or PPSA financing statements
(or other equivalent registration form, as the case may be), fixture filings and
amendments, renewals and continuations thereof; cooperating with Agent's,
representatives or U.S. Security Trustee's representatives; keeping stock
records; obtaining waivers from landlords and mortgagees and from warehousemen
and their landlords and mortgages; and, paying claims which might, if unpaid,
become a Lien on the Collateral not permitted under this Agreement.

      6.16 DISSOLUTION OF ASHWORTH STORE III, INC.. Borrower shall cause Store
III formally to be dissolved within ninety (90) days of the Closing Date. Prior
to the date of such dissolution, Store III shall neither hold nor receive any
assets, debt or equity, nor engage in any business other than winding up and
dissolving (and any activity directly related thereto). The certificate(s) for
the shares of stock of Store III shall be returned by Agent to Borrower upon
receipt by Agent of evidence satisfactory to Agent of the dissolution of Store
III.

ARTICLE VII. NEGATIVE COVENANTS

      So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly:

      7.01 LIENS. Create, incur, assume or suffer to exist, any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired, other
than the following:

            (a) Liens pursuant to any Loan Document;

            (b) Liens existing on the date hereof and listed on Schedule 7.01
hereto and any renewals or extensions thereof, provided that the property
covered thereby is not increased and any renewal or extension of the obligations
secured or benefited thereby is permitted by Section 7.03(b):

            (c) Liens for taxes not yet due or which are being contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
with respect thereto are maintained on the books of the applicable Person in
accordance with GAAP;

            (d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings diligently conducted, if adequate
reserves with respect thereto are maintained on the books of the applicable
Person in accordance with GAAP;

            (e) pledges or deposits in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation, other than any Lien imposed by ERISA;

                                      -38-
<PAGE>

            (f) deposits to secure the performance of bids, trade contracts and
leases (other than Indebtedness), statutory obligations, surety bonds (other
than bonds related to judgments or litigation), performance bonds and other
obligations of a like nature incurred in the ordinary course of business;

            (g) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;

            (h) Liens securing judgments for the payment of money not
constituting an Event of Default under Section 8.01 (h) or securing appeal or
other surety bonds relating to such judgments; and

            (i) liens securing Indebtedness permitted under Section 7.03(d);
provided that (i) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (ii) the Indebtedness secured
thereby does not exceed the cost or fair market value, whichever is lower, of
the property being acquired on the date of acquisition.

      7.02 INVESTMENTS. Make any Investments, except:

            (a) Investments held by Borrower or such Subsidiary in the form of
cash equivalents or short-term marketable debt securities;

            (b) advances to officers, directors and employees of Borrower and
Subsidiaries in an aggregate amount not to exceed $850,000 at any time
outstanding, for travel, entertainment, relocation and analogous ordinary
business purposes;

            (c) Investments of Borrower in any wholly-owned Subsidiary and
Investments of any wholly-owned Subsidiary in Borrower or in another
wholly-owned Subsidiary;

            (d) Investments consisting of extensions of credit in the nature of
accounts receivable or notes receivable arising from the grant of trade credit
in the ordinary course of business, and Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss;

            (e) Guarantees permitted by Section 7.03;

            (f) Investments by Borrower (without duplication with any
Investments permitted hereunder) in connection with the acquisition of the
membership interests of Gekko, not to exceed $30,000,000; and

            (g) Additional Investments which do not exceed $1,000,000 in the
aggregate at any time; provided that at the time of each Investment no Event of
Default exists or would exist after giving effect to such Investment.

      7.03 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, except:

            (a) Indebtedness under the Loan Documents;

            (b) Indebtedness outstanding on the date hereof and listed on
Schedule 7.03 hereto and any refinancings, refundings, renewals or extensions
thereof; provided that the amount of such Indebtedness is not increased at the
time of such refinancing, refunding, renewal or extension except by an amount
equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred, in connection with such refinancing and by an
amount equal to any existing commitments unutilized thereunder;

            (c) Guarantees of Borrower or any Subsidiary in respect of
Indebtedness otherwise permitted hereunder of Borrower or any Subsidiary;

                                      -39-
<PAGE>

            (d) Indebtedness in respect of capital leases and purchase money
obligations for fixed assets within the limitations set forth in Section
7.01(i); provided, however, that the aggregate amount of all such Indebtedness
outstanding (excluding those covered in Section 6.12(d) of this Agreement) shall
not exceed $3,000,000 in any fiscal year.

      7.04 FUNDAMENTAL CHANGES. Merge, amalgamate, dissolve, liquidate,
consolidate with or into, another Person, or Dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except that, so long as no Default exists or would result therefrom:

            (a) any Subsidiary may merge or amalgamate with (i) Borrower,
provided that Borrower shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries, provided that when any wholly-owned Subsidiary
is merging or amalgamating with another Subsidiary, the wholly-owned Subsidiary
shall be the continuing or surviving Person, and, provided further that if a
Guarantor is merging or amalgamating with another Subsidiary, the Guarantor
shall be the continuing or surviving Person; and

            (b) any Subsidiary may dispose of all or substantially all of its
assets (upon voluntary liquidation or otherwise), to Borrower or to another
Subsidiary; provided that if the transferor in such a transaction is a
wholly-owned Subsidiary, then the transferee must also be a wholly-owned
Subsidiary, and provided further that if the transferor of such assets is a
Guarantor, the transferee thereof must either be Borrower or a Guarantor.

      7.05 DISPOSITIONS. Make any Disposition or enter into any agreement to
make any Disposition, except:

            (a) Dispositions of obsolete or worn out property, whether now owned
or hereafter acquired, in the ordinary course of business;

            (b) Dispositions of inventory in the ordinary course of business;

            (c) Dispositions of equipment or real property to the extent that
(i) such property is exchanged for credit against the purchase price of similar
replacement property, or (ii) the proceeds of such Disposition are reasonably
promptly applied to the purchase price of such replacement property;

            (d) Dispositions of property by any Subsidiary to Borrower or to a
wholly-owned Subsidiary, provided that if the transferor of such property is a
Guarantor, the transferee thereof must either be Borrower or a Guarantor,

            (e) Dispositions permitted by Section 7.04;

            (f) Additional Dispositions in the ordinary course of business and
on ordinary and reasonable business terms, not to exceed $750,000 in any fiscal
year;

            (g) Dispositions of the properties listed on Schedule 7.05; and

provided, however, that any Disposition pursuant to clauses (a) through (e)
shall be for fair market value, except for the transfer of inventory from the
Borrower to its retail stores within the United States.

      7.06 RESTRICTED PAYMENTS. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that:

            (a) each Subsidiary may make Restricted Payments to Borrower and to
wholly-owned Subsidiaries (and, in the case of a Restricted Payment by a
non-wholly-owned Subsidiary, to Borrower and any Subsidiary and to each other
owner of capital stock or other equity interests of such Subsidiary on a pro
rata basis based on their relative ownership interests);

                                      -40-
<PAGE>

            (b) Borrower and each Subsidiary may declare and make dividend
payments or other distributions payable solely in the common stock or other
common equity interests of such Person;

            (c) Borrower and each Subsidiary may purchase, redeem or otherwise
acquire shares of its common stock or other common equity interests or warrants
or options to acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock or other common
equity interests; and

            (d) Borrower may purchase, redeem or otherwise acquire shares of its
common stock in an aggregate amount not exceeding $1,000,000 per year, provided
that no Event of Default exists or would exist after giving effect thereto.

      7.07 CHANGE IN NATURE OF BUSINESS. Engage in any material line of business
substantially different from those lines of business conducted by Borrower and
its Subsidiaries on the date hereof.

      7.08 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind
with any Affiliate of Borrower, whether or not in the ordinary course of
business, other than on fair and reasonable terns substantially as favorable to
Borrower or such Subsidiary as would be obtainable by Borrower or such
Subsidiary at the time in a comparable arm's length transaction with a Person
other than an Affiliate, provided that, to the extent permitted under applicable
law, the foregoing restriction shall not apply to transactions between or among
Borrower and any of its wholly-owned Subsidiaries or between and among any
wholly-owned Subsidiaries, advances permitted under Section 7.02(b) and
reasonable and customary employee compensation and benefits, directors fees and
indemnification of directors, officers and employees.

      7.09 MARGIN REGULATIONS. Use the proceeds of any Credit Extension, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or cant" margin stock (within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System of the United States) or to extend
credit to others for the purpose of purchasing or carrying margin stock or to
refund indebtedness originally incurred for such purpose.

      7.10 SUSPENSION OF BUSINESS. Voluntarily suspend its business for more
than seven (7) days in any 30-day period.

ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES

      8.01 EVENTS OF DEFAULT. Any of the following shall constitute an Event of
Default:

            (a) Non-Payment. Borrower or any other Loan Party fails to pay (i)
when and as required to be paid herein, any amount of principal of any Loan, or
any L/C Obligation, or (ii) within three days after the same becomes due, any
interest on any Loan or on any L/C Obligation, or any commitment or other fee
due hereunder, or (iii) within five days after the same becomes due, any other
amount payable hereunder or under any other Loan Document; or

            (b) Specific Covenants. Borrower fails to perform or observe any
term, covenant or agreement contained in any of Section 6.01. 6.02, 6.03, 6.05
(as to existence of Borrower), 6.10, 6.12 or Article VII; or

            (c) Other Defaults. Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days or any default or event of default occurs under
any other Loan Document; or

            (d) Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of
Borrower or any other Loan Party herein, in any other Loan Document, or in any
document delivered in connection herewith or therewith shall be incorrect or
misleading in any material respect when made or deemed; or

                                      -41-
<PAGE>

            (e) Cross-Default. Borrower or any Subsidiary (A) fails to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee
(other than Indebtedness hereunder) having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
the Threshold Amount, or (B) fails to observe or perform any other agreement or
condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause, or to
permit the holder or holders of such Indebtedness or the beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an
offer to repurchase, prepay, defease or redeem such Indebtedness to be made
prior to its stated maturity, or such Guarantee to become payable or cash
collateral in respect thereof to be demanded; or

            (f) Insolvency Proceedings, Etc. Any Loan Party or any of its
Subsidiaries institutes or consents to the institution of any proceeding (by
petition, proposal, or otherwise) under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
monitor, administrator, rehabilitator or similar officer for it or for all or
any material part of its property; or any receiver, trustee, custodian,
conservator, liquidator, monitor, administrator, rehabilitator or similar
officer is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding (by petition, proposal, or otherwise) under any Debtor Relief Law
relating to any such Person or to all or any material part of its property is
instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding or a warrant of attachment, execution, writ of seizure or seizure and
sale or similar process shall be issued against any substantial portion of its
property; or

            (g) Inability to Pay Debts: Attachment. (i) Borrower or any
Subsidiary becomes unable or admits in writing its inability or fails generally
to pay its debts as they become due, or (ii) any writ or warrant of attachment
or execution or similar process is issued or levied against all or any material
part of the property of any such Person and is not released, vacated or fully
bonded within 30 days after its issue or levy; or

            (h) Judgments. There is entered against Borrower or any Subsidiary
(i) a final judgment or order for the payment of money in an aggregate amount
exceeding the Threshold Amount (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute coverage), or
(ii) any one or more non-monetary final judgments that have, or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
and, in either case, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order, or (B) there is a period of 10 consecutive days
during which a stay of enforcement of such judgment, by reason of a pending
appeal or otherwise, is not in effect; or

            (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of Borrower under applicable law in an aggregate amount in
excess of the Threshold Amount, (ii) Borrower or any ERISA Affiliate fails to
pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of the
Threshold Amount, or (iii) any Lien arises (save for contribution amounts not
yet due) in connection with any Plan; or

            (j) Invalidity of Loan Documents. Any Loan Document, at any time
after its execution and delivery and for any reason other than as expressly
permitted hereunder or satisfaction in full of all the Obligations, ceases to be
in full force and effect; or any Loan Party or any other Person contests in any
manner the validity or enforceability of any Loan Document; or any Loan Party
denies that it has any or further liability or obligation under any Loan
Document, or purports to revoke, terminate or rescind any Loan Document, or any
Lien with respect to any material portion of the Collateral intended to be
secured thereby ceases to be, or, subject to Section 7.01, is not, valid,
perfected and prior to all other Liens or is terminated, revoked or declared
void; or

            (k) Change of Control. There occurs any Change of Control with
respect to Borrower, or

                                      -42-
<PAGE>

            (l) Material Adverse Effect. There occurs any event or circumstance
that has a Material Adverse Effect.

      8.02 REMEDIES UPON EVENT OF DEFAULT. If any Event of Default occurs, Agent
shall, at the request of, or may, with the consent of, the Required Lenders,
take any or all of the following actions:

            (a) declare the commitment of each Lender to make Loans and any
obligation of Agent to make L/C Credit Extensions to be terminated, whereupon
such commitments and obligation shall be terminated;

            (b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower,

            (c) require that Borrower Cash Collateralize the L/C Obligations (in
an amount equal to the then Outstanding Amount thereof); and

            (d) both in its capacity as Agent and U.K. Security Trustee,
exercise on behalf of itself and Lenders all rights and remedies available to it
and Lenders under the Loan Documents or applicable law;

            (e) provided, however, that upon the occurrence of an actual or
deemed entry of an order for relief with respect to Borrower under the
Bankruptcy Code of the United States, the obligation of each Lender to make
Loans and any obligation of Agent to make L/C Credit Extensions shall
automatically terminate, the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable, and the obligation of Borrower to Cash Collateralize the L/C
Obligations as aforesaid shall automatically become effective, in each case
without further act of Agent or any Lender.

      8.03 APPLICATION OF FUNDS. After the exercise of remedies provided for in
Section 8.02 (or after the Loans have automatically become immediately due and
payable and the L/C Obligations have automatically been required to be Cash
Collateralized as set forth in the proviso to Section 8.02), any amounts
received on account of the Obligations shall be applied by Agent in the
following order:

            First, to payment of that portion of the Obligations constituting
      fees, indemnities, expenses and other amounts (including Attorney Costs
      and amounts payable under Article III) payable to Agent in its capacity as
      such;

            Second, to payment of that portion of the Obligations constituting
      fees, indemnities and other amounts (other than principal and interest)
      payable to Lenders (including Attorney Costs and amounts payable under
      Article III), ratably among them in proportion to the amounts described in
      this clause Second payable to them;

            Third, to payment of that portion of the Obligations constituting
      accrued and unpaid interest on the Loans and L/C Borrowings, ratably among
      Lenders in proportion to the respective amounts described in this clause
      Third payable to them;

            Fourth, to payment of that portion of the Obligations constituting
      unpaid principal of the Loans and L/C Borrowings, ratably among Lenders in
      proportion to the respective amounts described in this clause Fourth held
      by them;

            Fifth, to Agent, to Cash Collateralize that portion of L/C
      Obligations comprised of the aggregate undrawn amount of Letters of
      Credit; and

      Last, the balance, if any, after all of the Obligations have been paid in
full, to Borrower or as otherwise required by Law.

                                      -43-
<PAGE>

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Fifth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. If any
amount remains on deposit as Cash Collateral after all Letters of Credit have
either been fully drawn or expired, such remaining amount shall be applied to
the other Obligations, if any, in the order set forth above.

ARTICLE IX. AGENT

      9.01 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
irrevocably appoints, designates and authorizes Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere herein or in any other Loan Document, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender or participant, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent Without
limiting the generality of the foregoing sentence, the use of the term "agent"
herein and in the other Loan Documents with reference to Agent is not intended
to connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable Law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties. All
benefits and immunities provided to Agent in this Article IX shall apply to
Agent as issuer of Letters of Credit with respect to any acts taken or omissions
suffered by Agent in connection with Letters of Credit issued by it or proposed
to be issued by it and the applications and agreements for letters of credit
pertaining to such Letters of Credit, and as additionally provided herein with
respect to Agent as issuer of letters of Credit.

      9.02 DELEGATION OF DUTIES. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties. Agent
shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct

      9.03 LIABILITY OF AGENT. No Agent-Related Person shall (a) be liable for
any action taken or omitted to be taken by any of them under or in connection
with this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct in connection
with its duties expressly set forth herein), or (b) be responsible in any manner
to any Lender or Participant for any recital, statement, representation or
warranty made by any Loan Party or any officer thereof, contained herein or in
any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of any Loan Party or any other party
to any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender or Participant
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party or
any Affiliate thereof.

      9.04 RELIANCE BY AGENT. (a) Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, communication, signature,
resolution, representation, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, electronic mail message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to any Loan
Party), independent accountants and other experts selected by Agent. Agent shall
be fully justified in failing or refusing to take any action under any Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by all Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Lenders (or such greater

                                      -44-
<PAGE>

number of Lenders as may be expressly required by any instance), and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all Lenders.

      (b) For purposes of determining compliance with the conditions specified
in Section 4.01, each Lender that has signed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter required thereunder to be consented to or approved by or
acceptable or satisfactory to a Lender unless Agent shall have received notice
from such Lender prior to the proposed Closing Date specifying its objection
thereto.

      9.05 NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to Agent for the
account of Lenders, unless Agent shall have received written notice from a
Lender or Borrower referring to this Agreement, describing such Default and
stating that such notice is a "notice of default." Agent will notify Lenders of
its receipt of any such notice. Agent shall take such action with respect to
such Default as may be directed by the Required Lenders in accordance with
Article VIII; provided, however, that unless and until Agent has received any
such direction, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable or in the best interest of Lenders.

      9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY AGENT. Each Lender
acknowledges that no Agent-Related Person has made any representation or
warranty to it, and that no act by Agent hereafter taken, including any consent
to and acceptance of any assignment or review of the affairs of any Loan Party
or any Affiliate thereof, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender as to any matter, including
whether Agent-Related Persons have disclosed material information in their
possession. Each Lender represents to Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Loan Parties and their respective
Subsidiaries, and all applicable bank or other regulatory Laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrower and the other Loan Parties hereunder.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower and the other Loan Parties.
Except for notices, reports and other documents expressly required to be
furnished to Lenders by Agent herein, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Loan Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.

      9.07 INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby are consummated, Lenders shall indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan
Party and without limiting the obligation of any Loan Party to do so), pro rata,
and hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no Lender shall
be liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have been caused primarily by
such Agent-Related Person's own gross negligence or willful misconduct; it being
agreed by all Lenders that no action taken in accordance with the directions of
the Required Lenders shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Section. Without limitation of the foregoing,
each Lender shall reimburse Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including Attorney Costs and costs and expenses in
connection with the use of IntraLinks, Inc. or other similar information
transmission systems in connection with this Agreement) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Borrower. The undertaking in
this Section shall survive termination of the Aggregate Commitments, the payment
of all other

                                      -45-
<PAGE>

Obligations and the resignation of Agent.

      9.08 AGENT IN ITS INDIVIDUAL CAPACITY. Union Bank and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with each of the Loan Parties
and their respective Affiliates as though Union Bank were not Agent hereunder
and without notice to or consent of Lenders. Lenders acknowledge that, pursuant
to such activities, Union Bank or its Affiliates may receive information
regarding any Loan Party or its Affiliates (including information that may be
subject to confidentiality obligations in favor of such Loan Party or such
Affiliate) and acknowledge that Agent shall be under no obligation to provide
such information to them. With respect to its Loans, Union Bank shall have the
same rights and powers under this Agreement as any other Lender and may exercise
such rights and powers as though it were not Agent, and the terms "Lender" and
"Lenders" include Union Bank in its individual capacity.

      9.09 SUCCESSOR AGENT. Agent may resign as Agent upon 30 days' written
notice to Lenders and Borrower; provided that any such resignation by Union Bank
shall also constitute its resignation as Agent in its capacity of issuer of
Letters of Credit If Agent resigns under this Agreement, the Required Lenders
shall appoint from among Lenders a successor Agent for Lenders, which successor
Agent shall be consented to by Borrower at all times other than during the
existence of a Default (which consent of Borrower shall not be unreasonably
withheld or delayed). If no successor Agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with
Lenders and Borrower, a successor Agent from among Lenders. Upon the acceptance
of its appointment as successor Agent hereunder, the Person acting as such
successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent (including those in its capacity as issuer of Letters of Credit)
and the term "Agent" shall mean such successor Agent in all such capacities and
the retiring Agent's appointment, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such
retiring Agent or any other Lender, other than the obligation of the successor
Agent to issue letters of credit in substitution for the Letters of Credit, if
any, outstanding at the time of such succession or to make other arrangements
satisfactory to the retiring Agent to effectively assume the obligations of the
retiring Agent with respect to such Letters of Credit After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article IX and Sections
10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement If no successor Agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

      9.10 AGENT MAY FILE PROOFS OF CLAIM. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to any Loan Party,
Agent (irrespective of whether the principal of any Loan or L/C Obligation shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether Agent shall have made any demand on Borrower) shall be
entitled and empowered, by intervention in such proceeding or otherwise:

            (a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans, L/C Obligations and all
other Obligations that are owing and unpaid and to file such other documents as
may be necessary or advisable in order to have the claims of Lenders and Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Agent and their respective agents and counsel and
all other amounts due Lenders and Agent under Sections 2.03(1) and (j), 2.09 and
10.4) allowed in such judicial proceeding; and

            (b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

      and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Lender to make such payments to Agent and, in the event that

                                      -46-
<PAGE>

Agent shall consent to the making of such payments directly to Lenders, to pay
to Agent any amount due for the reasonable compensation, expenses, disbursements
and advances of Agent and its agents and counsel, and any other amounts due
Agent under Sections 2.09 and 10.04.

      Nothing contained herein shall be deemed to authorize Agent to authorize
or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Lender or to authorize Agent to vote in respect of the
claim of any Lender in any such proceeding.

      9.11 GUARANTY MATTERS. Each Lender hereby irrevocably authorizes Agent, at
its option and in its discretion, to release any Guarantor from its obligations
under the Guaranty if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder. Upon request by Agent at any time, each Lender
will confirm in writing Agents authority to release any Guarantor from its
obligations under the Guaranty pursuant to this Section 9.11.

      9.12 COLLATERAL MATTERS(a) Each Lender hereby irrevocably authorizes and
directs Agent to enter into the Collateral Documents for the benefit of such
Lender. Each Lender hereby agrees, and each holder of any Note by the acceptance
thereof will be deemed to agree, that, except as otherwise set forth in Section
10.01, any action taken by the Required Lenders, in accordance with the
provisions of this Agreement or the Collateral Documents, and the exercise by
the Required Lenders of the powers set forth herein or therein, together with
such other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of Lenders. Agent is hereby authorized on behalf of all of
Lenders, without the necessity of any notice to or further consent from any
Lender from time to time prior to, an Event of Default, to take any action with
respect to any Collateral or Collateral Documents which may be necessary to
perfect and maintain perfected the Liens upon the Collateral granted pursuant to
the Collateral Documents.

            Without limiting the generality of this paragraph, for the purposes
of creating a solidarite active in accordance with Article 1541 of the Civil
Code of Quebec, between each Lender, taken individually, on the one hand, and
the Agent, on the other hand, each Loan party, each such Lender and the Agent
acknowledge and agree that such Lender and the Agent are hereby conferred the
legal status of solidary creditors of each Loan Party in respect of all
Obligations, present and future, owed by each Loan Party to each such Lender and
the Agent (collectively, the "Solidary Claim"). Each Loan Party which is not a
signatory of this Agreement but is or may become a signatory to any other Loan
Documents shall be deemed to have accepted the provisions contained in this
paragraph by its execution of such other Loan Documents. Accordingly, but
subject (for the avoidance of doubt) to Article 1542 of the Civil Code of
Quebec, the Loan Parties are irrevocably bound towards the Agent and each Lender
in respect of the entire Solidary Claim of the Agent and each Lender. As a
result of the foregoing, the parties hereto acknowledge that the Agent and each
Lender shall at all times have a valid and effective right of action for the
entire Solidary Claim of the Agent and such Lender and the right to give full
acquittance for it. Accordingly, without limiting the generality of the
foregoing, the Agent, as solidary creditor with each Lender, shall at all times
have a valid and effective right of action in respect of all Obligations,
present and future, owed by each Loan Party to the Agent and Lenders or any of
them and the right to give a full acquittance for same. The parties further
agree and acknowledge that the Liens created by the Collateral Documents on the
Collateral shall be granted to the Agent, for its own benefit and for the
benefit of Lenders.

            (b) Each Lender hereby irrevocably authorizes Agent, at its option
and in its discretion,

                  (i) to release any Lien on any property granted to or held by
      Agent under any Loan Document (A) upon termination of the Aggregate
      Commitments and payment in full of all Obligations (other than contingent
      indemnification obligations) and the expiration or termination of all
      Letters of Credit, (B) that is sold or to be sold as part of or in
      connection with any sale permitted hereunder or under any other Loan
      Document, or (C) subject to Section 10.01, if approved, authorized or
      ratified in writing by the Required Lenders; and

                  (ii) to subordinate any Lien on any property granted to or
      held by Agent under any Loan Document to the holder of any Lien on such
      property that is permitted by this Agreement or any other Loan Document.

                                      -47-
<PAGE>

      Upon request by Agent at any time, each Lender will confirm in writing
Agents authority to release or subordinate its interest in particular types or
items of Collateral pursuant to this Section 9.12.

            (c) Subject to (b) above, Agent shall (and is hereby irrevocably
authorized by each Lender, to) execute such documents as may be necessary to
evidence the release or subordination of the Liens granted to Agent for the
benefit of Agent and Lenders herein or pursuant hereto upon the applicable
Collateral; provided that (i) Agent shall not be required to execute any such
document on terms which, in Agents opinion, would expose Agent to or create any
liability or entail any consequence other than the release or subordination of
such Liens without recourse or warranty and (ii) such release or subordination
shall not in any manner discharge, affect or impair the Obligations or any Liens
upon (or obligations of Borrower or any other Loan Party in respect of) all
interests retained by Borrower or any other Loan Party, including the proceeds
of the sale, all of which shall continue to constitute part of the Collateral.
In the event of any sale or transfer of Collateral, or any foreclosure with
respect to any of the Collateral, Agent shall be authorized to deduct all
expenses reasonably incurred by Agent from the proceeds of any such sale,
transfer or foreclosure.

            (d) Agent or, as the case may be, U.K. Security Trustee, shall have
no obligation whatsoever to any Lender or any other Person to assure that the
Collateral exists or is owned by Borrower or any other Loan Party or is cared
for, protected or insured or that the Liens granted to Agent or, as the case may
be, U.K. Security Trustee, herein or in any of the Collateral Documents or
pursuant hereto or thereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise or to continue exercising at all or in any manner or
under any duty of care, disclosure or fidelity any of the rights, authorities
and powers granted or available to Agent or, as the case may be, U.K. Security
Trustee, in this Section 9.12 or in any of the Collateral Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, Agent or U.K. Security Trustee may act in any manner it
may deem appropriate, in its sole discretion, given Agent's and U.K. Security
Trustee's own interest in the Collateral as one of Lenders and that Agent or
U.K. Security Trustee shall have no duty or liability whatsoever to Lenders.

            (e) Each Lender hereby appoints each other Lender as agent for the
purpose of perfecting Lenders' security interest in assets which, in accordance
with Article 9 of the UCC or PPSA can be perfected only by possession. Should
any Lender (other than Agent) obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.

      9.13 APPOINTMENT OF U.K. SECURITY TRUSTEE. Each Lender and the Agent
hereby appoint the U.K. Security Trustee to act as its trustee under and in
relation to the U.K. Security Documents to which the U.K. Security Trustee is a
party pursuant to this Agreement and to hold the Trust Property as trustee for
the Agent and the Lenders on trust and in accordance with the other terms
contained in the U.K. Security Documents to which the U.K. Security Trustee is a
party and the Agent and each Lender hereby irrevocably authorize the U.K.
Security Trustee to exercise such rights, remedies, powers and discretions as
are specifically delegated to the U.K. Security Trustee by the terms of the U.K.
Security Documents to which the U.K. Security Trustee is party together with all
such rights, remedies, powers and discretions as are reasonably incidental
thereto.

      9.14 AGENT AS U.K. SECURITY TRUSTEE. In this Agreement, any rights
exercisable by, any documents to be delivered to, or any other indemnities or
obligations in favor of the Agent shall be, as the case may be, exercisable by,
delivered to, or be indemnities or other obligations in favor of the Agent in
its capacity as U.K. Security Trustee to the extent that the right, document,
indemnity or other obligation relates to the U.K. Security Documents or the
security thereby created. Any obligations of the Agent in this Agreement shall
be obligations of the Agent in its capacity as U.K. Security Trustee to the
extent that the obligations relate to the U.K. Security Documents or the
security thereby created. Additionally, in its capacity as U.K. Security
Trustee, the Agent shall have (i) all the rights, powers, and benefits in favor
of the Agent contained in the provisions of this Article 9; (ii) all the rights
and powers of an absolute owner of the security constituted by the U.K. Security
Documents, and (iii) all the rights and powers granted to it and be subject to
all the obligations and duties owed by it under the U.K. Security Documents. The
Lenders agree that at any time that the U.K. Security Trustee shall be a Person
other than the Agent, such other Person shall have all the rights, benefits and
powers granted to the Agent in its capacity as U.K Security Trustee in this
Agreement

                                      -48-
<PAGE>

      9.15 LIENS IN FAVOR OF U.K. SECURITY TRUSTEE. Any reference in this
Agreement to Liens stated to be in favor of the Agent shall be construed so as
to include a reference to Liens granted in favor of the U.K. Security Trustee.

ARTICLE X. MISCELLANEOUS

      10.01 AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by
Borrower or any other Loan Party therefrom, shall be effective unless in writing
signed by the Required Lenders and Borrower or the applicable Loan Party, as the
case may, be, and acknowledged by Agent, and each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, waiver or consent shall:

            (a) waive any condition set forth in Section 4.01 (a) without the
written consent of each Lender, provided, however, in the sole discretion of
Agent, only a waiver by Agent shall be required with respect to immaterial
matters or items specified in Section 4.01(a) (iii) or (iv) with respect to
which Borrower has given assurances satisfactory to Agent that such items shall
be delivered promptly following the Closing Date;

            (b) extend or increase the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to Section 8.02) without the written consent
of such Lender,

            (c) postpone any date fixed by this Agreement or any other Loan
Document for any payment (excluding mandatory prepayments) of principal,
interest, fees or other amounts due to Lenders (or any of them) hereunder or
under any other Loan Document without the written consent of each Lender
directly affected thereby;

            (d) reduce the principal of, or the rate of interest specified
herein on, any Loan or L/C Borrowing, or (subject to clause (ii) of the second
proviso to this Section 10.01) any fees or other amounts payable hereunder or
under any other Loan Document without the written consent of each Lender
directly affected thereby; provided, however, that only the consent of the
Required Lenders shall be necessary (i) to amend the definition of "Default
Rate" or to waive any obligation of Borrower to pay interest at the Default Rate
or (ii) to amend any financial covenant hereunder (or any defined term used
therein) even if the effect of such amendment would be to reduce the rate of
interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

            (e) change Section 2.13 or Section 8.03 in a manner that would alter
the pro rata sharing of payments required thereby without the written consent of
each Lender; or

            (f) change any provision of this Section or the definition of
"Required Lenders" or any other provision hereof specifying the number or
percentage of Lenders required to amend, waive or otherwise modify any rights
hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender, or

            (g) release any Guarantor from the Guaranty or release the Liens on
all or substantially all of the Collateral except in accordance with the terms
of any Loan Document without the written consent of each Lender.

      and, provided further, that (i) no amendment, waiver or consent shall,
unless in writing and signed by Agent in addition to Lenders required above,
affect the rights or duties of Agent under this Agreement or any other Loan
Document, (A) as Administrative Agent, or (B) as Letter of Credit issuer or
under any Letter of Credit Application relating to any Letter of Credit issued
or to be issued by it (including, without limitation, any reduction in any fee,
charge, expense, cost or other amount payable to Agent for its own account under
this Agreement in any such capacity); and (ii) the Agent Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the respective panties thereto. Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder,

                                      -49-
<PAGE>

except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.

      10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES.

            (a) General. Unless otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
by facsimile transmission). All such written notices shall be mailed, faxed or
delivered, to the applicable address, facsimile number or (subject to subsection
(c) below) electronic mail address, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, specified for such Person on Schedule 10.02 or to
such other address, facsimile number, electronic mail address or telephone
number as shall be designated by such party in a notice to the other parties.
All such notices and other communications shall be deemed to be given or made
upon the earlier to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier, upon delivery; (B) if delivered by
mail, four Business Days after deposit in the mails, postage prepaid; provided,
however, that notices of Default, if delivered by mail, shall be effective four
Business Days after deposit in the mails, certified or registered postage
prepaid; (C) if delivered by facsimile, when sent and the sender has received
electronic confirmation of error free receipt; and (D) if delivered by
electronic mail (which form of delivery is subject to the provisions of
subsection (c) below), when delivered; provided, however, that notices and other
communications to Agent pursuant to Article II shall not be effective until
actually received by Agent. In no event shall a voicemail message be effective
as a notice, communication or confirmation hereunder.

            (b) Effectiveness of Facsimile Documents and Signatures. Loan
Documents may be transmitted and/or signed by facsimile. The effectiveness of
any such documents and signatures shall, subject to applicable Law, have the
same force and effect as manually-signed originals and shall be binding on all
Loan Parties, Agent, U.K. Security Trustee and Lenders. Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however. that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

            (c) Limited Use of Electronic Mail. Electronic mail and internet and
intranet websites may be used only to distribute routine communications, such as
financial statements, and to distribute Loan Documents for execution by the
parties thereto, and may not be used for any other purpose.

            (d) Reliance by Agent. U.K. Security Trustee and Lenders. Agent,
U.K. Security Trustee and Lenders shall be entitled to rely and act upon any
notices (including telephonic Committed Loan Notices) purportedly given by or on
behalf of Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. Borrower shall indemnify each
Agent-Related Person, U.K. Security Trustee and each Lender from all losses,
costs, expenses and liabilities resulting from the reliance by such Person on
each notice purportedly given by or on behalf of Borrower. All telephonic
notices to and other communications with Agent may be recorded by Agent, and
each of the parties hereto hereby consents to such recording.

      10.03 NO WAIVER; CUMULATIVE REMEDIES. No failure by any Lender or Agent to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.

      10.04 ATTORNEY COSTS, EXPENSES AND TAXES. Borrower agrees (a) to pay or
reimburse Agent for all reasonable costs and expenses incurred in connection
with the development, preparation, negotiation and execution of this Agreement
and the other Loan Documents and any amendment, waiver, consent or other
modification of the provisions hereof and thereof (whether or not the
transactions contemplated hereby or thereby are consummated), and the
consummation and administration of the transactions contemplated hereby and
thereby, including all reasonable Attorney Costs and costs and expenses in
connection with the use of IntraLinks,

                                      -50-
<PAGE>

Inc. or other similar information transmission systems in connection with this
Agreement, and (b) to pay or reimburse Agent and each Lender for all costs and
expenses incurred in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or the other Loan
Documents (including all such costs and expenses incurred during any "workout"
or restructuring in respect of the Obligations and during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs. The fore going costs and expenses shall include all search, filing,
recording, title insurance and appraisal charges and fees and taxes related
thereto, and other out-of-pocket expenses incurred by Agent and the cost of
independent public accountants and other outside experts retained by Agent or
any Lender. The agreements in this Section shall survive the termination of the
Aggregate Commitments and repayment of all other Obligations. Promptly upon
Borrower's request, Agent shall provide to Borrower such documentation as is
customary in support of such costs and expenses.

      10.05 INDEMNIFICATION BY BORROWER. Whether or not the transactions
contemplated hereby are consummated, Borrower shall indemnify and hold harmless
each Agent-Related Person, each Lender and their respective Affiliates,
directors, officers, employees, counsel, agents and attorneys-in-fact
(collectively the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses and disbursements (including Attorney Costs) of any kind
or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or
in connection with (a) the execution, delivery, enforcement, performance or
administration of any Loan Document or any other agreement, letter or instrument
delivered in connection with the transactions contemplated thereby or the
consummation of the transactions contemplated thereby, (b) any Commitment, Loan
or Letter of Credit or the use or proposed use of the proceeds therefrom
(including any refusal by Agent to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit), (c) any actual or alleged
presence or release of Hazardous Materials on or from any property currently or
formerly owned or operated by Borrower, any Subsidiary or any other Loan Party,
or any Environmental Liability related in any way to Borrower, any Subsidiary or
any other Loan Party, or (d) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, investigation, litigation or
proceeding) and regardless of whether Indemnitee is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, claims, demand, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee. No Indemnitee
shall be liable for any damages arising from the use by others of any
information or other materials obtained through IntraLinks or other similar
information transmission systems in connection with this Agreement, nor shall
any Indemnitee have any liability for any indirect or consequential damages
relating to this Agreement or any other Loan Document or arising out of its
activities in connection herewith or therewith (whether before or after the
Closing Date). The agreements in this Section shall survive the resignation of
Agent, the replacement of any Lender, the termination of the Aggregate
Commitments and the repayment, satisfaction or discharge of all the other
Obligations. All amounts due under this Section 10.05 shall be payable within
ten Business Days after demand therefor.

      10.06 PAYMENTS SET ASIDE. To the extent that any payment by or on behalf
of Borrower is made to Agent or any Lender, or Agent or any Lender exercises its
right of set-off, and such payment or the proceeds of such set-off or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by
Agent or such Lender in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any proceeding under any Debtor Relief Law
or otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Lender severally agrees to pay to Agent upon demand
its applicable share of any amount so recovered from or repaid by Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Rate from time to time in effect.

      10.07 SUCCESSORS AND ASSIGNS.

                                      -51-
<PAGE>

            (a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that Borrower may not assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of each
Lender and no Lender" may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of participation in
accordance with the provisions of subsection (d) of this Section, or (iii) by
way of pledge or assignment of a security interest subject to the restrictions
of subsection (f) of this Section (and any other attempted assignment or
transfer by any party hereto shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Indemnitees) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

            (b) So long as no Event of Default has occurred and is continuing,
with prior written consent of the Borrower (which shall not be unreasonably
withheld or delayed), any Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans (including for purposes of this
subsection (b), and participations in L/C Obligations) at the time owing to it);
provided that (i) except in the case of an assignment of the entire remaining
amount of the assigning Lender's Commitment and the Loans at the time owing to
it or in the case of an assignment to a Lender or an Affiliate of a Lender, the
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) subject to each such assignment, determined as of the
date the Assignment and Assumption Agreement with respect to such assignment is
delivered to Agent, shall not be less than $5,000,000 unless each of Agent and,
so long as no Event of Default has occurred and is continuing, Borrower
otherwise consents (each such consent not to be unreasonably withheld or
delayed); (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lenders rights and obligations under
this Agreement with respect to the Loans or the Commitment assigned, (iii) any
assignment of a Commitment must be approved by Agent, unless the Person that is
the proposed assignee is itself a Lender (whether or not the proposed assignee
would otherwise qualify as an Eligible Assignee), and (iv) the parties to each
assignment shall execute and deliver to Agent an Assignment and Assumption
Agreement, together with a processing and recordation fee of $3,500. Subject to
acceptance and recording thereof by Agent pursuant to subsection (c) of this
Section, from and after the effective date specified in each Assignment and
Assumption Agreement, the Eligible Assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Assumption
Agreement, have the rights and obligations of a Lender under this Agreement, and
the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption Agreement, be released from its obligations under
this Agreement (and, in the case of an Assignment and Assumption Agreement
covering all of the assigning Lenders rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with
respect to facts and circumstances occurring prior to the date of such
assignment). Upon request, Borrower (at its expense) shall execute and deliver a
Note to the assignee Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with subsection (d)
of this Section.

            (c) Agent, acting solely for this purpose as an agent of Borrower,
shall maintain at Agent's Office a copy of each Assignment and Assumption
Agreement delivered to it and a register for the recordation of the names and
addresses of Lenders, and the Commitments of, and principal amount of the Loans
and L/C Obligations owing to, each Lender pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive, and
Borrower, Agent and Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by Borrower and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.

            (d) Any Lender may, without the consent of, or notice to, Borrower
or Agent, sell participations to any Person (other than a natural person or
Borrower or any of Borrower's Affiliates or Subsidiaries (each a "Participant")
in all or a portion of such Lenders rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans
(including such Lender's participations in L/C Obligations) owing to it);
provided that (i) such Lenders obligations under this Agreement shall remain

                                      -52-
<PAGE>

unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) Borrower, Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lenders rights and obligations under this Agreement Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, waiver or other modification described in the first provision to
Section 10.01 that directly affects such Participant Subject to subsection (e)
of this Section, Borrower agrees that each Participant shall be entitled to the
benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.09 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.13 as though it were a
Lender.

            (e) A Participant shall not be entitled to receive any greater
payment under Section 3.01 or 3.04 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with Borrowers
prior written consent.

            (f) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its
Note, if any) to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no
such pledge or assignment shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

            (g) As used herein, "Eligible Assignee" means (a) a Lender; (b) an
Affiliate of a Lender, and (c) any other Person (other than a natural Person)
approved by (i) Agent and (ii) unless an Event of Default has occurred and is
continuing, Borrower (such approval referred to in (i) and (ii) not to be
unreasonably withheld or delayed) ); provided that notwithstanding the
foregoing, "Eligible Assignee" shall not include Borrower or any of Borrower's
Affiliates or Subsidiaries.

            (h) Notwithstanding anything to the contrary contained herein, if at
any time Union Bank assigns all of its Commitment and Loans pursuant to
subsection (b) above, Union Bank may, upon 30 days' notice to Borrower and
Lenders, resign in its capacity as issuer of Letters of Credit hereunder (the
"L/C Issuer"). In the event of any such resignation as L/C Issuer Borrower shall
be entitled to appoint from among Lenders a successor L/C Issuer hereunder;
provided, however, that no failure by Borrower to appoint any such successor
shall affect the resignation of Union Bank as L/C Issuer. If Union Bank resigns
as L/C Issuer, it shall retain all the rights and obligations of Agent as the
L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the
effective date of its resignation as L/C Issuer and all L/C Obligations with
respect thereto (including the right to require Lenders to make Base Rate
Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to
Section 2.03(c)). Borrower, Lenders and Union Bank agree that they shall amend
this Agreement as necessary to reflect that Union Bank remains Agent for
purposes of administering this Agreement, but has resigned in its capacity as
L/C Issuer and another Lender(s) shall provides such service, including the
obligation of the successor to Union Bank as L/C Issuer to issue letters of
credit in substitution for the Letters of Credit, if any, outstanding at the
time of such succession or to make other arrangements satisfactory to Union Bank
to effectively assume the obligations of Union Bank with respect to such Letters
of Credit.

      10.08 CONFIDENTIALITY. Each of Agent and Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process; (d) to any other party to this Agreement;
(e) in connection with the exercise of any remedies hereunder or any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or under any other
Loan Document; (f) subject to an agreement containing provisions substantially
the same as those of this Section, to (i) any Eligible Assignee of or
Participant in, or any prospective Eligible Assignee of or Participant in, any
of its rights or obligations under this Agreement or (ii) any

                                      -53-
<PAGE>

direct or indirect contractual counterparty or prospective counterparty (or such
contractual counterparty's or prospective counterparty's professional advisor)
to any credit derivative transaction relating to obligations of a Loan Party;
(g) with the consent of Borrower, (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to Agent or any Lender on a nonconfidential basis from a
source other than Borrower; or (i) to the National Association of Insurance
Commissioners or any other similar organization. In addition, Agent and Lenders
may disclose the existence of this Agreement and information about this
Agreement to market data collectors, similar service providers to the lending
industry, and service providers to Agent and Lenders in connection with the
administration and management of this Agreement, the other Loan Documents, the
Commitments, and the Credit Extensions. For the purposes of this Section,
"Information" means all information received from any Loan Party relating to any
Loan Party or its business, other than any such information that is available to
Agent or any Lender on a nonconfidential basis prior to disclosure by any Loan
Party. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

      10.09 SET-OFF. In addition to any rights and remedies of Lenders provided
by law, upon the occurrence and during the continuance of any Event of Default,
each Lender is authorized at any time and from time to time, without prior
notice to Borrower or any other Loan Party, any such notice being waived by
Borrower (on its own behalf and on behalf of each Loan Party) to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the
account of the respective Loan Parties against any and all Obligations owing to
such Lender hereunder or under any other Loan Document, now or hereafter
existing, irrespective of whether or not Agent or such Lender shall have made
demand under this Agreement or any other Loan Document and although such
Obligations may be contingent or unmatured or denominated in a currency
different from that of the applicable deposit or Indebtedness. Each Lender
agrees promptly to notify Borrower and Agent after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.

      10.10 INTEREST RATE LIMITATION. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the "Maximum Rate"). If Agent or any Lender shall
receive interest in an amount that exceeds the Maximum Rate, the excess interest
shall be applied to the principal of the Loans or, if it exceeds such unpaid
principal, refunded to Borrower. In determining whether the interest contracted
for, charged, or received by Agent or a Lender exceeds the Maximum Rate, such
Person may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

      10.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

      10.12 INTEGRATION. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and thereof and supersedes all prior agreements, written or oral,
on such subject matter. In the event of any conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control; provided that the inclusion of supplemental rights or
remedies in favor of Agent or Lenders or U.K. Security Trustee in any other Loan
Document shall not be deemed a conflict with this Agreement Each Loan Document
was drafted with the joint participation of the respective parties thereto and
shall be construed neither against nor in favor of any party, but rather in
accordance with the fair meaning thereof.

      10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by Agent and
U.K. Security Trustee and each

                                      -54-
<PAGE>

Lender, regardless of any investigation made by Agent or U.K. Security Trustee
or any Lender or on their behalf and notwithstanding that Agent or U.K Security
Trustee or any Lender may have had notice or knowledge of any Default at the
time of any Credit Extension, and shall continue in full force and effect as
long as any Loan or any other Obligation hereunder shall remain unpaid or
unsatisfied or any Letter of Credit shall remain outstanding.

      10.14 SEVERABILITY. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

      10.15 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE; PROVIDED THAT AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.

      (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
SITTING IN LOS ANGELES COUNTY OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT
OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER, AGENT
AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THOSE COURTS. BORROWER, AGENT AND EACH LENDER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. BORROWER, AGENT AND EACH
LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

      10.16 WAIVER TO RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

      10.17 JUDGMENT CURRENCY. If for the purpose of obtaining judgment in any
court it is necessary to convert an amount due hereunder in the currency in
which it is due (the "Original Currency") into another currency (the "Second
Currency"), the rate of exchange applied shall be that at which, in accordance
with normal banking procedures, the Lender(s) could purchase in the California
foreign exchange market, the Original Currency with the Second Currency on the
date two (2) Business Days preceding that on which judgment is given. Each Loan
Party agrees that its obligation in respect of any Original Currency due from it
hereunder shall, notwithstanding any judgment or payment in such other currency,
be discharged only to the extent that, on the Business Day following the date
the Lender(s) receives payment of any sum so adjudged to be due hereunder in the
Second Currency, the Lender(s) may, in accordance with normal banking
procedures, purchase, in the California foreign exchange market, the Original
Currency with the amount of the Second Currency so paid; and if the amount of
the Original Currency so purchased or could have been so purchased is less than
the amount originally due in the Original Currency, each Loan Party agrees as a
separate obligation and notwithstanding any such payment or

                                      -55-
<PAGE>

judgment to indemnify the Lender(s) against such loss. The term "rate of
exchange" in this Section 10.17 means the spot rate at which the Lender, in
accordance with normal practices, is able on the relevant date to purchase the
Original Currency with the Second Currency, and includes any premium and costs
of exchange payable in connection with such purchase.

                  [Remainder of page intentionally left blank]

                                      -56-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                ASHWORTH, INC.

                                ________________________________________
                                By:       Terence W. Tsang

                                Title: Its Executive Vice President, Chief
                                Operating Officer, Chief Financial Officer,
                                Chief Accounting Officer and Treasurer

                                UNION BANK OF CALIFORNIA, N.A., as Agent

                                By: ___________________________________________

                                Name: ___________________________________

                                Title: __________________________________

                                UNION BANK OF CALIFORNIA, N.A., as U.K. Security
                                Trustee

                                By: ___________________________________________

                                Name: ___________________________________

                                Title:___________________________________

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

                                By:____________________________________________

                                Name:____________________________________

                                Title:___________________________________

            [SIGNATURE PAGE TO REVOLVING/TERM LOAN CREDIT AGREEMENT]

                        [SIGNATURES CONTINUED NEXT PAGE]

<PAGE>

                                 BANK OF THE WEST

                                 By: ___________________________________________

                                 Name: ___________________________________

                                 Title: __________________________________

                                 COLUMBUS BANK AND TRUST

                                 By: ___________________________________________

                                 Name: ___________________________________

                                 Title: __________________________________

            [SIGNATURE PAGE TO REVOLVING/TERM LOAN CREDIT AGREEMENT]

<PAGE>

                                                                   SCHEDULE 2.01

                                   COMMITMENTS
                               AND PRO RATA SHARES

<TABLE>
<CAPTION>
       LENDER                         COMMITMENT               PRO RATA SHARE
       ------                         ----------               --------------
<S>                                  <C>                       <C>
Union Bank of California             $30,000,000.00             54.545454546%

Bank of the West                      12,500,000.00             22.727272727%

Columbus Bank and Trust               12,500,000.00             22.727272727%
                                     --------------            -------------
             Total                   $55,000,000.00            100.000000000%
                                     --------------            -------------
</TABLE>

<PAGE>

                                                                   Schedule 2.03

                           EXISTING LETTERS OF CREDIT
                           (AND BANKER'S ACCEPTANCES)

<TABLE>
<CAPTION>
Type       Number                      Amount
----       ------                      ------
<S>       <C>                      <C>
DLC       1120578                  $   82,312.94
DBA       10808200                     47,541.00
DLC       1120585                      68,480.86
DLC       1120591                      22,544.60
DBA       10808418                     11,907.18
DLC       1120597                     113,956.87
DBA       10808035                     55,264.15
DBA       10808324                    183,018.80
DBA       10808668                    189,985.95
DLC       1120601                      30,060.21
DLC       1120604                     240,367.57
DBA       10808005                     25,771.44
DBA       10808247                     71,509.25
DBA       10808541                     42,370.00
DLC       1120609                      37,507.40
DBA       10808954                     18,541.60
DBA       10808074                     36,800.00
DLC       1120612                      62,522.10
DLC       1120613                     381,639.76
DBA       10808242                     90,733.76
DBA       10808739                     29,282.40
DLC       1120614                      54,296.00
DBA       10809095                     20,296.00
DLC       1120615                       1,449.50
DLC       1120616                         897.00
DBA       10808666                     25,500.00
DLC       1120617                      35,148.75
DLC       1120618                      30,187.50
DLC       1120619                      68,486.40
DBA       10808874                     38,800.80
DBA       10809008                     91,587.84
DLC       1120620                       2,647.95
DBA       10808921                     45,757.05
DLC       1120621                      21,771.75
DLC       1120622                      52,416.00
                                   -------------
Subtotal:                          $2,331,360.38
Plus reserve:                      $  233,136.03
                                   =============

TOTAL:                             $2,564,496.41
</TABLE>

<PAGE>

                                                                   SCHEDULE 5.06

                                   LITIGATION

On January 22, 1999, Milberg Weiss Bershad Hynes & Lerach LLP filed a class
action in the United States District Court for the Southern District of
California ("U.S. District Court") on behalf of purchasers of the Company's
common stock during the period between September 4, 1997 and July 15, 1998. The
action was subsequently consolidated with two similar suits and plaintiffs filed
their Amended and Consolidated Complaint on December 17, 1999. Upon the
Company's motion, the U.S. District Court dismissed the Complaint with leave to
amend on July 18, 2000. On September 18, 2000, plaintiffs served their Second
Consolidated Amended Complaint ("Second Amended Complaint"). On November 6,
2000, the Company filed its motion to dismiss the Second Amended Complaint,
which the U.S. District Court granted, in part, and denied, in part. The
remaining portions of the Second Amended Complaint allege that, among other
things, during the class period and in violation of the Securities Exchange Act
of 1934, the Company's financial statements, as reported, did not conform to
generally accepted accounting principles with respect to revenues and inventory
levels. It further alleges that certain Company executives made false or
misleading statements or omissions concerning product demand and that two former
executives engaged in insider trading. The plaintiffs seek unspecified damages.
As discussed with the Lenders prior to the Closing Date, the parties voluntarily
suspended discovery activity while they seek to work out a settlement. The
Company has not to date booked any provision for settlement charges.

The Company is party to other claims and litigation proceedings arising in the
normal course of business. Although the legal responsibility and financial
impact with respect to such other claims and litigation cannot currently be
ascertained, the Company does not believe that these other matters will result
in payment by the Company of monetary damages, net of any applicable insurance
proceeds, that, in the aggregate, would be material in relation to the
consolidated financial position or results of operations of the Company.

<PAGE>

                                                                   SCHEDULE 5.09

                              ENVIRONMENTAL MATTERS

Ashworth, Inc.

None.

GEKKO Brands, L.L.C.

GEKKO Brands, L.L.C. uses approximately 40 gallons of Acetone in the Company's
facilities annually. No reportable spill of Acetone has occurred. GEKKO Brands,
L.L.C. has no air permits for the use of Acetone.

<PAGE>

                                                                   SCHEDULE 5.13

                                  SUBSIDIARIES
                          AND OTHER EQUITY INVESTMENTS

Part (a). Subsidiaries

<TABLE>
<CAPTION>
Name of subsidiary                 State or other jurisdiction of incorporation
------------------                 --------------------------------------------
<S>                                <C>
Ashworth Store I, Inc.             Delaware

Ashworth Store II, Inc.            Delaware

Ashworth EDC, LLC                  Delaware

Ashworth U.K., Ltd.                England

Ashworth Acquisition Corp.         Delaware

GEKKO Brands, L.L.C.               Alabama

Kudzu, L.L.C.                      Alabama

The Game, LLC                      Alabama
</TABLE>

Part (b) Other Equity Investments

The Game, LLC owns 4,500 shares of Osprey Events, Inc.

<PAGE>

                                                                   SCHEDULE 7.01

                                 EXISTING LIENS

1.    CAPITAL LEASE - CISCO EQUIPMENT AND SERVICES
      Lien holder:    SBC Capital Services        File No. 0117660263
                      2550 West Golf Road
                      Rolling Meadows, IL 60008
      Final payment due:     May 2006

2.    CAPITAL LEASE - AS400 SYSTEM UPGRADE
      Lien holder:    IBM Credit Corporation
                      600 Anton Boulevard
                      Costa Mesa, CA 92626
      Final payment due:     January 2005

3.    MORTGAGE - 4010 OCEAN RANCH BOULEVARD - DISTRIBUTION FACILITY
      Lien holder:    Bank of America, N.A.
                      214 North Tryon Street
                      Charlotte, NC 28255
      Final payment due:     May 1, 2014

4.    OPERATING LEASE - EQUIPMENT LEASED IN CONNECTION WITH CERTAIN MASTER
      AGREEMENT/LEASE NO. 325020 CAIRC3200 MSK05421
      Lien holder:    IOS Capital                 File No. 33082008

5.    NOTE PAYABLE - CHEVROLET C3500 CREW CAB TRUCK (KUDZU, LLC)
      Lien holder:    GMAC Financial Services
                      3616 Manchester Expressway
                      Columbus, GA
      Final payment due:     June 26, 2007

6.    OPERATING LEASE - NISSAN FORKLIFT MODEL RCOSN SN 4079550 (KUDZU, LLC)
      Lien holder:    Associates Leasing, Inc.    File No. 2000-28903

7.    OPERATING LEASE - TAJIMA EMBROIDERY MACHINES (KUDZU, LLC)
      Lien holder:    Hirsch International Corp   File No. 2000-38231

8.    OPERATING LEASE - 3 TAJIMA EMBROIDERY MACHINES (KUDZU, LLC AND THE GAME,
      LLC)
      Lien holder:    Hirsch International Corp      File No. 02-0357056

9.    OPERATING LEASE - 3 TAJIMA EMBROIDERY MACHINES (KUDZU, LLC AND THE GAME,
      LLC)
      Lien holder:    Hirsch International Corp   File No. 03-0119997

10.   OPERATING LEASE - ALL EQUIPMENT NOW AND HEREAFTER LEASED FROM LESSOR
      (KUDZU, LLC)
      Lien holder:    Citicorp Vendor Finance     File No. 2001-09087

<PAGE>

THE FOLLOWING LIENS RELATING TO THE UNDERLYING LINES OF CREDIT HAVE BEEN PAID IN
FULL AND/OR NO OUTSTANDING OBLIGATIONS RELATED THERETO REMAIN. ASHWORTH HAS
DEMANDED THAT THE RELATED LIENS AND RELATED FINANCING STATEMENTS BE TERMINATED.

11.   CAPITAL LEASE - KEYMATIC RACK AND RAIL SYSTEM
      Lien holder:    New England Capital Corp    File No. 92225933

12.   CAPITAL LEASE - VOLT TRAPEZE UNITS
      Lien holder:    New England Capital Corp    File No. 93005094

13.   EQUIPMENT FINANCING AGREEMENT - COMPUTER HARDWARE AND SOFTWARE,
      MACHINERY AND OFFICE EQUIPMENT
      Lien holder:    Banc One Leasing            File No.0013460375

THE FOLLOWING LIENS RELATE TO THE UNDERLYING LINES OF CREDIT AND ARE TO BE
RELEASED AT CLOSING.

14.   LINE OF CREDIT LOAN - ALL EQUIPMENT (GEKKO BRANDS, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38635

15.   LINE OF CREDIT LOAN - ALL EQUIPMENT (THE GAME, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38636

16.   LINE OF CREDIT LOAN - ALL EQUIPMENT (KUDZU, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38637

17.   LINE OF CREDIT LOAN - INVENTORY AND ALL ACCOUNTS (KUDZU, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38638

18.   LINE OF CREDIT LOAN - INVENTORY AND ALL ACCOUNTS (THE GAME, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38639

19.   LINE OF CREDIT LOAN - INVENTORY AND ALL ACCOUNTS (GEKKO BRANDS, LLC)
      Lien holder:    Columbus Bank and Trust     File No. 2000-38640

20.   LINE OF CREDIT LOAN - ALL DEBTOR'S RIGHT, TITLE AND INTEREST IN THE
      GAME, LLC (GEKKO BRANDS, LLC)
      Lien holder:    W.C. Bradley Co.            File No. 2001-08302

21.   LINE OF CREDIT LOAN - ALL DEBTOR'S RIGHT, TITLE AND INTEREST IN THE
      GAME, LLC (GEKKO BRANDS, LLC)
      Lien holder:    W.C. Bradley Co.            File No. 10601000386

22.   LINE OF CREDIT LOAN - TRADENAMES, TRADEMARKS, SERVICEMARKS, LOGOS AND
      GOODWILL RELATED TO LAND, EQUIPMENT AND PROCEEDS (KUDZU, LLC)
      Lien holder:    SunTrust Bank.              File No. 126330

23.   LINE OF CREDIT LOAN - INTANGIBLES COLLATERAL SUCH AS, COPYRIGHTS, TRADE
      NAMES, TRADEMARKS, SERVICE MARKS, ETC. (KUDZU, LLC)
      Lien holder:    SunTrust Bank, Atlanta.     File No. 53-98-1042

<PAGE>

                                                                   SCHEDULE 7.03

                              EXISTING INDEBTEDNESS

Ashworth, Inc.

   1. CAPITAL LEASE - CISCO EQUIPMENT AND SERVICES
      Balance Due as of 6/30/04:                  $70,264.64
      Monthly Payment (including interest):       $ 3,313.60

   2. CAPITAL LEASE - AS400 SYSTEM UPGRADE
      Balance Due as of 6/30/04:                  $88,679.31
      Monthly Payment (including interest):       $11,905.00

   3. ASHWORTH, INC. GUARANTY OF PAYMENTS UNDER THE AMENDED AND RESTATED
      LEASE AGREEMENT DATED JULY 6, 2004 WITH 16 DOWNING, LLC.
      Annual rent                   Approximately $  400,000

   4. ASHWORTH, INC. GUARANTY OF ASHWORTH ACQUISITION CORP. PROMISSORY NOTE
      IN FAVOR OF W. C. BRADLEY
      Note amount                              $1,000,000.00

Ashworth EDC, LLC

   5. MORTGAGE ON THE REAL ESTATE PROPERTY AT 4010 OCEAN RANCH BLVD., OCEANSIDE,
      CA 92054
      Balance Due as of 6/30/04:                 $11,637,320
      Monthly Payment (including interest):      $ 62,539.72

Ashworth Acquisition Corp. (GEKKO Brands, L.L.C., Kudzu, L.L.C. and The Game,
LLC)

   6. NOTE PAYABLE ON A 2002 CHEVROLET C3500 CREW CAB TRUCK
      Balance due as of 6/30/04:                  $16,195.54
      Monthly Payment (including interest):       $   470.90

   7. KUDZU, L.L.C. GUARANTY - MAXIMUM EXPOSURE NOT TO EXCEED $100,000
      Guaranty is with respect to indebtedness of Osprey Events, Inc. (Kudzu
      owns 4,500 shares of the stock of Osprey.)

   8. ASHWORTH ACQUISITION CORP. PROMISSORY NOTE IN FAVOR OF W. C. BRADLEY
      (THIS NOTE IS GUARANTEED BY ASHWORTH, INC., AS IDENTIFIED IN NUMBER 4
      ABOVE)
      Note amount:                             $1,000,000.00

<PAGE>

                                                                   SCHEDULE 7.05

                                  DISPOSITIONS

None.

<PAGE>

                                                                   SECTION 10.02

                              ADDRESSES FOR NOTICES

Ashworth, Inc.
2765 Loker Avenue West
Carlsbad, CA 92008
Attn:    Chief Financial Officer
         Telephone: 760.929.4611
         Facsimile: 760.476.8438
         Electronic Mail:  terence.tsang@ashworthinc.com

UNION BANK OF CALIFORNIA
ADMINISTRATIVE AGENTS OFFICE

Notices (other than Requests for Extensions of Credit):
UNION BANK OF CALIFORNIA, N.A.
1980 Saturn Street
Monterey Park, California 91755
Mail Code: 4-957-161
Attention: Luis Lopez

         Telephone: (323) 720-2574
         Facsimile: (323) 720-2780
         Electronic Mail:  luis.lopez@uboc.com

Requests for Extensions of Credit:
UNION BANK OF CALIFORNIA, N.A.
530 B Street, 4th Floor
San Diego, California    92101
Mail Code: S420
Attention: Thomas Vessey, VP

         Telephone: (619) 230-3380
         Facsimile: (619) 230-3010
         Electronic Mail:  Thomas.vessey@uboc.com

Payments:
UNION BANK OF CALIFORNIA
Monterey Park, California
ABA No. 122-000-496
Account No.: 77070-196431
Account Name: Commercial Loan Operations
Reference: Ashworth, Inc.

Address for Receiving Letter of Credit Applications and related correspondence

Standby Letters of Credit:

UNION BANK OF CALIFORNIA, N.A.
1980 Saturn Street
Monterey Park, California  91755
Mail Code: V01-519
Attention: Evelyn Aficial

<PAGE>

         Telephone: (323) 720-7957
         Facsimile: (323) 720-2773
         Electronic Mail: evelyn.aficial@uboc.com

Commercial Letters of Credit

UNION BANK OF CALIFORNIA, N.A.
1980 Saturn Street
Monterey Park, California  91755
Mail Code: V01-517
Attention: Alicia Vergel de Dios

         Telephone: (323) 720-2772
         Facsimile: (323) 720-2777
         Electronic Mail: Alicia.vergeldedios@uboc.com

Other Notices as a Lender.
UNION BANK OF CALIFORNIA, N.A.
San Diego Commercial Banking S-420
530 B Street, 4th Floor
San Diego, CA 92101
Attention:        Lawrence D. Hart, Vice President
                  Telephone: 619.230.3380
                  Facsimile: 619.230.3010
                  Electronic Mail: larry.hart@uboc.com

BANK OF THE WEST

Notices for Subsequent Borrowings, Payments, Rollovers, Letters of Credit.
Bank of the West
1977 Saturn Street
Monterey Park, CA 91755
Attn:    Sandy Fox
         Telephone: 323.727.3065
         Facsimile: 323.727.3099
         Electronic Mail: sfox@bankofthewest.com

Payments
Bank of the West
ABA#: 121100782
Account Name: Commercial Loan Servicing
Account Number: 239855-332
Attn: Agented Credit Unit
Ref: Ashworth, Inc.

<PAGE>

Other Notices:
Bank of the West
Agency Services Center
300 S. Grand Avenue
Los Angeles, CA 90071
Attn:    Elsa Pirola, VP/Manager
         Telephone: 213.972.0630
         Facsimile: 213.972.0618
         Electronic Mail: epirola@bankofthewest.com

Bank of the West
San Diego Corporate Banking
1280 Fourth Avenue
San Diego, CA 92101
Attn:    Jack Lenhof
         Telephone: 619.234.0938
         Facsimile: 619.595.1918
         Electronic Mail: jlenhof@bankofthewest.com

COLUMBUS BANK AND TRUST

Notices for Subsequent Borrowings, Paydowns, Rollovers Letters of Credit
COLUMBUS BANK AND TRUST
Corporate Banking
Attention: Gayle Alligood
         Telephone: (706) 649-5239
         Facsimile:  (706) 649-6988
         Electronic Mail:  gaylealligood@columbusbankandtrust.com

PAYMENTS
COLUMBUS BANK AND TRUST
ABA No.: 061100606
Account No.: 0558031 8888
Account Name: Loan Control
Reference: Ashworth, Inc.

<PAGE>

                                                                       EXHIBIT A

                          FORM OF COMMITTED LOAN NOTICE

                                                       Date:  ___________, _____

To:   UNION BANK OF CALIFORNIA, N.A., as Agent

Ladies and Gentlemen:

      Reference is made to that certain Revolving/Term Loan Credit Agreement,
dated as of July 6, 2004 (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Credit Agreement;" the
terms defined therein being used herein as therein defined), among Ashworth,
Inc. ( "Borrower"), Lenders from time to time party thereto, and UNION BANK OF
CALIFORNIA, N.A., as Agent.

      The undersigned hereby requests (select one):

      [ ] A Borrowing of Committed Loans [ ] A conversion or continuation of
                                             Committed Loans

      1.  On _____________________________ (a Business Day).

      2.  In the amount of $___________________.

      3.  Comprised of_______________________________________.
                        [Type of Committed Loan requested]

      4.  For Eurodollar Rate Committed Loans: with an Interest Period of
          ___ months.

      The Committed Borrowing requested herein complies with the proviso to the
first sentence of Section 2.01 of the Credit Agreement.

      Borrower acknowledges that the Term Loan may not be converted to another
Type of Loan.

                                   ASHWORTH, INC.

                                   By:__________________________________________

                                   Name:________________________________________

                                   Title:_______________________________________

                                       A-1
                           Form of Revolving Loan Note
<PAGE>

                                                                     EXHIBIT B-1

                             FORM OF REVOLVING NOTE

$____________________________                               ____________________

      FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay
to the order of ____________________________ or registered assigns ("Lender"),
in accordance with the provisions of the Agreement (as hereinafter defined) the
principal amount of each Loan from time to time made by Lender to Borrower under
that certain Revolving/Term Loan Credit Agreement, dated as of July 6, 2004 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the "Agreement;" the terms defined therein being used herein as
therein defined), among Borrower, Lenders from time to time party thereto, and
UNION BANK OF CALIFORNIA, N.A., as Agent.

      Borrower promises to pay interest on the unpaid principal amount of each
Revolving Loan from the date of such Revolving Loan until such principal amount
is paid in full, at such interest rates and at such times as provided in the
Agreement. All payments of principal and interest shall be made to Agent for the
account of Lender in Dollars in immediately available funds at Agent's Office.
If any amount is not paid in full when due hereunder, such unpaid amount shall
bear interest, to be paid upon demand, from the due date thereof until the date
of actual payment (and before as well as after judgment) computed at the per
annum rate set forth in the Agreement.

      This Note is one of the Notes referred to in the Agreement, is entitled to
the benefits thereof and may be prepaid in whole or in part subject to the terms
and conditions provided therein. This Note is also entitled to the benefits of
the Guaranty and is secured by the Collateral. Upon the occurrence and
continuation of one or more of the Events of Default specified in the Agreement,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable all as provided in the Agreement. Loans made
by Lender shall be evidenced by one or more loan accounts or records maintained
by Lender in the ordinary course of business. Lender may also attach schedules
to this Note and endorse thereon the date, amount and maturity of its Loans and
payments with respect thereto.

      Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

      THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.

                                                  ASHWORTH, INC.

                                                  By:___________________________

                                                  Name:_________________________

                                                  Title:________________________

                                     B-1-1
                           Form of Revolving Loan Note
<PAGE>

                     LOANS AND PAYMENTS WITH RESPECT THERETO

<TABLE>
<CAPTION>
                                                                             AMOUNT OF        OUTSTANDING
                                                                            PRINCIPAL OR       PRINCIPAL
                    TYPE OF LOAN      AMOUNT OF LOAN    END OF INTEREST    INTEREST PAID      BALANCE THIS        NOTATION
      DATE              MADE               MADE              PERIOD          THIS DATE            DATE             MADE BY
-------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                  <C>               <C>                <C>              <C>                <C>
______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________

______________  ___________________  ________________  _________________  _______________  _________________
</TABLE>

                                      B-1-2
                           Form of Revolving Loan Note
<PAGE>

                                                                     EXHIBIT B-2

                                FORM OF TERM NOTE

$______________________                                       __________________

      FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay
to the order of ____________________________ or registered assigns ("Lender"),
in accordance with the provisions of the Agreement (as hereinafter defined) the
principal amount of each Loan from time to time made by Lender to Borrower under
that certain Revolving/Term Loan Credit Agreement, dated as of July 6, 2004 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the "Agreement;" the terms defined therein being used herein as
therein defined), among Borrower, Lenders from time to time party thereto, and
UNION BANK OF CALIFORNIA, N.A., as Agent.

      Borrower promises to pay interest on the unpaid principal amount of each
Term Loan from the date of such Term Loan until such principal amount is paid in
full, at such interest rates and at such times as provided in the Agreement. All
payments of principal and interest shall be made to Agent for the account of
Lender in Dollars in immediately available funds at Agent's Office. If any
amount is not paid in full when due hereunder, such unpaid amount shall bear
interest, to be paid upon demand, from the due date thereof until the date of
actual payment (and before as well as after judgment) computed at the per annum
rate set forth in the Agreement.

      This Note is one of the Notes referred to in the Agreement, is entitled to
the benefits thereof and may be prepaid in whole or in part subject to the terms
and conditions provided therein. This Note is also entitled to the benefits of
the Guaranty and is secured by the Collateral. Upon the occurrence and
continuation of one or more of the Events of Default specified in the Agreement,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable all as provided in the Agreement. Loans made
by Lender shall be evidenced by one or more loan accounts or records maintained
by Lender in the ordinary course of business. Lender may also attach schedules
to this Note and endorse thereon the date, amount and maturity of its Loans and
payments with respect thereto.

      Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

      THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.

                                              ASHWORTH, INC.

                                              By:_______________________________

                                              Name:_____________________________

                                              Title:____________________________

                                      B-2-1
                             Form of Term Loan Note
<PAGE>

                     LOANS AND PAYMENTS WITH RESPECT THERETO

<TABLE>
<CAPTION>
                                                                             AMOUNT OF        OUTSTANDING
                                                                            PRINCIPAL OR       PRINCIPAL
                    TYPE OF LOAN      AMOUNT OF LOAN    END OF INTEREST    INTEREST PAID      BALANCE THIS        NOTATION
     DATE               MADE               MADE              PERIOD          THIS DATE            DATE             MADE BY
-------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                  <C>               <C>                <C>              <C>                <C>
______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________  _________________

______________  ___________________  ________________  _________________  _______________  _________________

______________  ___________________  ________________  _________________  _______________  _________________
</TABLE>

                                      B-2-2
                             Form of Term Loan Note

<PAGE>

                                                                       EXHIBIT C

                         FORM OF COMPLIANCE CERTIFICATE

                                      Financial Statement Date:________________,

To: UNION BANK OF CALIFORNIA, N.A., as Agent

Ladies and Gentlemen:

      Reference is made to that certain Revolving/Term Loan Credit Agreement,
dated as of July 6, 2004 (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Agreement;" the terms
defined therein being used herein as therein defined), among Ashworth, Inc. (
"Borrower"), Lenders from time to time party thereto, and UNION BANK OF
CALIFORNIA, N.A., as Agent.

      The undersigned Responsible Officer, solely in such capacity, hereby
certifies as of the date hereof that he/she is the __________ __________________
____________ of Borrower, and that, as such, he/she is
authorized to execute and deliver this Certificate to Agent on behalf of
Borrower, and that:

            [Use following for fiscal YEAR-END financial statements]

      1. Attached hereto as Schedule 1 are the year-end audited financial
statements required by Section 6.01 (a) of the Agreement for the fiscal year of
Borrower ended as of the above date, together with the report and opinion of an
independent certified public accountant required by such section.

           [Use following for fiscal QUARTER-END financial statements]

      1. Attached hereto as Schedule 1 are the unaudited financial statements
required by Section 6.01(b) of the Agreement for the fiscal quarter of Borrower
ended as of the above date. Such financial statements fairly present the
financial condition, results of operations and cash flows of Borrower and its
Subsidiaries in accordance with GAAP as at such date and for such period,
subject only to normal year-end audit adjustments and the absence of footnotes.

      2. The undersigned has reviewed and is familiar with the terms of the
Agreement and has made, or has caused to be made under his/her supervision, a
detailed review of the transactions and condition (financial or otherwise) of
Borrower during the accounting period covered by the attached financial
statements.

      3. A review of the activities of Borrower during such fiscal period has
been made under the supervision of the undersigned with a view to determining
whether during such fiscal period Borrower performed and observed all its
Obligations under the Loan Documents, and

                                  (SELECT ONE:]

      [TO THE BEST KNOWLEDGE OF THE UNDERSIGNED DURING SUCH FISCAL PERIOD,
BORROWER PERFORMED AND OBSERVED EACH COVENANT AND CONDITION OF THE LOAN
DOCUMENTS APPLICABLE TO IT.]

                                     --OR--

      [THE FOLLOWING COVENANTS OR CONDITIONS HAVE NOT BEEN PERFORMED OR OBSERVED
AND THE FOLLOWING IS A LIST OF EACH SUCH DEFAULT OR EVENT OF DEFAULT AND ITS
NATURE AND STATUS:]

      4. THE REPRESENTATIONS AND WARRANTIES OF THE BORROWER CONTAINED IN ARTICLE
V OF THE AGREEMENT, OR WHICH ARE CONTAINED IN ANY DOCUMENT FURNISHED AT ANY TIME
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS, ARE TRUE AND CORRECT ON AND AS
OF THE DATE HEREOF, EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND
WARRANTIES SPECIFICALLY REFER TO AN EARLIER DATE, IN WHICH CASE THEY ARE TRUE
AND CORRECT

                                       C-1
                         Form of Compliance Certificate
<PAGE>

AS OF SUCH EARLIER DATE, AND EXCEPT THAT FOR PURPOSES OF THIS COMPLIANCE
CERTIFICATE, THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SUBSECTIONS (a) AND
(b) OF SECTION 5.05 OF THE AGREEMENT SHALL BE DEEMED TO REFER TO THE MOST RECENT
STATEMENTS FURNISHED PURSUANT TO CLAUSES (a) AND (b), RESPECTIVELY, OF SECTION
6.01 OF THE AGREEMENT, INCLUDING THE STATEMENTS IN CONNECTION WITH WHICH THIS
COMPLIANCE CERTIFICATE IS DELIVERED.

      5. The financial covenant analyses and information set forth on Schedule 2
attached hereto are true and accurate on and as of the date of this Certificate.

      IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
__________________,_______________.

                                                 ASHWORTH, INC.

                                                 By:____________________________

                                                 Name:__________________________

                                                 Title:_________________________
                                     C - 2
                         Form of Compliance Certificate
<PAGE>

                For the Quarter/Year ended ___________________("Statement Date")

                                   SCHEDULE 2
                          to the Compliance Certificate

<TABLE>
<S>                                                                               <C>
I.    SECTION 6.12(a) -TANGIBLE NET WORTH.

      A.    Tangible Net Worth at Statement Date:

            1.       Total Assets:                                                $__________________

            2.       Total Liabilities:                                           $__________________

            3.       Total Net Intangibles:                                       $__________________

            4.       Tangible Net Worth (Line I.A.1 less Line I.A.2 less          $__________________
                     line 1.A.3):

      B.    1.       $74,000,000, plus                                            $__________________

            2.       the sum of 90% of net income after income taxes (without     $__________________
                     subtracting losses) earned in each quarterly accounting
                     period commencing after April 30, 2004, plus

            3.       the net proceeds from any equity securities issued           $__________________
                     after the date of the Agreement, plus

            4.       Minimum Required Tangible Net Worth (I.B.1 plus I.B.2        $__________________
                     plus I.B.3)

      C.    Excess (deficient) for covenant compliance (Line I.A.4 less I.B.4):   $__________________

II.   SECTION 6.12(b) - EBITDA.

      A.    net Income                                                            $__________________

      B.    less income or plus loss from discontinued operations and             $__________________
            extraordinary items, plus

      C.    income taxes, plus                                                    $__________________

      D.    interest expense, plus                                                $__________________

      E.    depreciation, depletion and amortization                              $__________________

      F.    total EBITDA (Line II A + B + C + D + E)                              $__________________

      G.    EBITDA for the second most recent quarter                             $__________________

      H.    EBITDA for the third most recent quarter                              $__________________

      I.    EBITDA for the fourth most recent quarter                             $__________________
</TABLE>

                                      C-3
                         Form of Compliance Certificate
<PAGE>

<TABLE>
<S>                                                                               <C>
      J.       Total EBITDA for last four quarters (sum of II.F+G+H+I)            $__________________

      Minimum required EBITDA:      $16,500,000 from 4/30/04 through 10/30/04
                                    $19,000,000 from 10/31/04 to 10/30/05
                                    $22,000,000 from 10/31/05 through 10/30/06
                                    $23,000,000 from 10/31/06 through 10/30/07
                                    $25,500,000 from 10/31/07 through 10/30/08
                                    $27,000,000 from 10/31/08 and thereafter

III.  SECTION 6.12(c) - QUICK RATIO.

      A.       Quick Assets                                                       $__________________

               1.       cash, plus                                                $__________________
               2.       short-term cash investments, plus                         $__________________
               3.       net trade receivables, plus                               $__________________
               4.       marketable securities not classified as long-term         $__________________
                        investment
               5.       Total Quick Assets                                        $__________________

      B.       Current Liabilities                                                $__________________

      C.       Outstanding Amount of L/C Obligations                              $__________________

      D.       Outstanding Amount of Loans (revolving line of credit)             $__________________

      E.       Ratio (Line III.A.5 / sum of Line III.B + C + D):                  ____________ to 1.0

      Minimum Required:    0.75:1.0 for fiscal quarters ending January
                           31 and April 30

                           1.00:1.00 otherwise

IV.   APPLICABLE RATE - FUNDED DEBT TO EBITDA RATIO.

      A.1 Funded Debt (quarterly)

      a.       Average daily outstandings under Notes to Lenders                  $__________________

      b.       Average daily of all L/C Obligations                               $__________________

      c.       all outstanding liabilities for borrowed money plus other          $__________________
               interest-bearing liabilities, including current and long-term
               liabilities (i.e., capitalized leases and real estate debt)

      2. Total Funded Debt (Lines IV.A.1 a + b + c)                               $__________________
</TABLE>

                                      C-4
                         Form of Compliance Certificate
<PAGE>

<TABLE>
<S>                                                                               <C>
      B.       EBITDA from Line 11J. above                                        $__________________

      C.       Ratio (Line IV.A.2 / Line IV.B.):                                  ____________ to 1.0

</TABLE>

                                APPLICABLE RATE

<TABLE>
<CAPTION>
                                                              Eurodollar Rate
                                                                     +
Pricing         Funded Debt to                                  -----------
 Level           EBITDA Ratio          Commitment Fee        Letters of Credit      Base Rate +
 -----           ------------          --------------        -----------------      -----------
<S>           <C>                      <C>                   <C>                    <C>
   1          Less than or equal           0.175%                  1.25%               0.00%
                 to 1.50:1.00

   2          Less than or equal           0.175%                  1.50%               0.00%
               to 2.00:1.00 but
                 greater than
                   1.50:1.00

   3          Less than or equal            0.25%                  1.75%               0.00%
               to 2.25:1:00 but
                 greater than
                   2.00:1.00

   4             Greater than              0.375%                  2.00%               0.25%
                   2.25:1.00
</TABLE>

      Any increase or decrease in the Applicable Rate resulting from a change in
the Financial Covenant shall become effective commencing on the 5th Business Day
immediately following the date a Compliance Certificate is delivered pursuant to
Section 6.02(b); provided, however, that if no Compliance Certificate is
delivered when due in accordance with such Section, then Pricing Level 4 shall
apply commencing on the 5th Business Day following the date such Compliance
Certificate was required to have been delivered until the 5th Business Day
following the date a Compliance Certificate is delivered.

<TABLE>
<S>                                                                               <C>
V.    SECTION 6.12(d) - LEASE AND RENTAL EXPENSE.

      A        aggregate payments due under operating[and capital leases]         $__________________
               (including leases for real or personal property in connection
               with the Oceanside Distribution Center) for fiscal year ending

      B.       Maximum permitted lease and rental expenses for fiscal year        $__________________

      C.       Excess (deficient) for covenant compliance (Line                   $__________________
               VI.A - VI.B):

VI.   SECTION 6.12(e) -- CAPITAL EXPENDITURES.

      A.       Obligations incurred (including capital leases) for fixed assets   $__________________
               during fiscal year to date

      B.       Maximum permitted capital expenditures ($5,000,000 in any single   $__________________
               year, plus $20,000,000 in 2004 for the Oceanside distribution
               center)
</TABLE>

                                      C-5
                         Form of Compliance Certificate
<PAGE>

<TABLE>
<S>                                                                               <C>
      C.       Excess (deficient) for covenant compliance (Line VI.A - VI.B):     $__________________

VII.  SECTION 6.12(f) - CLEAN DOWN DEBT.

      A.       Reduce debt to $15,000,000 or less for at least 30 consecutive     $__________________
               days each year

      B.       Dates reduced to $15,000,000 or less __________ to _________

VIII. SECTION 6.12(g) - FIXED CHARGE COVERAGE RATIO

      A.       EBITDA (enter EBITDA from Line II.J, above)                        $__________________

      B.       Maintenance Capital Expenditures                                   $__________________

      C.       Cash Income Taxes                                                  $__________________

      D.       Interest Expense                                                   $__________________

      E.       Current Portion of Long Term Debt                                  $__________________

      F.       Ratio (sum of Line VIII.A - B - C / sum of Line VIII.D + E)        ______:1.00

Minimum Required: 1.10:1.00 (for the fiscal quarter ended 7/31/04)

                  1.25:1.00 (thereafter)

IX.   SECTION 7.02(f) - ADDITIONAL INVESTMENTS

      A.       As of the date hereof amount of additional Investments             $__________________
               $_____________

      B.       Maximum permitted at any time $1,000,000

      C.       $30,000,000 for Gekko Acquisition (in addition to Line IX.B)

X.    SECTION 7.06(d) - STOCK REPURCHASES

      A.       As of the date hereof, amount of stock repurchases in current     $___________________
               fiscal year

      B.       Maximum permitted in any fiscal year $1,000,000

XI.   SECTION 7.03(e) - ADDITIONAL CAPITALIZED LEASE AND PURCHASE MONEY
OBLIGATIONS

      A.       As of the date hereof, amount of capitalized lease and             $__________________
               purchase money obligations

      B.       Maximum permitted in any fiscal year $3,000,000                    $__________________
               plus $20,000,000 for the Oceanside distribution center.
</TABLE>

                                      C-6
                         Form of Compliance Certificate
<PAGE>

                                                                       EXHIBIT D

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

      This Assignment and Assumption Agreement (this "Assignment") is dated as
of the Effective Date set forth below and is entered into by and between [INSERT
NAME OF ASSIGNOR] (the "Assignor") and [INSERT NAME OF ASSIGNEE] (the
"Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Revolving/Term Loan Credit Agreement identified
below (the "Credit Agreement"), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in
Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment as if set forth herein in full.

      For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
Agent as contemplated below, (i) all of the Assignor's rights and obligations as
a Lender under the Credit Agreement and any other documents or instruments
delivered pursuant thereto to the extent related to the amount and percentage
interest identified below of all of such outstanding rights and obligations of
the Assignor under the respective facilities identified below (including, to the
extent included in any such facilities, Letters of Credit) included in such
facilities and, (ii) to the extent permitted to be assigned under applicable
law, all claims, including, without limitation, suits, causes of action and any
other right of the Assignor (in its capacity as a Lender) against any Person,
whether known or unknown, arising under or in connection with the Credit
Agreement, any other documents or instruments delivered pursuant thereto or the
loan transactions governed thereby or in any way based on or related to any of
the foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause (i)
above (the rights and obligations sold and assigned pursuant to clauses (i) and
(ii) above being referred to herein collectively as, (the "Assigned Interest").
Such sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment, without representation or warranty by the
Assignor.

  1.  Assignor:    ___________________________

  2.  Assignee:    ___________________________ [and is an Affiliate of Assignor]

  3.  Borrower(s): ___________________________

  4.  Agent: Union Bank of California, N. A., as Agent under the
      Credit Agreement

  5.  Revolving/Term Loan Credit Agreement: The Credit Agreement,
      dated as of July 6, 2004, among Ashworth, Inc., Lenders
      parties thereto, and Agent

  6.  Assigned Interest:

<TABLE>
<CAPTION>
                              Aggregate
                              Amount of                   Amount of                Percentage
                           Commitment/Loans           Commitment/Loans            Assigned of
Facility Assigned          for all Lenders                Assigned             Commitment/Loans
-----------------          ---------------                --------             ----------------
<S>                        <C>                        <C>                      <C>
_______________            $______________            $______________          ______________%

_______________            $______________            $______________          ______________%

_______________            $______________            $______________          ______________%
</TABLE>

      Effective Date: __________________, 20__

                                      D-1
                             Form of Assignment and
                              Assumption Agreement
<PAGE>

      The terms set forth in this Assignment are hereby agreed to:

                                                   ASSIGNOR
                                                   [NAME OF ASSIGNOR]

                                                   By: _________________________
                                                       Title:

                                                   ASSIGNEE
                                                   [NAME OF ASSIGNEE]

                                                   By: _________________________
                                                       Title:

CONSENTED TO AND Accepted:

UNION BANK OF CALIFORNIA, N.A., as Agent

By: ________________________
    Title:__________________

[CONSENTED TO:]

[NAME OF BORROWER(s)]

By: ________________________
   Title:___________________

                                      D-2
                             Form of Assignment and
                              Assumption Agreement
<PAGE>

                 ANNEX 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

                  STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT
                            AND ASSUMPTION AGREEMENT

      1. Representations and Warranties.

            1.1. Assignor. The Assignor (a) represents and warrants that (i) it
is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and dear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents , or any collateral thereunder, (iii) the financial condition of
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by Borrower,
any of its Subsidiaries or Affiliates or any other Person of any of their
respective obligations under any Loan Document.

            1.2. Assignee. The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and to consummate the transactions contemplated hereby
and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee. under the Credit Agreement, (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, and (iv) it has received a
copy of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 6.01 thereof, as applicable, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on Agent or any other Lender, and (b) agrees
that (i) it will, independently and without reliance on Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

            1.3 Assignee's Address for Notices, etc. Attached hereto as Schedule
1 is all contact information, address, account and other administrative
information relating to the Assignee.

      2. Payments. From and after the Effective Date, Agent shall make all
payments in respect of the Assigned Interest (including payments of principal,
interest, fees and other amounts) to the Assignee whether such amounts have
accrued prior to or on or after the Effective Date. The Assignor and the
Assignee shall make all appropriate adjustments in payments by Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.

      3. General Provisions. This Assignment shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
This Assignment may be executed in any number of counterparts, which together
shall constitute one instrument. Delivery of an executed counterpart of a
signature page of this Assignment by telecopy shall be effective as delivery of
a manually executed counterpart of this Assignment. This Assignment shall be
governed by, and construed in accordance with, the laws of the State of
California.

      4. Agent. [The Assignee hereby appoints and authorizes the Assignor to
take such legal action as agent on its behalf and to exercise such powers under
the Credit Agreement as are delegated to the Agent by the Lenders pursuant to
the terms of the Credit Agreement.] [Insert bracketed text only if Assignor is
Agent.] Without limiting the generality of the foregoing, the parties
acknowledge and agree that the Assignee and the Agent are solidary creditors of
each of the Loan Parties in respect of all Obligations owed by each of the Loan
Parties, as the case may be, to each of them, as contemplated in Section 9.12(a)
of the Credit Agreement and in accordance with Article 1541 of the Civil Code of
Quebec. The Assignee shall assume no duties or obligations held by the Assignor
in its capacity as Agent under the Credit Agreement.

                                      D-3
                             Form of Assignment and
                              Assumption Agreement
<PAGE>

                               SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

                             ADMINISTRATIVE DETAILS

      (ASSIGNEE TO LIST NAMES OF CREDIT CONTACTS, ADDRESSES, PHONE AND FACSIMILE
NUMBERS, ELECTRONIC MAIL ADDRESSES AND ACCOUNT AND PAYMENT INFORMATION)

                                      D-4
                             Form of Assignment and
                              Assumption Agreement

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(2)
<SEQUENCE>3
<FILENAME>a01811exv10wxzyx2y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(2)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(2)

                                                  BORROWER: Ashworth, Inc.

                                                  GUARANTORS: Ashworth Store I,
                                                  Inc., Ashworth Store II, Inc.,
                                                  Ashworth Acquisition Corp.,
                                                  GEKKO Brands, L.L.C., Kudzu,
                                                  L.L.C. and The Game, LLC

                                    GUARANTY

To:   Union  Bank of California, N.A., as Administrative Agent under the Loan
      Documents (as defined herein), and to each of the Lenders party to the
      Credit Agreement referred to below

            1.    The Guaranty. This Guaranty, dated as of July 6, 2004, is
given by the undersigned, jointly and severally (each a "Guarantor" and
collectively, the "Guarantors"), in favor of Union Bank of California, N.A., as
Administrative Agent ("Agent") and to each of the Lenders as defined in the
Revolving/Term Loan Credit Agreement dated July 6, 2004, by and among Ashworth,
Inc., a Delaware corporation ("Borrower"), each lender from time to time party
thereto, and Union Bank of California, N.A. as Administrative Agent, and L/C
Issuer (all as defined therein) (the "Credit Agreement") (the Agent and each of
the Lenders hereinafter collectively referred to as "Lenders"). For valuable
consideration, each Guarantor hereby unconditionally guarantees and promises to
pay promptly to Lenders, or order, in lawful money of the United States, any and
all Indebtedness of Borrower to Lenders when due, whether at stated maturity,
upon acceleration or otherwise, and at all times thereafter, subject to such
limitations on each Guarantor's liability as are set forth below. This Guaranty
is cumulative and does not supersede any other outstanding guaranties, and the
liability of each Guarantor under this Guaranty is exclusive of each Guarantor's
liability under any other guaranties signed by each Guarantor. The obligations
of all Guarantors under this Guaranty shall be joint and several.

The liability of each Guarantor under this Guaranty shall be limited to the
Indebtedness under the Loan Documents (as defined herein) and shall not exceed
at any one time the sum of (a) the principal amount of the Indebtedness under
such Loan Documents plus (b) all interest, fees, indemnities (including, without
limitation, hazardous waste indemnities), and other costs and expenses relating
to or arising out of the Indebtedness under such Loan Documents and under any
Swap Contract (as defined in the Credit Agreement) now or hereafter entered into
between Borrower and any Lender or any Affiliate of any Lender.

Notwithstanding the limitations on each Guarantor's liability set forth above,
each Guarantor's liability hereunder shall not exceed at any one time the
Maximum Guaranteed Amount. "Maximum Guaranteed Amount" shall mean the largest
amount during the period commencing with such Guarantor's execution of this
Guaranty and thereafter that would not render such Guarantor's obligations
hereunder subject to avoidance under Section 548 of the Bankruptcy Code (Title
11, United States Code) or any comparable provisions of any applicable state
law.

                                      -1-
<PAGE>

            2.    Definitions.

                  (a)   "Borrower" shall mean the entity named in Paragraph 1 of
this Guaranty.

                  (b)   "Guarantor" shall mean the entities signing this
Guaranty and, if more than one, then any one or more of them.

                  (c)   "Indebtedness" shall mean any and all debts,
liabilities, and obligations of Borrower to Lenders, now or hereafter existing,
whether voluntary or involuntary arising pursuant to the Loan Documents, whether
direct or indirect or acquired by Lenders by assignment, succession, or
otherwise, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, held or to be held by Lenders for its
own account or as agent for another or others, whether Borrower may be liable
individually or jointly with others, whether recovery upon such debts,
liabilities, and obligations may be or hereafter become barred by any statute of
limitations, and whether such debts, liabilities, and obligations may be or
hereafter become otherwise unenforceable. Indebtedness includes, without
limitation, any and all obligations of Borrower to Lenders for reasonable
attorneys' fees and all other costs and expenses incurred by Lenders in the
collection or enforcement of any debts, liabilities, and obligations of Borrower
to Lenders arising pursuant to the Loan Documents. Indebtedness also includes,
without limitation, all obligations of Borrowers to any Lender or any Affiliate
of any Lender now or hereafter owing under a Swap Contract (as defined in the
Credit Agreement).

                  (d)   "Loan Documents" shall mean the Credit Agreement between
Borrower and Lenders, promissory notes from Borrower in favor of Lenders, and
all other agreements, documents, and instruments evidencing any of the
Indebtedness, and deeds of trust, mortgages, security agreements, and other
agreements, documents, and instruments executed by Borrower in connection with
such loan agreements, promissory notes, and other agreements, documents, and
instruments evidencing any of the Indebtedness, all as now in effect and as
hereafter amended, restated, renewed, or superseded.

            3.    Obligations Independent. The obligations hereunder are
independent of the obligations of Borrower or any other guarantor, and a
separate action or actions may be brought and prosecuted against each Guarantor,
or any of them, whether action is brought against Borrower or any other
guarantor or whether Borrower or any other guarantor be joined in any such
action or actions. Anyone executing this Guaranty shall be bound by its terms
without regard to execution by anyone else.

            4.    Rights of Lenders. Each Guarantor authorizes Lenders, without
notice or demand and without affecting its liability hereunder, from time to
time to:

                  (a)   renew, compromise, extend, accelerate, or otherwise
change the time for payment, or otherwise change the terms, of the Indebtedness
or any part thereof, including increase or decrease of the rate of interest
thereon, or otherwise change the terms of any Loan Documents;

                                      -2-
<PAGE>

                  (b)   receive and hold security for the payment of this
Guaranty or any Indebtedness and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security;

                  (c)   apply such security and direct the order or manner of
sale thereof as Lenders in its discretion may determine;

                  (d)   release or substitute any Guarantor or any one or more
of any endorsers or other guarantors of any of the Indebtedness; and

                  (e)   permit the Indebtedness to exceed any Guarantor's
liability under this Guaranty, and each Guarantor agrees that any amounts
received by Lenders from any source, other than from any Guarantor, shall be
deemed to be applied first to any unguaranteed portion of the Indebtedness.

            5.    Guaranty to be Absolute. Each Guarantor agrees that until the
Indebtedness has been paid in full and any commitments of Lenders or facilities
provided by Lenders with respect to the Indebtedness have been terminated, each
Guarantor shall not be released by or because of the taking of, or failure to
take, any action that might in any manner or to any extent vary the risks of
each Guarantor under this Guaranty or that, but for this paragraph, might
discharge or otherwise reduce, limit, or modify such Guarantor's obligations
under this Guaranty. Each Guarantor waives and surrenders any defense to any
liability under this Guaranty based upon any such action, including but not
limited to any action of Lenders described in the immediately preceding
paragraph of this Guaranty. It is the express intent of each Guarantor that each
Guarantor's obligations under this Guaranty are and shall be absolute and
unconditional.

            6.    Guarantor's Waivers of Certain Rights and Certain Defenses.
Each Guarantor waives:

                  (a)   any right to require Lenders to proceed against
Borrower, proceed against or exhaust any security for the Indebtedness, or
pursue any other remedy in Lenders' power whatsoever;

                  (b)   any defense arising by reason of any disability or other
defense of Borrower, or the cessation from any cause whatsoever of the liability
of Borrower;

                  (c)   any defense based on any claim that any of the
Guarantor's obligations exceed or are more burdensome than those of Borrower;
and

                  (d)   the benefit of any statute of limitations affecting any
Guarantor's liability hereunder.

No provision or waiver in this Guaranty shall be construed as limiting the
generality of any other waiver contained in this Guaranty.

            7.    Waiver of Subrogation. Until the Indebtedness has been paid in
full and any commitments of Lenders or facilities provided by Lenders with
respect to the Indebtedness

                                      -3-
<PAGE>

have been terminated, even though the Indebtedness may be in excess of any of
the Guarantor's liability hereunder, each Guarantor waives any right of
subrogation, reimbursement, indemnification, and contribution (contractual,
statutory, or otherwise) including, without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11, United States Code) or any
successor statute, arising from the existence or performance of this Guaranty,
and until the Indebtedness has been paid in full and any commitments of Lenders
for facilities provided by Lenders with respect to the Indebtedness have been
terminated, each Guarantor shall not exercise any right to enforce any remedy
which Lenders now have or may hereafter have against Borrower, and waives any
benefit of, and any right to participate in, any security now or hereafter held
by Lenders.

            8.    Waiver of Notices. Each Guarantor waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, notices of intent to accelerate, notices of
acceleration, notices of any suit or any other action against Borrower or any
other person, any other notices to any party liable on any Loan Document
(including any Guarantor), notices of acceptance of this Guaranty, and notices
of the existence, creation, or incurring of new or additional Indebtedness to
which this Guaranty applies or any other Indebtedness of Borrower to Lenders.

            9.    Waivers of Other Rights and Defenses.

                  (a)   Each Guarantor waives any rights and defenses that are
or may become available to such Guarantor by reason of Sections 2787 to 2855,
inclusive, of the California Civil Code.

                  (b)   Each Guarantor waives all rights and defenses that such
Guarantor may have because any of the Indebtedness is secured by real property.
This means, among other things: (i) Lenders may collect from any Guarantor
without first foreclosing on any real or personal property collateral pledged by
Borrower; and (ii) if Lenders foreclose on any real property collateral pledged
by Borrower: (1) the amount of the Indebtedness may be reduced only by the price
for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (2) Lenders may collect from
any Guarantor even if Lenders, by foreclosing on the real property collateral,
has destroyed any right any Guarantor may have to collect from Borrower. This is
an unconditional and irrevocable waiver of any rights and defenses any Guarantor
may have because any of the Indebtedness is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure.

                  (c)   Each Guarantor waives any right or defense it may have
at law or equity, including California Code of Civil Procedure Section 580a, to
a fair market value hearing or action to determine a deficiency judgment after a
foreclosure.

            10.   Security. To secure all of each Guarantor's obligations
hereunder, each Guarantor assigns and grants to Lenders a security interest in
all moneys, securities, and other property of each Guarantor now or hereafter in
the possession of Lenders, all deposit accounts of each Guarantor maintained
with Lenders, and all proceeds thereof. Upon default or breach of any of the
Guarantor's obligations to Lenders, Lenders may apply any deposit account to
reduce

                                      -4-
<PAGE>

the Indebtedness, and may foreclose any collateral as provided in the Uniform
Commercial Code and in any security agreements between Lenders and any
Guarantor.

            11.   Subordination. Any obligations of Borrower to each Guarantor,
now or hereafter existing, including but not limited to any obligations to each
Guarantor as subrogee of Lenders or resulting from each Guarantor's performance
under this Guaranty, are hereby subordinated to the Indebtedness. In addition to
each Guarantor's deferral of any right of subrogation as set forth in this
Guaranty with respect to any obligations of Borrower to each Guarantor as
subrogee of Lenders, each Guarantor agrees that, if Lenders so request, each
Guarantor shall not demand, take, or receive from Borrower, by setoff or in any
other manner, payment of any other obligations of Borrower to each Guarantor
until the Indebtedness has been paid in full and any commitments of Lenders or
facilities provided by Lenders with respect to the Indebtedness have been
terminated. If any payments are received by any Guarantor in violation of such
waiver or agreement, such payments shall be received by such Guarantor as
trustee for Lenders and shall be paid over to Lenders on account of the
Indebtedness, but without reducing or affecting in any manner the liability of
such Guarantor under the other provisions of this Guaranty. Any security
interest, lien, or other encumbrance that each Guarantor may now or hereafter
have on any property of Borrower is hereby subordinated to any security
interest, lien, or other encumbrance that Lenders may have on any such property.

            12.   Revocation of Guaranty.

                  (a)   This Guaranty may be revoked at any time by any
Guarantor in respect to future transactions, unless there is a continuing
consideration as to such transactions which such Guarantor does not renounce.
Such revocation shall be effective upon actual receipt by Lenders, at the
address shown below or at such other address as may have been provided to each
Guarantor by Lenders, of written notice of revocation. Revocation shall not
affect any of the Guarantor's obligations or Lenders' rights with respect to
transactions committed or entered into prior to Lenders' receipt of such notice,
regardless of whether or not the Indebtedness related to such transactions,
before or after revocation, has been incurred, renewed, compromised, extended,
accelerated, or otherwise changed as to any of its terms, including time for
payment or increase or decrease of the rate of interest thereon, and regardless
of any other act or omission of Lenders authorized hereunder. Revocation by any
Guarantor shall not affect any obligations of any other guarantor.

                  (b)   Each Guarantor acknowledges and agrees that this
Guaranty may be revoked only in accordance with the foregoing provisions of this
paragraph and shall not be revoked simply as a result of any change in name,
location, or composition or structure of Borrower, the dissolution of Borrower,
or the termination, increase, decrease, or other change of any personnel or
owners of Borrower.

            13.   Reinstatement of Guaranty. If this Guaranty is revoked,
returned, or canceled, and subsequently any payment or transfer of any interest
in property by Borrower to Lenders is rescinded or must be returned by Lenders
to Borrower, this Guaranty shall be reinstated with respect to any such payment
or transfer, regardless of any such prior revocation, return, or cancellation.

                                      -5-
<PAGE>

            14.   Stay of Acceleration. In the event that acceleration of the
time for payment of any of the Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower or otherwise, all such Indebtedness
guaranteed by each Guarantor shall nonetheless be payable by each Guarantor
immediately if requested by Lenders.

            15.   No Deductions. All payments by each Guarantor hereunder shall
be paid in full, without setoff or counterclaim or any deduction or withholding
whatsoever, including, without limitation, for any and all present and future
taxes. In the event that any Guarantor or any Lender is required by law to make
any such deduction or withholding, each Guarantor agrees to pay on behalf of
Lenders such amount directly to the appropriate person or entity, or if any
Guarantor cannot legally comply with the foregoing, such Guarantor shall pay to
Lenders such additional amounts as will result in the receipt by Lenders of the
full amount payable hereunder. Each Guarantor shall promptly provide Lenders
with evidence of payment of any such amount made on Lenders' behalf.

            16.   Information Relating to Borrower. Each Guarantor acknowledges
and agrees that it shall have the sole responsibility for, and has adequate
means of, obtaining from Borrower such information concerning Borrower's
financial condition or business operations as each Guarantor may require, and
that Lenders have no duty, and each Guarantor is not relying on Lenders, at any
time to disclose to any Guarantor any information relating to the business
operations or financial condition of Borrower.

            17.   Borrower's Authorization. It is not necessary for Lenders to
inquire into the powers of Borrower or of the officers, directors, or agents
acting or purporting to act on its behalf, and any Indebtedness made or created
in reliance upon the professed exercise of such powers shall be guaranteed
hereunder, subject to any limitations on each Guarantor's liability set forth
herein.

            18.   Information Relating to Guarantor. Each Guarantor authorizes
Lenders to verify or check any information given by each Guarantor to Lenders,
check each Guarantor's credit references, and obtain credit reports.

            19.   Change of Status. Each Guarantor shall not enter into any
consolidation, merger, or other combination that is not otherwise permitted by
the Credit Agreement.

            20.   Notices. All notices required under this Guaranty shall be
personally delivered or sent by certified or registered mail, postage prepaid,
or by overnight courier, to the addresses on the signature page of this
Guaranty, or sent by facsimile to the fax numbers listed on the signature page,
or to such other addresses as Lenders and each Guarantor may specify from time
to time in writing. Notices sent by (a) certified or registered mail shall be
deemed delivered four business days after deposit in the mails, (b) overnight
courier shall be deemed delivered upon delivery, and (c) facsimile shall be
deemed delivered when sent and the sender has received electronic information of
error free receipt.

            21.   Successors and Assigns. This Guaranty (a) binds each Guarantor
and such Guarantor's executors, administrators, successors, and assigns,
provided that each such Guarantor may not assign its rights or obligations under
this Guaranty without the prior written

                                      -6-
<PAGE>

consent of Lenders, and (b) inures to the benefit of Lenders and Lenders'
indorsees, successors, and assigns. Lenders may, without notice to any Guarantor
and without affecting any Guarantor's obligations hereunder, sell, assign, grant
participations in, or otherwise transfer to any other person, firm, or
corporation the Indebtedness and this Guaranty, in whole or in part. Each
Guarantor agrees that Lenders may disclose to any assignee or purchaser, or any
prospective assignee or purchaser, of all or part of the Indebtedness any and
all information in Lenders' possession concerning each Guarantor, this Guaranty,
and any security for this Guaranty.

            22.   Amendments, Waivers, and Severability. No provision of this
Guaranty may be amended or waived except in writing. No failure by Lenders to
exercise, and no delay in exercising, any of its rights, remedies, or powers
shall operate as a waiver thereof, and no single or partial exercise of any such
right, remedy, or power shall preclude any other or further exercise thereof or
the exercise of any other right, remedy, or power. The unenforceability or
invalidity of any provision of this Guaranty shall not affect the enforceability
or validity of any other provision of this Guaranty.

            23.   Costs and Expenses. Each Guarantor agrees to pay all
reasonable attorneys' fees, including allocated costs of Lenders' in-house
counsel, and all other costs and expenses which may be incurred by Lenders (a)
in the enforcement of this Guaranty or (b) in the preservation, protection, or
enforcement of any rights of Lenders in any case commenced by or against any
Guarantor or Borrower under the Bankruptcy Code (Title 11, United States Code)
or any similar or successor statute.

            24.   Governing Law and Jurisdiction. This Guaranty shall be
governed by and construed under the laws of the State of California. Each
Guarantor irrevocably (a) submits to the non-exclusive jurisdiction of any
federal or state court sitting in the State of California in any action or
proceeding arising out of or relating to this Guaranty and (b) waives to the
fullest extent permitted by law any defense asserting an inconvenient forum in
connection therewith. Service of process by Lenders in connection with such
action or proceeding shall be binding on each Guarantor if sent to such
Guarantor by registered or certified mail at its address specified below.

            25.   Waiver to Right to Trial by Jury. EACH PARTY TO THIS GUARANTY
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS GUARANTY MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -7-
<PAGE>

This Guaranty is executed as of the date first written above.

                                  GUARANTORS:

                                  ASHWORTH STORE I, INC.
                                  a Delaware corporation

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Executive Vice President, Chief Operating
                                  Officer, Chief Financial Officer, Chief
                                  Accounting Officer and Treasurer

                                  ASHWORTH STORE II, INC.
                                  a Delaware corporation

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Executive Vice President, Chief Operating
                                  Officer, Chief Financial Officer, Chief
                                  Accounting Officer and Treasurer

                                  ASHWORTH ACQUISITION CORP.
                                  a Delaware corporation

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Executive Vice President, Chief Operating
                                  Officer, Chief Financial Officer, Chief
                                  Accounting Officer and Treasurer

                          [SIGNATURE PAGE TO GUARANTY]

                        [SIGNATURES CONTINUED NEXT PAGE]

<PAGE>

                                  GEKKO BRANDS, L.L.C.
                                  an Alabama limited liability company

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Manager

                                  KUDZU, L.L.C.
                                  an Alabama limited liability company

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Manager

                                  THE GAME, LLC
                                  an Alabama limited liability company

                                  By:__________________________________________
                                           Terence W. Tsang

                                  Its: Manager

                          [SIGNATURE PAGE TO GUARANTY]

<PAGE>

Address for notices to Lenders:             Address for notices for Guarantors:

Union Bank of California, N.A.              2765 Loker Avenue West
as Administrative Agent                     Carlsbad, CA  92008
Mail Code: S-420
530 B Street, Suite 1050
San Diego, CA  92101-4407

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(3)
<SEQUENCE>4
<FILENAME>a01811exv10wxzyx3y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(3)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(3)

                               SECURITY AGREEMENT
                                   (BORROWER)

            1.    THE SECURITY. The undersigned, Ashworth, Inc. (the "Pledgor")
hereby assigns and grants to Union Bank of California, N.A. as Administrative
Agent (the "Agent") on behalf of the Lenders as defined in the Revolving/Term
Loan Credit Agreement dated July 6, 2004, by and among the Pledgor, each lender
from time to time party thereto, and Union Bank of California, N.A., as
Administrative Agent and L/C Issuer (all as defined therein (the "Credit
Agreement") (the Agent and each of the Lenders hereinafter collective referred
to as "Lenders") a security interest in the following described property now
owned or hereafter acquired by the Pledgor ("Collateral"):

                  (a)   All accounts, contract rights, chattel paper,
instruments, deposit accounts, and general intangibles, including all amounts
due to the Pledgor from a factor; and all returned or repossessed goods which,
on sale or lease, resulted in an account or chattel paper.

                  (b)   All inventory, including all materials, work in process
and finished goods.

                  (c)   All equipment and fixtures of every type.

                  (d)   All of the Pledgor's deposit accounts with the Lenders
The Collateral shall include any renewals or rollovers of the deposit accounts,
any successor accounts, and any general intangibles and choses in action arising
therefrom or related thereto.

                  (e)   All instruments, notes, chattel paper, documents, and
certificates of deposit of every type The Collateral shall include all liens,
security agreements, leases and other contracts securing or otherwise relating
to the foregoing.

                  (f)   All general intangibles, including, but not limited to,
(i) all patents, and all unpatented or unpatentable inventions; (ii) all
trademarks, service marks, and trade names; (iii) all copyrights and literary
rights; (iv) all computer software programs; (v) all mask works of semiconductor
chip products; (vi) all trade secrets, proprietary information, customer lists,
manufacturing, engineering and production plans, drawings, specifications,
processes and systems The Collateral shall include all good will connected with
or symbolized by any of such general intangibles; all contract rights,
documents, applications, licenses, materials and other matters related to such
general intangibles; all tangible property embodying or incorporating any such
general intangibles; and all chattel paper and instruments relating to such
general intangibles.

                  (g)   All negotiable and nonnegotiable documents of title
covering any Collateral.

                  (h)   All accessions, attachments and other additions to the
Collateral, and all tools, parts and equipment used in connection with the
Collateral.

                                     - 1 -
<PAGE>

                  (i)   All substitutes or replacements for any Collateral, all
cash or noncash proceeds, product, rents and profits of any Collateral, all
income, benefits and property receivable on account of the Collateral, all
rights under warranties and insurance contracts covering the Collateral, and any
causes of action relating to the Collateral.

                  (j)   All books and records pertaining to any Collateral,
including but not limited to any computer-readable memory and any computer
hardware or software necessary to process such memory ("Books and Records").

            THE FOREGOING NOTWITHSTANDING, (1) AT NO TIME SHALL THE TERM
"COLLATERAL" INCLUDE MORE THAN 65% OF THE ISSUED AND OUTSTANDING CAPITAL STOCK
OF ASHWORTH U.K., LIMITED; AND (2) THE TERM "COLLATERAL" SHALL NOT INCLUDE ANY
MEMBERSHIP INTERESTS OF PLEDGOR IN ASHWORTH, EDC, LLC, A DELAWARE LIMITED
LIABILITY COMPANY ("EDC"), UNTIL THE EARLIER OF (X) RECEIPT OF CONSENT TO SUCH
PLEDGE FROM BANK OF AMERICA, N.A. (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS,
"BOFA"), OR (Y) SUCH TIME AS THE LOAN (AS DEFINED IN PARAGRAPH 8 TO THE LIMITED
LIABILITY COMPANY AGREEMENT OF EDC DATED AS OF MARCH 15, 2004) IS NO LONGER
OUTSTANDING.

            2.    THE INDEBTEDNESS. The Collateral secures and will secure all
Indebtedness of the Pledgor to the Lenders For the purposes of this Agreement,
"Indebtedness" means all loans, advances and extensions of credit made by the
Lenders to the Pledgor and all other obligations and liabilities of the Pledgor
to the Lenders arising under the Credit Agreement, whether now existing or
hereafter incurred or created, and including any obligation or liability arising
pursuant to any Swap Contract (as defined in the Credit Agreement) entered into
with the Lenders and/or any Affiliate of the Lenders.

            3.    PLEDGOR'S COVENANTS. The Pledgor represents, covenants and
warrants that unless compliance is waived by the Required Lenders in writing:

                  (a)   The Pledgor will properly preserve the Collateral;
defend the Collateral against any adverse claims and demands; and keep accurate
Books and Records.

                  (b)   Pledgor's chief executive office is located, in the
state specified on the signature page hereof In addition, Pledgor is
incorporated in or organized under the laws of the state specified on such
signature page Pledgor shall give Agent at least thirty (30) days notice before
changing its residence or its chief executive office or state of incorporation
or organization The current locations of Collateral are set forth on Schedule 1
attached hereto The Pledgor will notify, the Agent at the end of each fiscal
quarter in writing of any change in the location of any Collateral in excess of
$250,000, including the Books and Records.

                  (c)   The Pledgor will notify the Agent in writing prior to
any change in the Pledgor's name, identity or business structure.

                  (d)   Unless otherwise agreed, the Pledgor has not granted and
will not grant any security interest in any of the Collateral except to the
Agent; and will keep the Collateral free of all liens, claims, security
interests and encumbrances of any kind or nature

                                     - 2 -
<PAGE>

except the security interest of the Agent on behalf of the Lenders or as
otherwise permitted by the Credit Agreement.

                  (e)   The Pledgor will promptly notify the Agent in writing of
any event which diminishes the value of the Collateral by $500,000 or more, the
ability of the Pledgor or the Agent to dispose of the Collateral, or the rights
and remedies of the Agent in relation thereto, including, but not limited to,
the levy of any legal process against any Collateral in connection with the
collection of an obligation in excess of the Threshold Amount.

                  (f)   The Pledgor shall pay all costs necessary to preserve,
defend, enforce and collect the Collateral, including but not limited to taxes,
assessments, insurance premiums, repairs, rent, storage costs and expenses of
sales, and any costs to perfect the Agent's security interest Without waiving
the Pledgor's default for failure to make any such payment, the Agent at its
option may pay any such costs and expenses, discharge encumbrances on the
Collateral, and pay for insurance of the Collateral, and such payments shall be
a part of the Indebtedness and bear interest at the rate set out in the
Indebtedness The Pledgor agrees to reimburse the Agent on demand for any costs
so incurred.

                  (g)   Until the Agent exercises its rights to make collection,
the Pledgor will diligently collect all Collateral.

                  (h)   If any Collateral is or becomes the subject of any
registration certificate, certificate of deposit or negotiable document of
title, including any warehouse receipt or bill of lading, the Pledgor shall, if
an Event of Default has occurred and is continuing, immediately deliver such
document to the Agent, together with any necessary endorsements.

                  (i)   The Pledgor will not sell, lease, or otherwise dispose
of any Collateral except to the extent permitted by Section 7.05 of the Credit
Agreement.

                  (j)   The Pledgor will maintain and keep in force insurance
covering the Collateral against fire and extended coverages, to the extent that
any Collateral is of a type which can be so insured Such insurance shall require
losses to be paid on a replacement cost basis, be issued by insurance companies
acceptable to the Agent and include a loss payable endorsement in favor of the
Agent in a form reasonably acceptable to the Agent.

                  (k)   The Pledgor will not attach any Collateral having an
aggregate value in excess of $250,000 to any real property or fixture in a
manner which might cause such Collateral to become a part thereof unless the
Pledgor first obtains the written consent of any owner, holder of any lien on
the real property or fixture, or other person having an interest in such
property to the removal by the Agent of the Collateral from such real property
or fixture Such written consent shall be in form and substance acceptable to the
Agent and shall provide that the Agent has no liability to such owner, holder of
any lien, or any other person.

                  (l)   The Pledgor will, at its expense, diligently prosecute
all patent, trademark or service mark or copyright applications pending on or
after the date hereof, will maintain in effect all material issued patents and
will renew all material trademark and service mark registrations, including
payment of any and all maintenance and renewal fees relating thereto The Pledgor
also will promptly make application on any material registerable but

                                     - 3 -
<PAGE>

unregistered trademarks and service marks The Pledgor will at its expense
protect and defend all rights in the Collateral against any claims and demands
of all persons other than the Agent and the Lenders and will, at its expense,
enforce all rights in the Collateral against any and all infringers of the
Collateral Except as permitted by the Credit Agreement, the Pledgor will not
license or transfer any of the Collateral except with the Agent's prior written
consent.

            4.    ADDITIONAL OPTIONAL REQUIREMENTS. The Pledgor agrees that the
Agent may at its option at any time:

                  (a)   Require the Pledgor to deliver to the Agent (i) copies
of or extracts from the Books and Records, and (ii) information, as Agent
reasonably requests, concerning any material contracts or other matters
affecting the Collateral.

                  (b)   Examine the Collateral, including the Books and Records,
and make copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or any Books
and Records are located.

                  (c)   Require the Pledgor to deliver to the Agent any
instruments or chattel paper which are part of the Collateral to the extent
required therefor pursuant to Section 3(h).

                  (d)   If an Event of Default has occurred and is continuing,
notify any account debtors, any buyers of the Collateral, or any other persons
of the Agent's and the Lenders' interest in the Collateral.

            5.    DEFAULTS. An Event of Default under the Credit Agreement shall
be a default hereunder.

            6.    LENDERS' REMEDIES AFTER DEFAULT In the event of any default,
the Agent and the Lenders may do any one or more of the following:

                  (a)   Declare any Indebtedness immediately due and payable,
without notice or demand.

                  (b)   Enforce the security interest given hereunder pursuant
to the Uniform Commercial Code and any other applicable law.

                  (c)   Enforce the security interest of the Lenders in any
deposit account of the Pledgor maintained with any Lender by applying such
account to the Indebtedness.

                  (d)   Require the Pledgor to obtain the prior written consent
of the Lenders to any sale, lease, agreement to sell or lease, or other
disposition of any Collateral consisting of inventory, other than in the
ordinary course of business.

                  (e)   Require the Pledgor to segregate all collections and
proceeds of the Collateral so that they are capable of identification and
deliver daily such collections and proceeds to the Agent in kind.

                                     - 4 -
<PAGE>

                  (f)   Require the Pledgor to direct all account debtors to
forward all payments and proceeds of the Collateral to a post office box under
the Agent's exclusive control.

                  (g)   Require the Pledgor to assemble the Collateral,
including the Books and Records, and make them available to the Lenders at a
place designated by the Lenders.

                  (h)   Enter upon the property where any Collateral, including
any Books and Records, are located and take possession of such Collateral and
such Books and Records, and use such property (including any buildings and
facilities) and any of the Pledgor's equipment, if the Lenders deem such use
necessary or advisable in order to take possession of, hold, preserve, process,
assemble, prepare for sale or lease, market for sale or lease, sell or lease, or
otherwise dispose of, any Collateral.

                  (i)   Demand and collect any payments on and proceeds of the
Collateral In connection therewith the Pledgor irrevocably authorizes the Agent
to endorse or sign the Pledgor's name on all checks, drafts, collections,
receipts and other documents, and to take possession of and open the mail
addressed to the Pledgor and remove therefrom any payments and proceeds of the
Collateral.

                  (j)   Grant extensions and compromise or settle claims with
respect to the Collateral for less than face value, all without prior notice to
the Pledgor.

                  (k)   Use or transfer any of the Pledgor's rights and
interests in any Intellectual Property now owned or hereafter acquired by the
Pledgor, if the Agent deems such use or transfer necessary or advisable in order
to take possession of, hold, preserve, process, assemble, prepare for sale or
lease, market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral The Pledgor agrees that any such use or transfer shall be without any
additional consideration to the Pledgor As used in this paragraph, "Intellectual
Property" includes, but is not limited to, all trade secrets, computer software,
service marks, trademarks, trade names, trade styles, copyrights, patents,
applications for any of the foregoing, customer lists, working drawings,
instructional manuals, and rights in processes for technical manufacturing,
packaging and labeling, in which the Pledgor has any right or interest, whether
by ownership, license, contract or otherwise.

                  (l)   Have a receiver appointed by any court of competent
jurisdiction to take possession of the Collateral The Pledgor hereby consents to
the appointment of such a receiver and agrees not to oppose any such
appointment.

                  (m)   Take such measures as the Agent may deem necessary or
advisable to take possession of, hold, preserve, process, assemble, insure,
prepare for sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and the Pledgor hereby irrevocably constitutes and
appoints the Agent as the Pledgor's attorney-in-fact to perform all acts and
execute all documents in connection therewith.

                  (n)   Without notice or demand to the Pledgor, set off and
apply against any and all of the Indebtedness any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by any Lender or any

                                     - 5 -
<PAGE>

of the Lenders' agents or affiliates to or for the credit of the account of the
Pledgor or any guarantor or endorser of the Pledgor's Indebtedness.

            7.    MISCELLANEOUS.

                  (a)   Any waiver, express or implied, of any provision
hereunder and any delay or failure by the Agent or Lenders to enforce any
provision shall not preclude the Lenders from enforcing any such provision
thereafter.

                  (b)   The Pledgor shall, at the request of the Agent, execute
such other agreements, documents, instruments, or financing statements in
connection with this Agreement as the Agent may reasonably deem necessary To the
extent permitted by applicable law, a carbon, photographic or other reproduction
of this Agreement or any financing statement covering the Collateral shall be
sufficient as a financing statement The Pledgor hereby irrevocably constitutes
and appoints the Agent as the Pledgor's attorney-in-fact to sign any financing
statement or other document which must be executed or filed to perfect or
continue perfected, maintain the priority of or provide notice of the Lenders'
security interest in the Collateral and file any such financing statements and
other documents by electronic means with or without a signature as authorized or
required by applicable law or filing procedures.

                  (c)   All notes, security agreements, subordination agreements
and other documents executed by the Pledgor or furnished to the Agent in
connection with this Agreement must be in form and substance satisfactory to the
Agent.

                  (d)   This Agreement shall be governed by and construed
according to the laws of the State of California, to the jurisdiction of which
the parties hereto submit.

                  (e)   All rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies otherwise provided by law Any single
or partial exercise of any right or remedy shall not preclude the further
exercise thereof or the exercise of any other right or remedy.

                  (f)   All terms not defined herein are used as set forth in
the Uniform Commercial Code.

                  (g)   In the event of any action by the Agent or the Lenders
to enforce this Agreement or to protect the security interest of the Lenders in
the Collateral, or to take possession of, hold, preserve, process, assemble,
insure, prepare for sale or lease, market for sale or lease, sell or lease, or
otherwise dispose of, any Collateral, the Pledgor agrees to pay promptly the
costs and expenses thereof, together with reasonable attorney's fees and
allocated costs for inhouse legal services.

                  (h)   This Agreement shall constitute a continuing agreement,
applying to all future as well as existing transactions, whether or not of the
character contemplated at the date of this Agreement, and if all transactions
between the Lenders and the Pledgor shall be closed at any time, shall be
equally applicable to any new transactions thereafter.

                                     - 6 -
<PAGE>

                  (i)   The Agent's and the Lenders' rights hereunder shall
inure to the benefit of its successors and assigns In the event of any
assignment or transfer by any Lender of any of the Indebtedness or the
Collateral, the Agent thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
the Agent shall retain all rights and powers hereby given with respect to any of
the Indebtedness or the Collateral not so assigned or transferred All
representations, warranties and agreements of the Pledgor if more than one are
joint and several and all shall be binding upon the personal representatives,
heirs, successors and assigns of the Pledgor.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                     - 7 -
<PAGE>

This Agreement is executed as of the date first written above.

UNION BANK OF CALIFORNIA, N.A.          ASHWORTH, INC.
As Administrative Agent

By:_________________________________    By:__________________________________

                                                 Terence W. Tsang

Title:______________________________    Its:  Executive Vice President, Chief
                                        Operating Officer, Chief Financial
                                        Officer, Chief Accounting Officer and
                                        Treasurer

                                     - 8 -
<PAGE>

                                                          Address of Pledgor:
                                                          2765 Loker Avenue West
                                                          Carlsbad, CA  92008

Pledgor's state of incorporation
or organization (if Pledgor is a corporation, partnership,
limited liability company or other registered entity): Delaware

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(4)
<SEQUENCE>5
<FILENAME>a01811exv10wxzyx4y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(4)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(4)

                               SECURITY AGREEMENT
                                  (GUARANTORS)

            1.    THE SECURITY. Each of the undersigned, (individually and
collectively, the "Pledgor") hereby assigns and grants to Union Bank of
California, N.A. as Administrative Agent (the "Agent") on behalf of the Lenders
as defined in the Revolving/Term Loan Credit Agreement dated July 6, 2004, by
and among the Pledgor, each lender from time to time party thereto, and Union
Bank of California, N.A., as Administrative Agent and L/C Issuer (all as defined
therein (the "Credit Agreement") (the Agent and each of the Lenders hereinafter
collective referred to as "Lenders") a security interest in the following
described property now owned or hereafter acquired by the Pledgor
("Collateral"):

                  (a)   All accounts, contract rights, chattel paper,
instruments, deposit accounts, and general intangibles, including all amounts
due to the Pledgor from a factor; and all returned or repossessed goods which,
on sale or lease, resulted in an account or chattel paper.

                  (b)   All inventory, including all materials, work in process
and finished goods.

                  (c)   All equipment and fixtures of every type.

                  (d)   All of the Pledgor's deposit accounts with the Lenders.
The Collateral shall include any renewals or rollovers of the deposit accounts,
any successor accounts, and any general intangibles and choses in action arising
therefrom or related thereto.

                  (e)   All instruments, notes, chattel paper, documents, and
certificates of deposit of every type. The Collateral shall include all liens,
security agreements, leases and other contracts securing or otherwise relating
to the foregoing.

                  (f)   All general intangibles, including, but not limited to,
(i) all patents, and all unpatented or unpatentable inventions; (ii) all
trademarks, service marks, and trade names; (iii) all copyrights and literary
rights; (iv) all computer software programs; (v) all mask works of semiconductor
chip products; (vi) all trade secrets, proprietary information, customer lists,
manufacturing, engineering and production plans, drawings, specifications,
processes and systems. The Collateral shall include all good will connected with
or symbolized by any of such general intangibles; all contract rights,
documents, applications, licenses, materials and other matters related to such
general intangibles; all tangible property embodying or incorporating any such
general intangibles; and all chattel paper and instruments relating to such
general intangibles.

                  (g)   All negotiable and nonnegotiable documents of title
covering any Collateral.

                  (h)   All accessions, attachments and other additions to the
Collateral, and all tools, parts and equipment used in connection with the
Collateral.

                                      -1-
<PAGE>

                  (i)   All substitutes or replacements for any Collateral, all
cash or non-cash proceeds, product, rents and profits of any Collateral, all
income, benefits and property receivable on account of the Collateral, all
rights under warranties and insurance contracts covering the Collateral, and any
causes of action relating to the Collateral.

                  (j)   All books and records pertaining to any Collateral,
including but not limited to any computer-readable memory and any computer
hardware or software necessary to process such memory ("Books and Records").

            2.    THE INDEBTEDNESS. The Collateral secures and will secure (a)
all Indebtedness of the Pledgor to the Lenders, and (b) all Indebtedness of
Ashworth, Inc. to the Lenders. Each party obligated under any Indebtedness is
referred to in this Agreement as "Debtor." For the purposes of this Agreement,
"Indebtedness" means all loans, advances and extensions of credit made by the
Lenders to the Pledgor or any Debtor and all other obligations and liabilities
of the Pledgor or any Debtor to the Lenders arising under or in connection with
the Credit Agreement, whether now existing or hereafter incurred or created, and
including any obligation or liability arising pursuant to any guaranty and/or
any Swap Contract (as defined in the Credit Agreement) entered into with the
Lenders and/or any Affiliate of the Lenders.

            3.    PLEDGOR'S COVENANTS. The Pledgor represents, covenants and
warrants that unless compliance is waived by the Required Lenders in writing:

                  (a)   The Pledgor will properly preserve the Collateral;
defend the Collateral against any adverse claims and demands; and keep accurate
Books and Records.

                  (b)   Pledgor is incorporated in or organized under the laws
of the state specified on such signature page. Pledgor shall give Agent at least
thirty (30) days notice before changing its state of incorporation or
organization. The Pledgor will notify the Agent in writing at the end of each
fiscal quarter of any change in the location of any Collateral in excess of
$250,000, including the Books and Records.

                  (c)   The Pledgor will notify the Agent in writing prior to
any change in the Pledgor's name, identity or business structure.

                  (d)   Unless otherwise agreed, the Pledgor has not granted and
will not grant any security interest in any of the Collateral except to the
Agent, and will keep the Collateral free of all liens, claims, security
interests and encumbrances of any kind or nature except the security interest of
the Agent on behalf of the Lenders or as otherwise permitted by the Credit
Agreement.

                  (e)   The Pledgor will promptly notify the Agent in writing of
any event which diminishes the value of the Collateral by $500,000 or more, the
ability of the Pledgor or the Agent to dispose of the Collateral, or the rights
and remedies of the Agent in relation thereto, including, but not limited to,
the levy of any legal process against any Collateral in connection with the
collection of an obligation in the amount of $500,000 or more.

                  (f)   The Pledgor shall pay all costs necessary to preserve,
defend, enforce and collect the Collateral, including but not limited to taxes,
assessments, insurance

                                      -2-
<PAGE>

premiums, repairs, rent, storage costs and expenses of sales, and any costs to
perfect the Agent's security interest. Without waiving the Pledgor's default for
failure to make any such payment, the Agent at its option may pay any such costs
and expenses, discharge encumbrances on the Collateral, and pay for insurance of
the Collateral, and such payments shall be a part of the Indebtedness and bear
interest at the rate set out in the Indebtedness. The Pledgor agrees to
reimburse the Agent on demand for any costs so incurred.

                  (g)   Until the Agent exercises its rights to make collection,
the Pledgor will diligently collect all Collateral.

                  (h)   If any Collateral is or becomes the subject of any
registration certificate, certificate of deposit or negotiable document of
title, including any warehouse receipt or bill of lading, the Pledgor shall, if
an Event of Default has occurred and is continuing, immediately deliver such
document to the Agent, together with any necessary endorsements.

                  (i)   The Pledgor will not sell, lease, or otherwise dispose
of any Collateral except to the extent permitted by Section 7.05 of the Credit
Agreement.

                  (j)   The Pledgor will maintain and keep in force insurance
covering the Collateral against fire and extended coverages, to the extent that
any Collateral is of a type which can be so insured. Such insurance shall
require losses to be paid on a replacement cost basis, be issued by insurance
companies acceptable to the Agent and include a loss payable endorsement in
favor of the Agent in a form reasonably acceptable to the Agent.

                  (k)   The Pledgor will not attach any Collateral having an
aggregate value in excess of $250,000 to any real property or fixture in a
manner which might cause such Collateral to become a part thereof unless the
Pledgor first obtains the written consent of any owner, holder of any lien on
the real property or fixture, or other person having an interest in such
property to the removal by the Agent of the Collateral from such real property
or fixture. Such written consent shall be in form and substance acceptable to
the Agent and shall provide that the Agent has no liability to such owner,
holder of any lien, or any other person.

                  (l)   The Pledgor will, at its expense, diligently prosecute
all patent, trademark or service mark or copyright applications pending on or
after the date hereof, will maintain in effect all material issued patents and
will renew all material trademark and service mark registrations, including
payment of any and all maintenance and renewal fees relating thereto. The
Pledgor also will promptly make application on any material registerable but
unregistered trademarks and service marks. The Pledgor will at its expense
protect and defend all rights in the Collateral against any claims and demands
of all persons other than the Agent and the Lenders and will, at its expense,
enforce all rights in the Collateral against any and all infringers of the
Collateral. Except as permitted by the Credit Agreement, the Pledgor will not
license or transfer any of the Collateral except with the Agent's prior written
consent.

            4.    ADDITIONAL OPTIONAL REQUIREMENTS. The Pledgor agrees that the
Agent may at its option at any time:

                                      -3-
<PAGE>

                  (a)   Require the Pledgor to deliver to the Agent (i) copies
of or extracts from the Books and Records, and (ii) information, as Agent
reasonably requests, concerning any material contracts or other matters
affecting the Collateral.

                  (b)   Examine the Collateral, including the Books and Records,
and make copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or any Books
and Records are located.

                  (c)   Require the Pledgor to deliver to the Agent any
instruments or chattel paper which are part of the Collateral to the extent
required therefor pursuant to Section 3(h).

                  (d)   If an Event of Default has occurred and is continuing,
notify any account debtors, any buyers of the Collateral, or any other persons
of the Agent's and the Lenders' interest in the Collateral.

            5.    DEFAULTS. An Event of Default under the Credit Agreement shall
be a default hereunder.

            6.    LENDERS' REMEDIES AFTER DEFAULT. In the event of any default,
the Agent and the Lenders may do any one or more of the following:

                  (a)   Declare any Indebtedness immediately due and payable,
without notice or demand.

                  (b)   Enforce the security interest given hereunder pursuant
to the Uniform Commercial Code and any other applicable law.

                  (c)   Enforce the security interest of the Lenders in any
deposit account of the Pledgor maintained with any Lender by applying such
account to the Indebtedness.

                  (d)   Require the Pledgor to obtain the prior written consent
of the Lenders to any sale, lease, agreement to sell or lease, or other
disposition of any Collateral consisting of inventory, other than in the
ordinary course of business.

                  (e)   Require the Pledgor to segregate all collections and
proceeds of the Collateral so that they are capable of identification and
deliver daily such collections and proceeds to the Agent in kind.

                  (f)   Require the Pledgor to direct all account debtors to
forward all payments and proceeds of the Collateral to a post office box under
the Agent's exclusive control.

                  (g)   Require the Pledgor to assemble the Collateral,
including the Books and Records, and make them available to the Lenders at a
place designated by the Lenders.

                  (h)   Enter upon the property where any Collateral, including
any Books and Records, are located and take possession of such Collateral and
such Books and Records,

                                      -4-
<PAGE>

and use such property (including any buildings and facilities) and any of the
Pledgor's equipment, if the Lenders deem such use necessary or advisable in
order to take possession of, hold, preserve, process, assemble, prepare for sale
or lease, market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral.

                  (i)   Demand and collect any payments on and proceeds of the
Collateral. In connection therewith the Pledgor irrevocably authorizes the Agent
to endorse or sign the Pledgor's name on all checks, drafts, collections,
receipts and other documents, and to take possession of and open the mail
addressed to the Pledgor and remove therefrom any payments and proceeds of the
Collateral.

                  (j)   Grant extensions and compromise or settle claims with
respect to the Collateral for less than face value, all without prior notice to
the Pledgor.

                  (k)   Use or transfer any of the Pledgor's rights and
interests in any Intellectual Property now owned or hereafter acquired by the
Pledgor, if the Agent deems such use or transfer necessary or advisable in order
to take possession of, hold, preserve, process, assemble, prepare for sale or
lease, market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral. The Pledgor agrees that any such use or transfer shall be without
any additional consideration to the Pledgor. As used in this paragraph,
"Intellectual Property" includes, but is not limited to, all trade secrets,
computer software, service marks, trademarks, trade names, trade styles,
copyrights, patents, applications for any of the foregoing, customer lists,
working drawings, instructional manuals, and rights in processes for technical
manufacturing, packaging and labeling, in which the Pledgor has any right or
interest, whether by ownership, license, contract or otherwise.

                  (l)   Have a receiver appointed by any court of competent
jurisdiction to take possession of the Collateral. The Pledgor hereby consents
to the appointment of such a receiver and agrees not to oppose any such
appointment.

                  (m)   Take such measures as the Agent may deem necessary or
advisable to take possession of, hold, preserve, process, assemble, insure,
prepare for sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and the Pledgor hereby irrevocably constitutes and
appoints the Agent as the Pledgor's attorney-in-fact to perform all acts and
execute all documents in connection therewith.

                  (n)   Without notice or demand to the Pledgor, set off and
apply against any and all of the Indebtedness any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by any Lender or any of the Lenders' agents or affiliates
to or for the credit of the account of the Pledgor or any guarantor or endorser
of the Pledgor's Indebtedness.

            7.    MISCELLANEOUS.

                  (a)   Any waiver, express or implied, of any provision
hereunder and any delay or failure by the Agent or Lenders to enforce any
provision shall not preclude the Lenders from enforcing any such provision
thereafter.

                                      -5-
<PAGE>

                  (b)   The Pledgor shall, at the request of the Agent, execute
such other agreements, documents, instruments, or financing statements in
connection with this Agreement as the Agent may reasonably deem necessary. To
the extent permitted by applicable law, a carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral shall be sufficient as a financing statement. The Pledgor hereby
irrevocably constitutes and appoints the Agent as the Pledgor's attorney-in-fact
to sign any financing statement or other document which must be executed or
filed to perfect or continue perfected, maintain the priority of or provide
notice of the Lenders' security interest in the Collateral and file any such
financing statements and other documents by electronic means with or without a
signature as authorized or required by applicable law or filing procedures.

                  (c)   All notes, security agreements, subordination agreements
and other documents executed by the Pledgor or furnished to the Agent in
connection with this Agreement must be in form and substance satisfactory to the
Agent.

                  (d)   This Agreement shall be governed by and construed
according to the laws of the State of California, to the jurisdiction of which
the parties hereto submit.

                  (e)   All rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude the further
exercise thereof or the exercise of any other right or remedy.

                  (f)   All terms not defined herein are used as set forth in
the Uniform Commercial Code.

                  (g)   In the event of any action by the Agent or the Lenders
to enforce this Agreement or to protect the security interest of the Lenders in
the Collateral, or to take possession of, hold, preserve, process, assemble,
insure, prepare for sale or lease, market for sale or lease, sell or lease, or
otherwise dispose of, any Collateral, the Pledgor agrees to pay promptly the
costs and expenses thereof, together with reasonable attorney's fees and
allocated costs for in-house legal services.

                  (h)   This Agreement shall constitute a continuing agreement,
applying to all future as well as existing transactions, whether or not of the
character contemplated at the date of this Agreement, and if all transactions
between the Lenders and the Pledgor shall be closed at any time, shall be
equally applicable to any new transactions thereafter.

                  (i)   The Agent's and the Lenders' rights hereunder shall
inure to the benefit of its successors and assigns. In the event of any
assignment or transfer by any Lender of any of the Indebtedness or the
Collateral, the Agent thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
the Agent shall retain all rights and powers hereby given with respect to any of
the Indebtedness or the Collateral not so assigned or transferred. All
representations, warranties and agreements of the Pledgor if more than one are
joint and several and all shall be binding upon the personal representatives,
heirs, successors and assigns of the Pledgor.

                                      -6-
<PAGE>

This Agreement is executed as of the date first written above.

UNION BANK OF CALIFORNIA, N.A.       ASHWORTH STORE I, INC.
As Administrative Agent              a Delaware corporation

By:______________________________

                                     By:_____________________________________
                                              Terence W. Tsang

Title::__________________________

                                     Its: Executive Vice President, Chief
                                     Operating Officer, Chief Financial Officer,
                                     Chief Accounting Officer and Treasurer

                                     ASHWORTH STORE II, INC.
                                     a Delaware corporation

                                     By:_____________________________________
                                              Terence W. Tsang

                                     Its: Executive Vice President, Chief
                                     Operating Officer, Chief Financial Officer,
                                     Chief Accounting Officer and Treasurer

                                     ASHWORTH ACQUISITION CORP.
                                     a Delaware corporation

                                     By:_____________________________________
                                              Terence W. Tsang

                                     Its: Executive Vice President, Chief
                                     Operating Officer, Chief Financial Officer,
                                     Chief Accounting Officer and Treasurer

               [SIGNATURE PAGE TO SECURITY AGREEMENT (GUARANTORS)]

                        [SIGNATURES CONTINUED NEXT PAGE]

<PAGE>

                                     GEKKO BRANDS, L.L.C.
                                     an Alabama limited liability company

                                     By:_______________________________________
                                              Terence W. Tsang

                                     Its: Manager

                                     KUDZU, L.L.C.
                                     an Alabama limited liability company

                                     By:_______________________________________
                                              Terence W. Tsang

                                     Its: Manager

                                     THE GAME, LLC
                                     an Alabama limited liability company

                                     By:_______________________________________
                                              Terence W. Tsang

                                     Its: Manager

               [SIGNATURE PAGE TO SECURITY AGREEMENT (GUARANTORS)]

<PAGE>

                                                          ADDRESS OF PLEDGOR:
                                                          2765 LOKER AVENUE WEST
                                                          CARLSBAD, CA  92008

Pledgor's state of incorporation or organization (if Pledgor is a corporation,
partnership, limited liability company or other registered entity):

Ashworth Store I, Inc.              Delaware

Ashworth Store II, Inc.             Delaware

Ashworth Acquisition Corp.          Delaware

GEKKO Brands, L.L.C.                Alabama

Kudzu, L.L.C.                       Alabama

The Game, LLC                       Alabama

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(5)
<SEQUENCE>6
<FILENAME>a01811exv10wxzyx5y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(5)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(5)

                                DEED OF HYPOTHEC
                     ON THE UNIVERSALITY OF MOVABLE PROPERTY

BETWEEN:    ASHWORTH, INC., a Delaware corporation, having its head office at
            2765 Loker Avenue West, Carlsbad, California, 92008, U.S.A.

            (the "GRANTOR")

AND:        UNION BANK OF CALIFORNIA, N.A., a national banking association under
            the federal laws of the United States, having an office at 530 B
            Street, Suite 1050, San Diego, California, 92101-4407, U.S.A.

            (Union Bank of California, N.A., acting for itself and as agent and
            solidary creditor for the benefit of the Lenders under the
            hereinafter defined Credit Agreement hereinafter referred to as the
            "AGENT")

WHO HAVE DECLARED AS FOLLOWS:

WHEREAS the Grantor as Borrower, the financial institutions listed in the
signature pages thereto, as Lenders, and the Agent have been or will be entering
into contemporaneously herewith a revolving/term loan credit agreement
providing, inter alia, for credit facilities in an initial amount not to exceed
US $55,000,000 to be made available thereunder by the Lenders to the Grantor,
subject to the terms and conditions therein set forth (said credit agreement as
same may be amended, restated, supplemented or otherwise modified from time to
time, being hereinafter referred to as the "CREDIT AGREEMENT"); all capitalized
words and expressions used herein shall have the same meaning as ascribed
thereto in the Credit Agreement, unless otherwise defined herein or unless the
context otherwise requires;

WHEREAS the Grantor has agreed to grant a hypothec on the Hypothecated Property
(as such expression is hereinafter defined) in favour of the Agent to secure,
inter alia, the Grantor's obligations to the Lenders and the Agent pursuant to
the Credit Agreement;

WHEREAS pursuant to Section 9.12 of the Credit Agreement, the Agent, on one
hand, and each Lender, respectively, on the other hand, have been or will be
conferred the legal status of solidary creditors of the Loan Parties in respect
of all amounts, liabilities and other obligations owed by each of the Loan
Parties to the Agent and each such Lender, respectively, under the Credit
Agreement and the other Loan Documents, the whole in accordance with Article
1541 of the Civil Code of Quebec;

AND WHEREAS the Agent, as solidary creditor for the benefit of the Lenders, has
the authority to hold any and all Liens created by the Security Agreements or
any other Loan Document on the Facility Collateral, for the payment and
performance of all obligations to the Agent and the Lenders of the Obligated
Parties arising under or in connection with the Credit Agreement and the other
Loan Documents;

                                      -1-
<PAGE>

NOW, THEREFORE, THE PARTIES HERETO HAVE AGREED AS FOLLOWS:

1.    SECURED OBLIGATIONS

      The hypothec granted by this deed secures the performance of the following
      obligations (hereinafter collectively called the "OBLIGATIONS"):

      1.1   the prompt payment, as and when due and payable, of all amounts in
            principal, interest, fees, costs or otherwise now or hereafter owing
            by the Grantor to the Agent and the Lenders under the Credit
            Agreement or any other Loan Document to which the Grantor is or may
            become a party;

      1.2   the strict performance and observance by the Grantor of all
            agreements, warranties, representations, covenants and conditions of
            the Grantor made pursuant to this deed, the Credit Agreement, any
            Loan Document to which the Grantor is or may become a party or any
            other agreement between the Grantor and the Agent or any Lender all
            as now in effect or as hereafter entered into or amended; and

      1.3   the prompt payment, as and when due and payable, of all other
            amounts now or hereafter owing by the Grantor to the Agent and the
            Lenders, including by way of guarantee or indemnity, whether now
            existing or hereafter incurred, matured or unmatured, direct,
            indirect or contingent, including any extensions and renewals
            thereof and including the payment of all amounts payable hereunder
            and the legitimate costs that the Agent or any Lender may incur to
            recover the obligations secured hereby and to preserve the
            Hypothecated Property (as such expression is hereinbelow defined).

2.    HYPOTHEC

      2.1   Amount of Hypothec

            To secure the performance of the Obligations, the Grantor hereby
            hypothecates in favour of the Agent the property described in
            Section 2.2 hereof for the sum of one hundred thirty seven million
            five hundred thousand Canadian dollars (CDN $137,500,000) bearing
            interest at the rate of twenty-five percent (25%) per annum from the
            date hereof, compounded annually.

      2.2   Description of Hypothecated Property

            The hypothec charges the universality of all the Grantor's movable
            property, present and future, corporeal and incorporeal, of
            whatsoever nature and kind and wheresoever situated (hereinafter
            collectively called the "HYPOTHECATED PROPERTY"), including, without
            limitation, all tools and equipment pertaining to the enterprises of
            the Grantor, all claims and customer accounts, all securities, all
            patents, trademarks and other intellectual property rights and all
            corporeal movables included in the assets of any of the Grantor's
            enterprises kept for sale,

                                      -2-
<PAGE>

            lease or processing in the manufacture or transformation of property
            intended for sale, for lease or for use in providing a service.

      2.3   Interpretation

            The parties hereto acknowledge and confirm as follows:

            2.3.1 that the hypothec created on the Hypothecated Property
                  pursuant to this deed is not and shall not be construed as a
                  floating hypothec within the meaning of articles 2715 et seq.
                  of the Civil Code of Quebec;

            2.3.2 that the hypothec constituted hereunder will remain in full
                  force and effect for the full amount stipulated in Section 2.1
                  hereof until such time' s an express written discharge is
                  executed by the Agent and delivered to the Grantor. The
                  hypothec, security and rights hereby created in favour of the
                  Agent will not be extinguished, reduced, novated or otherwise
                  affected by any payments made to or amounts received by the
                  Agent, directly or indirectly, from the Grantor or any other
                  party or as a result of any insurance indemnities arising from
                  loss or damage to any of the Hypothecated Property or by
                  reason of the collection of any claims hypothecated hereunder;
                  and

            2.3.3 that should the Obligations at any time be fully extinguished
                  without an express discharge of the hypothec created hereunder
                  having been granted, and should any new Obligations arise, the
                  security created hereunder will secure such new Obligations in
                  the same manner and to the same extent as if there had never
                  occurred an extinction of any of the Obligations and the
                  Grantor is and shall remain obligated under the provisions
                  hereof. The Grantor shall be deemed to have obligated itself
                  for such new Obligations pursuant to the provisions hereof and
                  the hypothec herein created shall secure such new Obligations
                  as contemplated by Article 2797 of the Civil Code of Quebec.

3.    GRANTOR'S UNDERTAKINGS

      3.1   Alienation

            Unless the Agent gives its prior written consent or unless otherwise
            permitted under the Credit Agreement, the Grantor agrees not to
            alienate, lease or otherwise dispose of any of the Hypothecated
            Property outside the ordinary course of business of its enterprise.

      3.2   Transformation

            The Grantor may not, without the Agent's prior written consent,
            transform any of the movables forming part of the Hypothecated
            Property either by incorporating such movables into an immovable or
            by combining or mixing them with other movables so as to form new
            property, unless such immovable or new property are

                                      -3-
<PAGE>

            themselves subject or made subject to the hypothec hereby granted or
            unless such transformation is made in the ordinary course of
            operating an enterprise of the Grantor that is engaged in the
            business of manufacturing or transforming property. In no event,
            however, may the Grantor transform any such property where such
            transformation would result in the Agent's security or rights
            hereunder, including in particular their rank, being diminished.

            In the event of any such transformation, even without the Agent's
            authorization, the Grantor (who shall not be relieved of the default
            resulting from the failure to obtain authorization) shall
            immediately inform the Agent of the details of such transformation
            and shall in particular provide the Agent with a description of the
            property thereby affected, the name and address of the owner of the
            property that may result therefrom and the address where such
            property is located.

4.    PROVISIONS APPLICABLE TO THE HYPOTHEC ON CLAIMS

      The following provisions apply to claims owed to the Grantor and
      hypothecated in favour of the Agent, including present and future rents
      payable under current and future leases affecting all or part of the
      Hypothecated Property.

      4.1   Collection

            Except for those claims consisting of securities pledged to the
            Agent, the Grantor shall have authority to collect payments of
            interest and repayments of capital made on the claims included in
            the Hypothecated Property hypothecated in favour of the Agent
            pursuant to this deed, as they fall due. The Agent may withdraw this
            authorization by written notice at any time after the occurrence of
            and during the continuance of an Event of Default. Notwithstanding
            the foregoing, the Agent may at any time after the occurrence and
            during the continuance of an Event of Default, take all necessary
            steps to set up this hypothec against the debtors of the
            hypothecated claims. In such event, the Grantor undertakes to remit
            to the Agent, upon request, all titles, documents, registers,
            invoices and accounts evidencing the claims or relating thereto,
            whatever the nature of their medium and whatever the form in which
            they are accessible, whether written, graphic, taped, filmed,
            computerized, or other.

            Any payment received by the Grantor on account of any hypothecated
            claim other than pursuant to the foregoing authorization shall be
            received for the Agent's account, shall not entitle the Grantor to
            the amounts collected and shall be kept separate from the Grantor's
            other property at all times and remitted forthwith by the Grantor to
            the Agent without compensation.

            Notwithstanding the provisions of Section 3.1 hereof, the Grantor is
            not authorized to alienate any claim forming a part of a
            universality of claims hypothecated in favour of the Agent without
            the latter's prior written consent or as otherwise permitted by the
            Credit Agreement.

                                      -4-
<PAGE>

      4.2   Agent's Rights

            The Agent shall not be obliged to exercise its rights to the
            hypothecated claims or to ensure their recovery from the debtors,
            whether by legal proceedings or otherwise. Should the Agent decide
            to collect the hypothecated claims, it shall be at liberty to
            negotiate such arrangements as it deems appropriate with the debtors
            or third parties, to enter into agreements with them with respect to
            the claims and any security securing the claims, and even to waive
            the claims and such security, the whole without the Grantor's
            consent or intervention, and the Agent shall not thereby incur any
            liability toward or be accountable to the Grantor. Unless the
            Grantor so requests in writing, the Agent shall not be obliged to
            inform the Grantor of any irregularity in the payment of any amounts
            due on the claims. Apart from its obligation to remit to the Grantor
            any sums collected over and above the amount of the Obligations in
            principal, interest and costs, the Agent shall not be accountable to
            the Grantor with respect to the status of the collections made or
            any transactions and arrangements entered into.

      4.3   Information

            The Agent may, at its discretion, verify the existence and status of
            the claims at any time. The Grantor shall provide the necessary
            assistance and information for this purpose and shall take such
            action in this respect as the Agent may reasonably request: in
            particular, it shall allow the Agent and its agents, upon seven
            days' prior notice, so long as no Event of Default shall have
            occurred and be continuing, to enter the premises occupied by the
            Grantor and to consult the Grantor's accounting books and registers
            as well as any document relating to the claims and make copies
            thereof.

            At any time after the occurrence and during the continuance of an
            Event of Default, the Grantor specifically authorizes the Agent to
            communicate with any third party in order to obtain or transmit any
            personal information and any information relating to the claims and
            to the Grantor for the purpose of verifying and collecting the
            claims.

            Where the hypothec granted by this deed affects a claim that is
            itself secured by a registered hypothec, the Grantor shall inform
            the Agent accordingly and shall supply all the information that the
            Agent may request in this connection.

      4.4   Financial Administration Act (Canada)

            Where any of the claims are subject to the provisions of the
            Financial Administration Act (Canada), the Grantor hereby sells,
            assigns and transfers the same absolutely to the Agent so that, upon
            a withdrawal of authorization as referred to in Section 4.1 hereof,
            the Agent shall be free to complete the formalities required to make
            such assignment fully enforceable.

                                      -5-
<PAGE>

5.    POSSESSION OF PROPERTY

      This deed creates a hypothec without delivery.

6.    DEFAULT

      6.1   Events of Default

            The Grantor shall be considered in default upon the occurrence of
            any of the following events:

            6.1.1 an Event of Default under the Credit Agreement;

            6.1.2 should the Grantor default in the performance of the
                  Obligations or to comply with any of its obligations or
                  undertakings under this deed;

            6.1.3 should the Agent receive from any present or future guarantor
                  of all "or any of the Obligations a notice purporting to
                  terminate or limit such guarantor's liability under its
                  guarantee.

      6.2   Effects

            Without limiting its right, at any time and at its discretion, to
            demand payment of any Obligations payable on demand and without
            prejudice to any rights and remedies which it has pursuant to
            agreements with the Grantor or at law (in particular with respect to
            hypothecated claims), the Agent, upon the occurrence of any of the
            events listed in Section 6.1 hereof, may demand immediate and full
            payment of the amounts owing on account of the Obligations, which
            shall forthwith become due and payable, and exercise, at its
            discretion, without restriction and without any prior notice other
            than such notices as are required by law, any rights and remedies
            which it has pursuant to this deed or at law, including, in
            particular, the following hypothecary rights:

            -     taking of possession for purposes of administration;

            -     taking in payment;

            -     sale by the Agent;

            -     sale by judicial authority.

      6.3   Agent's Rights

            Irrespective of the particular remedy exercised by the Agent in the
            event of the Grantor's default, the following provisions shall apply
            in addition to any provisions that may by law apply in the
            circumstances, the Grantor expressly agreeing thereto:

                                      -6-
<PAGE>

            6.3.1 the Grantor undertakes to voluntarily surrender the
                  Hypothecated Property to the Agent upon request, and agrees
                  not to put any impediment in the way of, but rather to
                  facilitate by all legal means, the exercise of the powers
                  hereby granted to the Agent and not to interfere therewith; in
                  addition, the Agent may, but shall not be obliged to, conduct
                  a verification of the Hypothecated Property, assemble or move
                  any of such property or take proceedings or do or take any act
                  or action in relation to the Hypothecated Property that it may
                  deem advisable, the whole at the Grantor's expense;

            6.3.2 the Agent may, in addition, at its discretion and at the
                  Grantor's expense, whether after the Grantor has surrendered
                  the Hypothecated Property and until the Agent has exercised
                  the hypothecary right which it intends to exercise, or whether
                  after the Agent has chosen to take possession of the
                  Hypothecated Property for purposes of administration, use or
                  operate all or any part of the Hypothecated Property (without
                  being obliged to make such property productive), change the
                  destination of or alienate such property by onerous title
                  (except for Hypothecated Property of little value) or charge
                  such property with a hypothec or other real right, enter into
                  or renew any leases for such amounts and on such terms and
                  conditions as the Agent deems appropriate, make any repairs or
                  renovations or undertake or complete any work;

            6.3.3 the Agent may, in the exercise of its rights, renounce any
                  right belonging to the Grantor, even where no valuable
                  consideration is received;

            6.3.4 the Agent shall not be bound to make an inventory, take out
                  insurance or furnish other security to secure the performance
                  of its obligations;

            6.3.5 the Agent may, at its discretion, take possession, through its
                  officers, agents or mandataries, of all or any part of the
                  Hypothecated Property, with full power to carry on, manage and
                  conduct the Grantor's business; the Agent may use the
                  Hypothecated Property or any information that it obtains by
                  reason of its administration for its own benefit;

            6.3.6 the Grantor, through its officers and directors, shall
                  forthwith execute such documents and transfers as may be
                  necessary to place the Agent in legal possession of the
                  Hypothecated Property and the business of the Grantor in
                  connection therewith, and thereupon all the powers, functions,
                  rights and privileges of each and every one of the directors
                  and officers of the Grantor shall cease and terminate with
                  respect to the Hypothecated Property;

            6.3.7 the Agent shall not be obliged to render an account with
                  respect to its actions in the exercise of its hypothecary
                  rights, except as stipulated by law. Should the Agent see fit
                  to render an account, it may do so in summary fashion;

                                      -7-
<PAGE>

            6.3.8  for the purpose of exercising any of its rights, the Agent
                   may make use of any premises on which the Hypothecated
                   Property is located, the whole at the Grantor's expense;

            6.3.9  the Agent may, at its discretion, decide to sell and dispose
                   of the Hypothecated Property as a whole or in separate
                   parcels, by tender, public auction or private contract, on
                   such date and on such terms and conditions as the Agent may
                   stipulate, after giving such prior notices as are required by
                   articles 2784 and following of the Civil Code of Quebec, and
                   the Agent may make such sale for cash or credit upon such
                   reasonable conditions as to upset or reserve bid or price and
                   as to terms of payment as it may deem proper, and may rescind
                   or vary any contract of sale that may have been entered into
                   and resell such property under any of the powers conferred by
                   this deed, adjourn any such sale from time to time and
                   execute and deliver to the purchaser or purchasers of the
                   said property or any part thereof good and sufficient deed or
                   deeds for the same, the Grantor hereby giving the Agent an
                   irrevocable power of attorney for the purpose of making such
                   sale and executing such deeds, and any such sale made as
                   aforesaid shall be a perpetual bar in law and in equity
                   against the Grantor and its assigns and against any other
                   persons who may claim the said property or any part thereof
                   from the Grantor or its assigns; and

            6.3.10 the Agent, or its agents or representatives, may become
                   purchasers at any sale of the Hypothecated Property, whether
                   made under the power of sale herein contained or pursuant to
                   foreclosure or other legal proceedings.

7.    MISCELLANEOUS PROVISIONS

      7.1   Nature of the Obligations

            Each of the Obligations of the Grantor is indivisible.

      7.2   Nullity of a Provision

            In the event that any provision of this deed is declared null and
            void or is deemed not to have been written, the other provisions of
            this deed shall be severable from such provision and shall continue
            to have full force and effect.

      7.3   Application of Payments

            Any insurance indemnity, as well as any other amount or other
            property received by the Agent in the exercise of the rights
            conferred upon it by this deed or by law or in any other manner with
            respect to any of the Hypothecated Property, may be

                                      -8-
<PAGE>

            retained by the Agent as Hypothecated Property or applied to the
            payment of the Obligations, whether or not they are due. Any amount
            collected by the Agent, even on account of the voluntary performance
            of the Obligations, shall be applied at the Agent's discretion, and
            the Agent may vary such application from time to time, in whole or
            in part, as it sees fit.

            Should any of the Hypothecated Property or its proceeds be in a
            currency different from that of the Obligations, the Agent is hereby
            authorized to convert the amount or the claim in question into the
            currency of the Obligations at the Agent's rate of exchange for the
            currencies concerned on the date the payment is applied or on such
            other date as the Agent deems appropriate.

      7.4   Rights Cumulative and Exercise of Remedies

            The rights hereby created are in addition to and not in substitution
            for any other right or security held by the Agent including, without
            limitation, under the Credit Agreement. The exercise by the Agent of
            any of its rights and remedies shall not prevent it from exercising
            any other right or remedy conferred upon it by this deed or any
            other security or by law.

            The Agent may, separately or successively, exercise the rights
            conferred upon it by this deed on any part of the Hypothecated
            Property, without being obliged to do so on the entire Hypothecated
            Property and without prejudice to its rights and remedies with
            respect to the remaining Hypothecated Property, and it shall not be
            in any way obliged to exercise its rights and remedies against any
            other person liable for the Obligations or to realize any other
            security securing the Obligations.

            The Agent may delegate the exercise of its rights or the performance
            of its obligations arising from this deed to another person and may
            in such case supply to such other person any information that it
            holds on the Grantor or on the Hypothecated Property.

      7.5   Notice of Default

            The mere expiry of the time limit for performing any of the
            Obligations shall serve to put the Grantor in default, without any
            notice or demand being required for that purpose.

      7.6   Waivers

            The Grantor may not claim that an act or omission by the Agent
            constitutes or implies a waiver of its right to invoke a default by
            the Grantor or to assert a right arising out of such default, unless
            the Agent has expressly so stated after the occurrence of the
            default.

                                      -9-
<PAGE>

      7.7   Power of Attorney

            The Grantor hereby grants to the Agent and each of its officers,
            agents, correspondents or mandataries, including any depositary, an
            irrevocable power of attorney with full powers of substitution and
            revocation, to do, make and execute, for the Grantor and in its
            name, all such deeds, documents, transfers, assignments, hypothecs,
            assurances, consents and things as the Agent may deem necessary or
            appropriate to be done, made or executed by the Grantor to protect
            the Agent's rights hereunder and/or preserve the Hypothecated
            Property and to give effect to all the provisions of this deed and
            the documents and other acts, matters and things that the Grantor
            has agreed to do, make and execute or that may be required in the
            exercise of the powers conferred upon the Agent by this deed, and in
            particular, without limiting the generality of the foregoing, to
            obtain from any taxation authority at any time, if deemed useful,
            any information necessary to allow the Agent to determine the amount
            of the Grantor's indebtedness to such taxation authorities. The
            Grantor also grants to each of such persons holding its power of
            attorney the right to use its name whenever they may deem it
            necessary or appropriate to do so for the purposes hereof and the
            Grantor further ratifies and confirms, and undertakes to ratify and
            confirm, all acts and actions done or taken by each of such persons
            in connection herewith.

      7.8   Indemnification

            The Grantor hereby agrees and undertakes to indemnify the Agent and
            save and hold it harmless from and against any and all losses,
            expenses, costs and liabilities (including reasonable legal fees and
            disbursements) that the Agent or any of its mandataries or persons
            holding its power of attorney may sustain or incur in the exercise
            of the powers and rights conferred upon the Agent hereunder except
            to the extent any such loss, expense, cost or liability results from
            the gross negligence or wilful misconduct of the Agent.

      7.9   Election of Domicile

            Any service, notice or demand shall be given or made upon the
            Grantor at the latter's address indicated in the appearance Section
            hereof or at the last address communicated in writing by the Grantor
            to the Agent.

      7.10  Interpretation

            References herein to gender shall include all genders and the
            singular shall include the plural and vice versa, as required by the
            context.

      7.11  Further Assurances

            The Grantor hereby agrees to do, make and execute, at its own
            expense, all such deeds, documents and things as may be necessary or
            advisable, in the opinion of the Agent's legal counsel, to give
            effect to the provisions of this deed, including without limiting
            the generality of the foregoing, in order that a valid and

                                      -10-
<PAGE>

            enforceable hypothec be created and maintained on any property
            forming part of the Hypothecated Property as of the execution of
            this deed or at any time in the future.

      7.12  Divisions and Titles

            The division of this deed into sections and subsections and the
            insertion of titles are for ease of reference only and shall not
            influence its meaning or construction.

      7.13  Applicable Law

            This deed shall be governed and construed in accordance with the
            laws in force in the Province of Quebec.

      7.14  Explanation of Contract

            The Grantor confirms that the Agent has provided it with adequate
            explanations concerning the nature and scope of this deed and that
            it has had an opportunity to consult a lawyer, notary or other
            adviser in connection therewith.

      7.15  Counterparts

            This deed may be executed in any number of counterparts each of
            which when executed and delivered is an original but all of which
            taken together constitute one and the same instrument; any party may
            execute this deed by signing any counterpart of it.

      7.16  Language

            The parties hereto confirm that it is their wish that this deed and
            all documents relating thereto, including notices, be drawn up in
            the English language. Les parties aux presentes confirment leur
            volonte que cet acte de meme que tous documents, y compris tous
            avis, s'y rapportant soient rediges en langue anglaise.

                                      -11-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this deed at Carlsbad,
State of California, as of the __ day of _________, 2004.

                                     ASHWORTH, INC.

                                     By:_______________________________________
                                              Terence W. Tsang

                                     Its: Executive Vice President, Chief
                                     Operating Officer, Chief Financial Officer,
                                     Chief Accounting Officer and Treasurer

                                     UNION BANK OF CALIFORNIA, N.A., AS AGENT

                                     Per:   ____________________________________
                                     Name:  ____________________________________
                                     Title: ____________________________________

                                     Per:   ____________________________________
                                     Name:  ____________________________________
                                     Title: ____________________________________

  [SIGNATURE PAGE TO DEED OF HYPOTHEC ON THE UNIVERSALITY OF MOVABLE PROPERTY]

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(6)
<SEQUENCE>7
<FILENAME>a01811exv10wxzyx6y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(6)
<TEXT>
<PAGE>

                                                                Exhibit 10(z)(6)

                               DATED JULY 6, 2004
                               ------------------

                                 ASHWORTH, INC.

                                  AS MORTGAGOR

                                       AND

                         UNION BANK OF CALIFORNIA, N.A.

                               AS SECURITY TRUSTEE

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

                             EQUITABLE MORTGAGE OVER
                                   SECURITIES

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

                              BARLOW LYDE & GILBERT

              Beaufort House 15 St Botolph Street London EC3A 7NJ
             Telephone +44 101 20 7247 277 Fax +44 101 20 7643 8504
                   Website H-vvw.blg.co.uk DK 155 London CDE

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
CLAUSE                                                                              PAGE
<S>                                                                                 <C>
1     INTERPRETATION...........................................................       1

2     CHARGING PROVISIONS......................................................       4

3     PAYMENT OF THE SECURED OBLIGATIONS.......................................       4

4     REPRESENTATIONS AND WARRANTIES...........................................       4

5     COVENANTS................................................................       5

6     ENFORCEMENT..............................................................       9

7     VARIATION AND EXTENSION OF STATUTORY POWERS..............................      10

8     CONTINUING SECURITY......................................................      11

9     FURTHER ASSURANCE AND POWER OF ATTORNEY..................................      12

10    RELEASE OF INVESTMENTS...................................................      13

11    INDEMNITIES..............................................................      13

12    NO WAIVER................................................................      14

13    PAYMENTS AND DISCHARGE...................................................      14

14    CURRENCY.................................................................      15

15    NOTICES..................................................................      16

16    SET-OFF..................................................................      16

17    TRUSTEE PROVISIONS.......................................................      16

18    COUNTERPARTS.............................................................      22

19    LAW AND JURISDICTION.....................................................      22

SCHEDULE

1     THE SECURITIES...........................................................      25

2     FORM OF NOMINEE UNDERTAKING..............................................      26
</TABLE>

<PAGE>

THIS DEED is made on July 6, 2004

BETWEEN:

(1)   ASHWORTH, INC., a Delaware corporation, with offices at 2765 Loker Avenue
      West, Carlsbad, CA 92008, USA (the "MORTGAGOR"); and

(2)   UNION BANK OF CALIFORNIA, N.A. acting through its office at 530 B Street,
      4th Floor, San Diego, CA 92101-4407, Mail Code S-420 in its capacity as
      security trustee for the Beneficiaries (the "SECURITY TRUSTEE").

WITNESSES as follows:

1           INTERPRETATION

1.1         DEFINITIONS

            Throughout this Deed, including the Schedules, the following words
            and phrases shall have the following meanings:

            ACT: the Law of Property Act 1925;

            AGREEMENT: the revolving/term loan credit agreement dated on or
            about the date of this Deed made between (1) the Mortgagor (2) the
            Administrative Agent and (3) the other Lenders Party thereto whereby
            it was agreed that there should be made available to the Mortgagor a
            revolving credit facility of up to fifty-five million US dollars (US
            $55,000,000) upon the terms and conditions contained in it;

            BENEFICIARIES: the Administrative Agent, the Agent, the Lenders,
            Union Bank of California and the Security Trustee and "BENEFICIARY"
            means any one of them;

            DERIVATIVE ASSETS: all assets deriving from any of the Securities
            including all allotments, accretions, offers, rights, dividends,
            interest, income, benefits and advantages whatsoever at any time
            accruing, offered or arising in respect of or incidental to any of
            the Securities and all stocks, shares, rights, money or property
            accruing or offered at any time by way of conversion, redemption,
            bonus, preference, exchange, purchase, substitution, option,
            interest or otherwise in respect thereof;

            EXPENSES: all banking, legal and other costs, charges, expenses
            and/or liabilities (including any VAT thereon) paid or, if earlier,
            incurred by or on behalf of the Security Trustee and any other
            Beneficiary in each case on a full indemnity basis in relation to
            any of the Investments, or in protecting, preserving, improving,
            considering the enforcement or exercise of or enforcing or
            exercising or attempting to enforce or exercise, any rights arising
            under or pursuant to any of the Loan Documents, and/or in procuring
            the payment, performance or

                                       1
<PAGE>

            discharge of any of the Secured Obligations and including, without
            limitation, the principal amount of any borrowings together with
            interest thereon and all other expenses and/or liabilities of the
            Security Trustee or any other Beneficiary incurred from time to time
            in relation to the exercise of any of its rights or powers referred
            to in the Loan Documents;

            INVESTMENTS: the Securities and the Derivative Assets;

            NOMINEE UNDERTAKING: an undertaking substantially in the form set
            out in Schedule 2;

            SECURED OBLIGATIONS: all monies, obligations and liabilities
            (whether present or future, actual or contingent) on the part of the
            Mortgagor to any of the Beneficiaries to be paid, performed or
            discharged, whether directly or indirectly, under or pursuant to the
            terms of any of the Loan Documents and/or in connection with the
            loan facility or other financial accommodation from time to time
            granted or otherwise made available pursuant thereto, together with
            all Expenses and any interest under the terms of this Deed;

            SECURITIES: all shares, stocks, debentures, debenture stock, bonds
            and securities of any kind whatsoever owned by the Mortgagor
            (including rights to subscribe for, convert into or otherwise
            acquire the same) whether marketable or otherwise, and all other
            interests (including loan capital) of the Mortgagor both present and
            future in Ashworth UK Limited, details of which appear in Schedule 1
            and any benefit, entitlement or interest to, in or in relation to
            any such Securities;

            TRUSTEE ACT: the Trustee Act 1925 as amended by the Trustee
            Investment Act 1961 and the Trustee Act 2000; and

            VAT: value added tax or any similar tax substituted therefor.

1.2         CONSTRUCTION

1.2.1       Words and phrases which are not defined or construed in this Deed
            but which are defined or construed in the Agreement, the Act or the
            Insolvency Act 1986 shall be construed as having the meanings
            ascribed to them therein. To the extent that there is any
            inconsistency between the terms of this Deed and the Agreement, the
            terms of the Agreement shall prevail.

1.2.2       In construing this Deed, general words introduced by the word
            "OTHER" shall not be given a restrictive meaning by reason of the
            fact that they are preceded by words indicating a particular class
            of acts, matters or things and general words shall not be given a
            restrictive meaning by reason of the fact that they are followed by
            particular examples intended to be embraced by the general words. In
            addition, the words

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            "ANY OF" shall be construed as a reference to any one or more
            (including all) of the rights, assets, liabilities or other things
            referred to.

1.2.3       The security constituted by, and the rights of the Security Trustee
            under, this Deed shall be enforceable notwithstanding any change in
            the constitution of the Security Trustee or its absorption in or
            amalgamation with any other person or the acquisition of all or part
            of its undertaking by any other person.

1.2.4       The headings in this Deed are inserted for convenience only and
            shall not affect its construction or interpretation and references
            to a clause or Schedule are (unless otherwise stated) to a clause
            in, or a Schedule to, this Deed.

1.2.5       Any reference in this Deed to "THIS DEED" or to any other agreement
            or document shall, unless the context otherwise requires, be
            construed as a reference to this Deed or to such other agreement or
            document as the same may from time to time be amended, varied,
            supplemented, novated or replaced and shall include any document
            which is supplemental to, is expressed to be collateral with, or is
            entered into pursuant to or in connection with, the terms of this
            Deed or of such other agreement or document.

1.2.6       The illegality, invalidity or unenforceability of any provision of
            this Deed under the law of any jurisdiction shall not affect its
            validity or enforceability under the law of any other jurisdiction.

1.2.7       This Deed shall constitute a "security agreement", as contemplated
            by Section 9.203(b)(3) of the UCC.

1.2.8       Save where the context otherwise requires, the plural of any term
            includes the singular and vice versa.

1.2.9       Any reference in this Deed to any statute or statutory provision
            shall, unless the context otherwise requires, be construed as a
            reference to such statute or statutory provision as in force at the
            date of this Deed and as subsequently re enacted or consolidated and
            shall also include all instruments, orders and regulations for the
            time being made thereunder or deriving validity therefrom.

1.2.10      The terms of this Deed may only be enforced by a party to it and the
            operation of the Contracts (Rights of Third Parties) Act 1999 is
            excluded.

1.2.11      In this Deed the expressions "THE MORTGAGOR", "THE SECURITY TRUSTEE"
            and "A BENEFICIARY" shall, unless the context otherwise requires,
            include their respective assignees or successors in title,

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            whether immediate or derivative in relation to their respective
            interests.

2           CHARGING PROVISIONS

2.1         CHARGE OVER INVESTMENTS

            The Mortgagor with full title guarantee and as a continuing security
            for the payment and discharge of the Secured Obligations hereby
            charges and agrees to mortgage to the Security Trustee the
            Investments, provided that:

            2.1.1 in the case of any Securities issued and outstanding at any
                  time, the amount of such Securities which are the subject of
                  the security constituted by this Deed shall be 65% of any such
                  Securities at that time; and

            2.1.2 in the case of any Derivative Assets relating to any
                  Securities, the amount of such Derivative Assets which are the
                  subject of the security constituted by this Deed shall be 65%
                  of any such Derivative Assets at that time.

2.2         FURTHER ADVANCES

            The security constituted by this Deed secures present and further
            advances.

3           PAYMENT OF THE SECURED OBLIGATIONS

            The Mortgagor hereby covenants to pay, perform and discharge to the
            Security Trustee the Secured Obligations on the due date or dates
            for payment, performance and discharge or, in the absence of any
            such date, forthwith upon any demand made by the Security Trustee.

            4 REPRESENTATIONS AND WARRANTIES

            The Mortgagor represents and warrants that:

            4.1   BENEFICIAL OWNER: it is the sole, absolute and beneficial
                  owner of the Securities and of all other Investments owned by
                  it as at the date of this Deed, free and clear from any Lien
                  other than permitted under the Agreement;

            4.2   NO DISPOSALS: except in accordance with the terms of the
                  Agreement, it has not disposed of any interest in, or granted
                  any rights (whether of pre-emption or otherwise) over, any of
                  the Investments nor agreed to do any of the same;

            4.3   NO CLAIMS: none of the Investments is the subject of any
                  claim, assertion, right, action or other restriction or

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                  arrangement of whatever nature which does or may impinge upon
                  the ownership of the Investments by the Mortgagor and the
                  Investments are and will be fully paid up;

            4.4   STATUS: it is a corporation duly incorporated and validly
                  existing under the laws of the State of Delaware, USA and has
                  the power and authority to own its assets and to conduct the
                  business and operations which it conducts or proposes to
                  conduct;

            4.5   POWERS AND AUTHORITY: it has full power and authority to enter
                  into and perform this Deed and has taken all necessary
                  corporate or other action to authorise the execution, delivery
                  and performance of this Deed;

            4.6   AUTHORISATIONS: all action, conditions and things required by
                  all applicable laws and regulations to be taken, fulfilled and
                  done in order to (i) enable it lawfully to enter into,
                  exercise its rights under and perform and comply with its
                  obligations under this Deed, (ii) ensure that those
                  obligations are valid, legally binding and enforceable and
                  (iii) make this Deed admissible in evidence in England and
                  Wales and (if different) its jurisdiction of incorporation
                  have been taken, fulfilled and done (or, in the case of
                  registrations, will be effected within any applicable required
                  period);

            4.7   NON-VIOLATION: the execution by it of this Deed and the
                  exercise by it of its rights and performance of or compliance
                  with its obligations under this Deed do not and will not
                  violate (i) any law or regulation to which it or any of its
                  assets is subject or (ii) any agreement to which it is a party
                  or which is binding on it or any of its assets; and

            4.8   OBLIGATIONS BINDING: its obligations under this Deed are
                  valid, legally binding and enforceable.

5           COVENANTS

5.1         THE INVESTMENTS

            The Mortgagor covenants with the Security Trustee that it will:

            5.1.1 DEPOSIT OF DOCUMENTS OF TITLE: forthwith upon execution of
                  this Deed and as soon as practicable following its acquisition
                  of any Investment, deposit or procure the deposit with the
                  Security Trustee and permit the Security Trustee to hold and
                  retain all stock and share certificates and documents of title
                  relating to each of the Investments mortgaged or charged
                  pursuant to clause 2.1 of this Deed at such time;

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<PAGE>

            5.1.2 EXECUTION OF TRANSFERS: forthwith upon execution of this Deed
                  (in relation to the Investments mortgaged or charged pursuant
                  to clause 2.1 of this Deed) and as soon as practicable
                  following its acquisition of any Investment and at any other
                  time upon request by the Security Trustee, promptly deliver to
                  the Security Trustee such instruments of transfer (with the
                  name of the transferee, the consideration and the date left
                  blank but otherwise duly completed and executed) and other
                  documents as the Security Trustee may from time to time
                  require for perfecting its title to any of the Investments
                  mortgaged or charged pursuant to clause 2.1 of this Deed (duly
                  executed by or signed on behalf of the registered holder) or
                  for vesting or enabling it to vest the same in itself or any
                  of its nominees or in any purchaser provided that, to the
                  extent that any such Investments are held by any nominee of
                  the Mortgagor, the provisions of this clause 5.1.2 shall be
                  satisfied in relation to such Investments if the Security
                  Trustee receives from such nominee a duly executed Nominee
                  Undertaking relating to such Investments together with such
                  instruments of transfer (with the name of the transferee, the
                  consideration and the date left blank, but otherwise duly
                  completed and executed) and other documents as the Security
                  Trustee may from time to time require for perfecting its title
                  to such Investments and provided also that, in the event of
                  any transfer being effected, neither the Security Trustee nor
                  any of its nominees shall be liable for any loss occasioned by
                  any exercise or non-exercise of rights attached to such
                  Investments or by any failure to report to the Mortgagor any
                  notice or other communication received in respect of such
                  Investments;

            5.1.3 NO RESTRICTIONS ON TRANSFER: ensure that the Investments are
                  at all times free from any restriction on transfer (whether
                  under any relevant constitutive documents or otherwise) by the
                  Security Trustee or its nominees to perfect or enforce the
                  security constituted or intended to be constituted by this
                  Deed and procure that the board of directors of any company in
                  which any of the Investments are held approves any transfer of
                  any of the Investments desired to be made by the Security
                  Trustee in the exercise of the rights, powers and remedies
                  conferred upon it by this Deed or by law.

            5.1.4 DERIVATIVE ASSETS: upon the accrual, offer or issue of any
                  Derivative Assets (apart from dividends, interest payments or
                  other payments of money, as the case may be, forming part of
                  the Investments) which have not accrued or been offered or
                  issued to the Security Trustee or its nominees as registered
                  holder of the Investments to which those Derivative Assets
                  relate deliver or pay to the Security Trustee (or procure the

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<PAGE>

                   delivery or payment to the Security Trustee of) all such
                   Derivative Assets and any certificates and other documents of
                   title to or representing the same together with each of the
                   documents required to be duly executed, completed and
                   delivered under and in accordance with the terms of clause
                   5.1.2.

            5.1.5  CALLS: duly and promptly pay or procure the payment of all
                   calls, instalments and other payments in respect of any of
                   the Investments provided that if it defaults in making or
                   procuring any such payment the Security Trustee may (but
                   shall not be obliged to) pay such amounts on behalf of the
                   Mortgagor and shall be reimbursed by the Mortgagor forthwith
                   on demand;

            5.1.6  COMMUNICATIONS: notify the Security Trustee of the contents
                   of any communication or document received by it in relation
                   to any of the Investments;

            5.1.7  NEGATIVE PLEDGE: not create or purport to create or permit to
                   subsist any Lien on or over any of the Investments or any
                   interest in the Investments other than permitted under the
                   Agreement;

            5.1.8  NO DISPOSALS: not sell, transfer, assign, lend or otherwise
                   dispose of, or grant any rights (whether of pre-emption or
                   otherwise) over, any of the Investments or any interest in
                   the Investments or attempt or agree to do so (other than to
                   the Security Trustee or a nominee of the Security Trustee);

            5.1.9  EXERCISE OF VOTING RIGHTS BY MORTGAGOR: exercise any voting
                   rights attaching to the Investments in such manner as it
                   thinks fit, provided that such voting rights shall not be
                   exercised in any manner which is inconsistent with the
                   security constituted or intended to be constituted by this
                   Deed or is in breach of any of the provisions of any of the
                   Loan Documents and notwithstanding the foregoing, at any time
                   after the Security Trustee shall have demanded the discharge
                   of any of the Secured Obligations, procure that all voting
                   and other rights in respect of the Investments are exercised
                   in accordance with the Security Trustee's instructions;

            5.1.10 VARIATION OF RIGHTS: not, by the exercise of any voting
                   rights or otherwise, permit or agree to any proposed
                   compromise, arrangement, capital reorganisation, conversion,
                   exchange, repayment or takeover offer affecting or in respect
                   of any of the Investments.

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<PAGE>

5.2         EXERCISE OF VOTING RIGHTS BY SECURITY TRUSTEE AND DIVIDEND
            ENTITLEMENT

            If any of the Investments are transferred into the name of the
            Security Trustee or any nominee of the Security Trustee or any
            nominee of the Security Trustee, then (subject always to the
            provisions of clause 6.1):

            5.2.1 the Security Trustee shall use all reasonable endeavours to
                  procure that all voting rights attached to such Investments
                  are exercised as the Mortgagor shall direct provided that the
                  Security Trustee shall not be obliged to comply with the
                  Mortgagor's directions if, as a result, such voting rights
                  would be exercised in any manner which (a) is inconsistent
                  with the security constituted or intended to be constituted by
                  this Deed or (b) is in breach of any provision of any of the
                  Loan Documents or (c) would or might result in permission or
                  agreement being given to any compromise, capital
                  reorganisation, conversion, exchange, repayment or takeover
                  offer affecting or in respect of any of the Investments or to
                  any variation of the rights attaching to or conferred by any
                  of the Investments; and

            5.2.2 any and all dividend and interest payments and other
                  distributions accruing on or deriving from the Investments
                  shall be paid to the Mortgagor.

5.3         OTHER COVENANTS

            The Mortgagor covenants with the Security Trustee that it will:

            5.3.1 OBLIGATIONS GENERALLY: comply with its obligations in the Loan
                  Documents and comply with every covenant (whether restrictive
                  or otherwise), obligation and provision on its part to be
                  complied with (and use its best endeavours to procure
                  compliance by each other party thereto with every covenant,
                  obligation and provision on the part of each such other party
                  to be complied with) contained in any document affecting the
                  Investments or their use and enjoyment;

            5.3.2 VALUE OF THE SECURITY: not do or cause or permit to be done
                  anything which may in any way depreciate, jeopardise or
                  otherwise prejudice the value of the security constituted or
                  intended to be constituted by this Deed.

5.4         INFORMATION COVENANTS

5.4.1       GENERAL: The Security Trustee may at any time seek from any person
            having dealings with the Mortgagor such information about the
            Mortgagor and its affairs as the Security Trustee may think fit. The

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<PAGE>

            Mortgagor authorises and requests any such person to provide any
            such information to the Security Trustee and agrees to provide such
            further authority for this purpose as the Security Trustee may
            require from time to time.

5.4.2       INVESTIGATIONS: If the Security Trustee so requests at any time, the
            Mortgagor shall appoint accountants nominated by the Security
            Trustee to investigate the financial affairs of the Mortgagor and
            any Subsidiary of the Mortgagor or company of which the Mortgagor is
            a Subsidiary. For the purposes of this clause 5.4.2, the Mortgagor
            authorises the Security Trustee to make such appointment on the
            Mortgagor's behalf. In every case the costs, fees and expenses of
            such accountants shall be paid by the Mortgagor, but the Security
            Trustee may, at its sole discretion, pay such costs, fees and
            expenses on behalf of the Mortgagor and, in such case, the Mortgagor
            agrees to reimburse the Security Trustee forthwith on demand.

6           ENFORCEMENT

6.1         POWER OF SALE

            At any time after the occurrence of an Event of Default described in
            the Agreement which is continuing, the security constituted by this
            Deed shall become enforceable and the Security Trustee (or its
            nominee(s)) shall have an immediate and absolute power of sale or
            other disposition over the Investments (including, without
            limitation, the power to execute, seal, deliver or otherwise
            complete any transfers or other documents required to vest any of
            the Investments in the Security Trustee, any of its nominees or in
            any purchaser of any of the Investments) and pending any such sale
            the Security Trustee (or its nominee(s)) shall, notwithstanding any
            other provision of this Deed, have the right (a) to exercise (or
            direct the exercise of) any and all voting rights attaching to any
            of the Investments in such manner as it shall in its sole discretion
            think fit and (b) to receive, retain and give a good discharge for
            any and all payments falling due in respect of dividends or other
            distributions of profits or capital on or arising from any of the
            Investments notwithstanding that they may have accrued in respect of
            a period prior to the time at which the security constituted by this
            Deed shall have become enforceable.

6.2         PROCEEDS OF SALE

            The proceeds of any sale of the Investments by the Security Trustee
            shall be applied in discharging the Secured Obligations in such
            order as the Security Trustee may determine in its absolute
            discretion and any balance shall be paid to the Mortgagor.

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<PAGE>

7           VARIATION AND EXTENSION OF STATUTORY POWERS

7.1         STATUTORY POWERS GENERALLY

            The powers conferred on mortgagees by the Act and the Insolvency Act
            1986 shall apply to this Deed except insofar as they are expressly
            or impliedly excluded and where there is any ambiguity or conflict
            between the powers contained in the Act and/or the Insolvency Act
            1986 and those contained in this Deed the terms of this Deed shall
            (so far as the law allows) prevail.

7.2         SECURITY TRUSTEE'S POWERS

            The restrictions contained in sections 93 and 103 of the Act shall
            not apply to the security constituted or intended to be constituted
            by this Deed and the powers contained in section 101 of the Act
            shall be immediately exercisable after the Security Trustee shall
            have demanded the discharge of any of the Secured Obligations.

7.3         TRUSTEE POWERS

            The Security Trustee and its nominees may in relation to any of the
            Investments, at any time exercise all the powers given to trustees
            by the Trustee Act in respect of any securities or property subject
            to a trust. Any payments made by the Security Trustee under this
            clause shall be paid by the Mortgagor to the Security Trustee
            forthwith on demand.

7.4         NO LIABILITY

            It is agreed and declared that no exercise by the Security Trustee
            of any one or more of the powers contained in this Deed shall render
            the Security Trustee liable for any loss or damage (including,
            without limitation, loss upon realisation of any of the Investments)
            save where caused by its gross negligence or wilful default.

7.5         PROTECTION FOR THIRD PARTIES

            No third party dealing with the Security Trustee or its or his
            agents shall, whether before, on or after any contract, disposition
            or assurance in relation to any of the Investments in such third
            party's favour be concerned to enquire whether any of the Secured
            Obligations have become payable or whether any power which the
            Security Trustee purports to exercise has become exercisable or
            whether any of the Secured Obligations remain undischarged or to see
            to the application of any money paid to the Security Trustee.

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<PAGE>

7.6         DELEGATION

            The Security Trustee may at any time delegate by power of attorney
            or in any other manner to any person or persons any of the powers
            (including the power of attorney contained in clause 9.3),
            authorities and discretions which are for the time being exercisable
            by the Security Trustee under this Deed in relation to any of the
            Investments. Any such delegation may be made upon such terms
            (including power to sub-delegate) and subject to such regulations as
            the Security Trustee may think fit. The Security Trustee shall not,
            save for its gross negligence or wilful default, be in any way
            liable or responsible to the Mortgagor for any loss or damage
            arising from any act, default, omission or misconduct on the part of
            any such delegate or sub-delegate.

7.7         SUSPENSE ACCOUNTS

            The Security Trustee may place and keep (for such time as it or he
            shall consider prudent) any money received, recovered or realised
            pursuant to this Deed in a separate suspense account (to the credit
            of either the Mortgagor or the Security Trustee as the Security
            Trustee shall think fit) without any obligation to apply the same or
            any part thereof in or towards the discharge of the Secured
            Obligations.

7.8         SECURITY TRUSTEE'S POWER TO REMEDY BREACHES

            If at any time the Mortgagor fails to perform any of the covenants
            contained in this Deed it shall be lawful for the Security Trustee,
            but the Security Trustee shall have no obligation, to take such
            action on behalf of the Mortgagor (including, without limitation,
            the payment of money) as may in the Security Trustee's reasonable
            opinion be required to ensure that such covenants are performed. Any
            losses, costs, charges and expenses incurred by the Security Trustee
            in taking such action shall be reimbursed by the Mortgagor on
            demand.

8           CONTINUING SECURITY

8.1         SUBSEQUENT CHARGES

8.1.1       If the Security Trustee receives notice (whether actual or
            constructive) of any subsequent Lien or other interest affecting any
            of the Investments or any interest in any of the Investments, or of
            any other matter which may cause the security created by or pursuant
            to the terms of this Deed to cease to be a continuing security the
            Security Trustee may open a new account or accounts for the
            Mortgagor.

8.1.2       If the Security Trustee does not open a new account pursuant to
            clause 8.1.1 then, unless the Security Trustee shall notify the
            Mortgagor to the contrary, it shall nevertheless be treated as if it
            had done so at the

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            time when it received such notice and as from that time all payments
            made by or on behalf of the Mortgagor to the Security Trustee shall
            be credited or deemed to have been credited to the new account and
            shall not operate to reduce the amount due from the Mortgagor at the
            time when it received such notice.

8.2         GENERAL

            The security constituted by this Deed shall be a continuing security
            notwithstanding any settlement of account or other matter whatsoever
            and is in addition to and shall not merge or otherwise prejudice or
            affect (or be prejudiced or affected by) the security constituted by
            any Lien, guarantee or other assurance now or hereafter held by the
            Security Trustee or any right or remedy of the Security Trustee in
            respect of the same and shall not be in any way prejudiced or
            affected by the invalidity thereof, or by the Security Trustee now
            or hereafter dealing with, exchanging, releasing, modifying or
            abstaining from perfecting or enforcing any of the same, or any
            rights which it may now or hereafter have, or giving time for
            payment or indulgence or compounding with any other person liable.

9           FURTHER ASSURANCE AND POWER OF ATTORNEY

9.1         FURTHER ASSURANCE

            The Mortgagor shall execute in favour of the Security Trustee, or as
            the Security Trustee may otherwise direct, such further assignments,
            transfers, mortgages, charges, Lien or other documents as in each
            case the Security Trustee shall stipulate (any such assignment,
            transfer, mortgage, charge, Lien or document to be in such form and
            to contain such provisions as the Security Trustee shall require)
            over the Investments and do such other acts or things, in each case
            for the purpose of more effectively providing security for the
            payment, performance and discharge of the Secured Obligations, in
            accordance with the terms of this Deed, or of enabling the Security
            Trustee to vest any of the Investments in the Security Trustee or
            its nominee(s).

9.2         VESTING OF TITLE

            The Mortgagor agrees that it will from time to time execute as a
            deed or under hand (as applicable) and deliver all transfers, powers
            of attorney and other documents which the Security Trustee may
            require for perfecting its title to any of the Investments, in
            accordance with the terms of this Deed, or for vesting or enabling
            it to vest any of the Investments in itself or its nominees. The
            Mortgagor further agrees that if at any time the Security Trustee
            should hold any transfer with any detail not yet completed the
            Security Trustee shall have the authority to complete and deliver
            such transfer.

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<PAGE>

9.3         APPOINTMENT

9.3.1       The Mortgagor, by way of security for the performance of the
            Mortgagor's obligations under this Deed, irrevocably appoints the
            Lender and the persons deriving title under it and separately any
            Receiver jointly or severally to be its attorney or attorneys for it
            and in the name and on behalf and as the act and deed or otherwise
            of the Mortgagor to sign, seal, execute, deliver, perfect and do all
            deeds, instruments, acts and things which may be required:

            (a)   for carrying out any obligations imposed on the Mortgagor by
                  or pursuant to this Deed;

            (b)   for carrying any sale, lease or other dealing whatsoever. by
                  the Lender or Receiver into effect;

            (c)   for conveying or transferring any legal estate or other
                  interest in land or any other property whatsoever;

            (d)   for getting in all or any part of the Securities; and

            (e)   generally for enabling the Lender and any Receiver to exercise
                  the respective powers, authorities and discretions conferred
                  on them by or pursuant to this Deed or by law.

9.3.2       The provisions of this clause 9.3 shall take effect as and by way of
            variation to the provisions of Section 109(8) of the Act 1925 which
            provisions as so varied and extended shall be deemed incorporated
            herein as if they related to a receiver of the Securities and not
            merely a receiver of the income thereof.

10          RELEASE OF INVESTMENTS

            The Mortgagor agrees that if any of the Investments charged by this
            Deed are released from such charge the Security Trustee may release
            securities of the same class and denomination as the Investments
            concerned rather than the identical Investments deposited or
            transferred under this Deed.

11          INDEMNITIES

11.1        GENERAL

            The Mortgagor agrees to indemnify the Security Trustee (and its
            nominees) on demand against all losses, actions, claims, expenses,
            demands or liabilities whether in contract, tort or otherwise now or
            hereafter incurred by any of them or by any manager, agent, officer
            or employee for whose liability, act or omission any of them may be
            answerable for anything done or omitted in the exercise or purported
            exercise of the powers contained in this Deed or occasioned by any

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            breach by the Mortgagor of any of its covenants or other obligations
            under this Deed or otherwise arising out of or in connection with
            any of the Investments or the security constituted or intended to be
            constituted by this Deed save where the same arises as a result of
            the negligence, fraud, default or wilful misconduct of the Security
            Trustee.

11.2        TAXES

            The Mortgagor agrees to indemnify the Security Trustee on demand
            against all present or future stamp or other taxes or duties and any
            penalties or interest with respect thereto which may be imposed by
            any competent authority in connection with the execution or
            enforcement of this Deed or in consequence of any payment made
            pursuant hereto being impeached or declared void for any reason
            whatsoever.

12          NO WAIVER

            No failure or delay by the Security Trustee in exercising any right
            or remedy shall operate as a waiver thereof, nor shall any single or
            any partial exercise or waiver of any right or remedy preclude its
            further exercise or the exercise of any other right or remedy as
            though no waiver had been made and no relaxation or indulgence
            granted.

13          PAYMENTS AND DISCHARGE

13.1        PAYMENT WITHOUT DEDUCTION

            All payments to be made to the Security Trustee under this Deed
            shall be made free and clear of and (save as required by law)
            without any deduction for or on account of any tax, withholding,
            charges, set-off or counterclaim. All payments shall be made into
            such account or accounts as the Security Trustee may from time to
            time specify for that purpose.

13.2        GROSS-UP AND TAX RECEIPTS

            If the Mortgagor is required by law to make a deduction or
            withholding from any payment made under this Deed then the sum
            payable by the Mortgagor in respect of which such deduction or
            withholding is required to be made shall be increased to the extent
            necessary to ensure that, after the making of such deduction or
            withholding, the Security Trustee receives and retains (free from
            any liability in respect of any such deduction or withholding) a net
            sum equal to the sum which it would have received and so retained
            had no such deduction or withholding been made or been required to
            be made. If the Mortgagor makes any payment under this Deed in
            respect of which it is required by law to make any deduction or
            withholding it shall pay the full amount to be deducted or withheld
            to the relevant taxation or other authority within the time allowed
            for such payment

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<PAGE>

            under applicable law and shall deliver to the Security Trustee
            within thirty days after it has made such payment to the applicable
            authority an original receipt or other appropriate evidence issued
            by such authority evidencing the payment to such authority of all
            amounts so required to be deducted or withheld from such payment.

13.3        REINSTATEMENT

            Any settlement or discharge under this Deed between the Security
            Trustee and the Mortgagor shall be conditional upon no security or
            payment to the Security Trustee by the Mortgagor or any other person
            being avoided or set aside or ordered to be refunded or reduced by
            or pursuant to any applicable law or regulation and, if such
            condition is not satisfied, the Security Trustee shall be entitled
            to recover from the Mortgagor on demand the value of such security
            or the amount of any such payment as if such settlement or discharge
            had not occurred.

13.4        RELEASES

            Without prejudice to any terms of any of the Loan Documents
            regarding the giving of consents, releases and/or discharges to the
            Mortgagor (whether to facilitate any disposition in relation to any
            of the Investments or otherwise) the Security Trustee shall, at the
            request and cost of the Mortgagor following the irrevocable payment
            and discharge in full of the Secured Obligations (with the Security
            Trustee being under no further obligation, actual or contingent, to
            the Mortgagor) and provided that the security constituted by this
            Deed shall not have been enforced, and the Security Trustee is
            satisfied that such payment is not subject to avoidance or liable to
            be set aside, refunded or reduced as referred to in clause 13.3,
            duly execute and do all such deeds, acts and things as may be
            necessary to release from the security constituted by this Deed the
            assets which are then subject to it.

14          CURRENCY

            Any amount received or recovered by the Security Trustee in respect
            of any sum expressed to be due to it from the Mortgagor under this
            Deed in a currency other than the currency (the "contractual
            currency") in which such sum is so expressed to be due (whether as a
            result of, or of the enforcement of, any judgment or order of the
            court or tribunal of any jurisdiction, the winding up of the
            Mortgagor or otherwise) shall only constitute a discharge to the
            Mortgagor to the extent of the amount of the contractual currency
            that the Security Trustee is able, in accordance with its usual
            practice, to purchase with the amount of the currency so received or
            recovered on the date of receipt or recovery (or, if later, the
            first date on which such purchase is practicable). If the amount of
            the contractual currency so purchased is less than the amount of the
            contractual currency so expressed to be due, the Mortgagor shall
            indemnify the Security Trustee against any loss

                                       15
<PAGE>

            sustained by it as a result, including the cost of making any such
            purchase.

15          NOTICES

            Any demand, notice or other communication to be made on or delivered
            to the Mortgagor hereunder or in respect of any of the Secured
            Obligations shall be made in accordance with clause 10.02 of the
            Agreement.

16          SET-OFF

            The Mortgagor authorises the Security Trustee without prior notice
            to the Mortgagor to apply any credit balance (whether or not then
            due) to which the Mortgagor is at any time beneficially entitled on
            any account at any office of the Security Trustee in or towards
            satisfaction of the Secured Obligations (and on or at any time after
            the Security Trustee shall have demanded the discharge of the
            Secured Obligations the Security Trustee may make such application
            notwithstanding any specified maturity of any deposits standing to
            the credit of any account of the Mortgagor with the Security
            Trustee) and for this purpose the Security Trustee is authorised to
            purchase with the monies standing to the credit of any such account
            such other currencies as may be necessary to effect such
            application. The Security Trustee shall not be obliged to exercise
            any of its rights under this clause which shall be without prejudice
            to and in addition to any rights of set-off, combination of
            accounts, consolidation or other rights to which it is at any time
            otherwise entitled (whether by operation of law, contract or
            otherwise).

17          TRUSTEE PROVISIONS

17.1        DECLARATION OF TRUST

            The Security Trustee shall hold the security constituted by this
            Deed and the benefit of all related rights in trust for the benefit
            of the Beneficiaries on the terms and subject to the conditions set
            out in this Deed.

17.2        PERPETUITY PERIOD

            The perpetuity period under the rule against perpetuities (if
            applicable to this Deed) shall be the period of eighty years from
            the date of this Deed.

17.3        SUMS RECEIVED BY THE SECURITY TRUSTEE

            Pending distribution under clause 17.4, the Security Trustee shall,
            if reasonably practicable, place any sum received, recovered or held
            by it in respect of the Investments in an interest bearing suspense
            account

                                       16
<PAGE>

            with a bank or financial institution in the name of or under the
            control of the Security Trustee. The interest paid on such account
            shall be credited to the relevant account.

17.4        APPLICATION OF SUMS RECEIVED

            Subject to the other provisions of this clause 17, the Security
            Trustee shall apply all amounts standing to the credit of any
            account referred to in clause 17.3 and any other amounts realised
            pursuant to the exercise of any rights or powers it might have
            pursuant to this Deed:

            17.4.1 first, in the payment of any costs, charges and expenses of
                   or incidental to the appointment of any receiver under the
                   Act, the payment of his remuneration and the payment and
                   discharge of any other Expenses incurred by or on behalf of
                   such receiver;

            17.4.2 secondly, in or towards payment of any debts or claims which
                   are by statute payable in preference to the Secured
                   Obligations but only to the extent to which such debts or
                   claims have such preference;

            17.4.3 thirdly, in or towards payment and discharge pro rata of any
                   Secured Obligations then due, owing or incurred to the
                   Security Trustee, in its capacity as Security Trustee (and
                   not in any other capacity) for its own account;

            17.4.4 fourthly, in payment to the Agent to be applied by the Agent
                   in or towards payment and discharge of the balance of the
                   Secured Obligations (if any) in accordance with the
                   provisions of Section 3 of the Agreement; and

            17.4.5 fifthly, in payment of the surplus (if any) to the Mortgagor
                   or such other person entitled thereto.

17.5        SECURITY TRUSTEE'S SOLE RIGHT TO APPROPRIATE

            The Mortgagor shall not have the right to appropriate any payment
            to, or other sum received, recovered or held by, the Security
            Trustee in or towards payment of any particular part of the Secured
            Obligations and the Security Trustee shall have the exclusive right
            to appropriate any such payment or other sum as provided in this
            clause 17.

17.6        TIMING OF DISTRIBUTION

            Distributions by the Security Trustee shall be made at such times as
            the Security Trustee in its absolute discretion determines to be as
            soon as is reasonably practicable, having regard to all relevant
            circumstances, and the Security Trustee shall have no liability
            whatsoever for any loss or damage which any Beneficiary might
            sustain as a consequence of the timing of any such distribution.

                                       17
<PAGE>

17.7        DATE FOR CALCULATION OF SECURED OBLIGATIONS

            For the purpose of any distribution by the Security Trustee, the
            Security Trustee may, by written notice to the Beneficiaries, fix a
            date (being not earlier than the date of such notice) as at which
            the amount of the Secured Obligations are to be calculated.

17.8        CERTIFICATE FROM BENEFICIARY

            For the purposes of determining the amount of any payment to be made
            to any Beneficiary pursuant hereto the Security Trustee shall be
            entitled to call for and rely upon (and it is the intention of the
            parties that the Security Trustee shall rely upon) a certificate
            from the relevant Beneficiary of the amount and nature of any amount
            due, owing or incurred to the relevant Beneficiary at the date fixed
            by the Security Trustee for such purpose and as to such other
            matters as the Security Trustee may deem necessary or desirable to
            enable it to make a distribution.

17.9        MISTAKEN PAYMENTS

            If the Security Trustee makes any distribution contrary to any of
            the provisions of this clause 17 or any distribution made by it
            otherwise transpires to have been invalid or the Security Trustee
            and the person receiving such distribution agree that it should be
            refunded, the recipient shall, to the extent that no charge is
            thereby created, hold the proceeds of that distribution on trust to
            repay to the Security Trustee forthwith on demand. If the trust
            imposed by this clause 17.9 cannot be given effect to for whatever
            reason, including the possible creation thereby of a charge, the
            relevant recipient shall, if and when so requested by the Security
            Trustee, pay an amount equal to the proceeds of that distribution
            required to be held on trust to the Security Trustee.

17.10       SUPPLEMENT TO TRUSTEE ACT

            By way of supplement to the Trustee Act it is expressly declared as
            follows:

17.10.1     EXPERTS: the Security Trustee may, in relation to this Deed, act or
            rely upon the opinion or advice of, or any information obtained
            from, any lawyer, valuer, surveyor, broker, auctioneer, accountant
            or other expert commissioned by the Security Trustee and shall not
            be responsible to anyone for any loss or damage occasioned by so
            acting or relying. Any such opinion, advice or information may be
            sent or obtained by letter, telex, cable, facsimile transmission or
            otherwise and the Security Trustee will not be liable to anyone for
            acting in good faith on any opinion, advice or information
            purporting to be conveyed by such means even if it contains some
            error or is not authentic or validly signed;

                                       18
<PAGE>

17.10.2     CERTIFICATE OF THE MORTGAGOR: the Security Trustee may call for and
            may accept as sufficient evidence a certificate of the Mortgagor
            signed by any director of the Mortgagor to the effect that any
            particular dealing, transaction, step or thing is, in the opinion of
            the said director, suitable or expedient or as to any other fact or
            matter upon which the Security Trustee may, in the exercise of any
            of its rights, powers or duties hereunder, require to be satisfied
            and the Security Trustee need not call for further evidence and will
            not be responsible to anyone for any loss or damage occasioned by
            acting on any such certificate;

17.10.3     INTERPRETATION OF THIS DEED: the Security Trustee (as between itself
            and each of the Beneficiaries) shall have full power to determine in
            good faith all questions and doubts arising in relation to any of
            the provisions of this Deed and every such determination, whether
            made upon such a question actually raised or implied in the acts or
            proceedings of the Security Trustee, shall be conclusive and shall
            (save for manifest error) bind the Security Trustee and each
            Beneficiary;

17.10.4     TITLE: the Security Trustee shall accept without enquiry,
            requisition, objection or investigation such title as the Mortgagor
            (or, as the case may be, any nominee) has to the Investments to the
            intent that the Security Trustee shall not in any way be responsible
            for its inability to exercise any of its rights or powers or duties
            hereunder or for any loss or damage thereby occasioned;

17.10.5     PERFECTION OF SECURITY: the Security Trustee shall not be liable for
            any failure, omission or defect in perfecting any security created
            or purported to be created by or pursuant to this Deed including
            (without prejudice to the generality of the foregoing):

            (a)   failure to obtain any licence, consent or other authority for
                  the execution, delivery, validity, legality, adequacy,
                  performance, enforceability or admissibility in evidence of
                  any of this Deed or any other document;

            (b)   failure to effect or procure registration of or otherwise
                  protect any security created or purported to be created by or
                  pursuant to any of this Deed or any other document by
                  registering under any applicable registration laws in any
                  territory, any notice, caution or other entry prescribed by or
                  pursuant to the provisions of the said laws;

            (c)   failure to take or require the Mortgagor to take any steps to
                  render the security created or purported to be created by or
                  pursuant to any of this Deed effective as regards any property
                  outside England and Wales or to secure the creation of any
                  ancillary charge under the laws of any territory concerned; or

                                       19
<PAGE>

            (d)   failure to call for delivery of documents of title to or
                  require transfers, legal mortgages, charges or other further
                  assurances in relation to any of the Investments;

17.10.6     ACTS AND OMISSIONS: the Security Trustee shall not in fulfilling its
            duties and discharging its responsibilities as Security Trustee be
            liable or responsible for any loss or damage which may result from
            anything done or omitted to be done by it in accordance with the
            provisions of this Deed;

17.10.7     COMPLIANCE WITH LAWS: the Security Trustee may refrain from doing
            anything which would or might in its opinion be contrary to any law
            of any jurisdiction or any regulation or which would or might
            otherwise render it liable to any person and may do anything which
            is, in its absolute discretion, necessary to comply with any such
            law or regulation;

            (a)   DEPOSIT OF SECURITY DOCUMENTS: the Security Trustee shall be
                  at liberty to place all title deeds and other documents
                  certifying, representing or constituting the title to any of
                  the Investments for the time being in its hands in any safe
                  deposit, safe or receptacle selected by the Security Trustee
                  or with any bankers or banking company (including the Security
                  Trustee or any of the other Beneficiaries) or company whose
                  business includes undertaking the safe custody of documents or
                  solicitors or firm of solicitors, may pay all reasonable sums
                  required to be paid on account of or in respect of such
                  deposit and may make any such arrangements as it thinks fit
                  for allowing the Mortgagor or its lawyers or auditors access
                  to or possession of such title deeds and other documents when
                  necessary or convenient and the Security Trustee shall not be
                  responsible for any loss incurred in connection with any such
                  deposit, access or possession;

17.10.8     USE OF NOMINEES: any investment of any part or all of the
            Investments may, at the discretion of the Security Trustee, be made
            or retained in the names of nominees;

17.10.9     DELEGATION: the Security Trustee may, whenever it thinks fit,
            delegate by power of attorney or otherwise to any person or persons,
            or fluctuating body of persons, all or any of the rights, powers,
            authorities and discretions vested in it by any of the Loan
            Documents and such delegation may be made upon such terms and
            subject to such conditions (including the power to sub-delegate) and
            subject to such regulations as it may think fit and it shall not be
            bound to supervise, or to be in any way responsible for any loss,
            liability, costs, charges or expenses incurred by reason of any
            misconduct or default on the part of, any such delegate or
            subdelegate; and

                                       20
<PAGE>

17.10.10    INSURANCE: without prejudice to any other provision of any of the
            Loan Documents, the Security Trustee shall not be under any
            obligation to insure any of the Investments or to require any other
            person to maintain any such insurance and shall not be responsible
            for any loss or damage which may be suffered by any person as a
            result of the lack of or inadequacy or insufficiency of any such
            insurance.

17.11       RELATIONSHIP WITH THE BENEFICIARIES

            The Security Trustee shall, for the purposes of the Loan Documents,
            be entitled to deal with each of the Beneficiaries by dealing
            exclusively with the Agent.

17.12       INDEMNITY PROVISIONS

            The Security Trustee and every attorney, agent or other person
            appointed by it under any of the Loan Documents may indemnify itself
            or himself out of the Investments against all claims, demands,
            liabilities, proceedings, costs, fees, charges, losses and expenses
            properly incurred by any of them in relation to or arising out of
            the taking or holding of the Investments, the exercise or purported
            exercise of the rights, trusts, powers and discretions vested in any
            of them or any other matter or thing done or omitted to be done in
            connection with any of the Loan Documents or pursuant to any law or
            regulation.

17.13       APPOINTMENT OF ADDITIONAL SECURITY TRUSTEES

            The Security Trustee may at any time appoint any person (whether or
            not a trust corporation) to act either as a separate trustee or as a
            co-trustee jointly with it (i) if it considers such appointment to
            be in the interests of the Beneficiaries or (ii) for the purposes of
            conforming to any legal requirements, restrictions or conditions
            which the Security Trustee deems relevant for the purposes hereof.
            Any person so appointed shall have such powers, authorities and
            discretions and such duties and obligations as shall be conferred or
            imposed on such person by the instrument of appointment and shall
            have the same rights, powers, discretions and benefits under the
            Loan Documents as the Security Trustee. Save where the contrary is
            indicated or unless the context otherwise requires any reference in
            the Loan Documents to the Security Trustee shall be construed as a
            reference to the Security Trustee and each such separate trustee and
            co-trustee. The Security Trustee shall have power in like manner to
            remove any person so appointed. Such remuneration as the Security
            Trustee may pay to any person so appointed, and any costs, charges
            and expenses incurred by such person in performing its functions
            pursuant to such appointment, shall for the purposes hereof be
            treated as costs, charges and expenses incurred by the Security
            Trustee in performing its function as trustee hereunder.

                                       21
<PAGE>

17.14       RESIGNATION

            The Security Trustee may, following consultation with the
            Beneficiaries, resign at any time by giving not less than 30 days
            notice in writing to that effect to each of the Beneficiaries
            provided that such resignation shall not become effective until a
            successor to the Security Trustee has been appointed and accepted
            its appointment and all necessary documents have been entered into
            to ensure that the benefit of this Debenture is held by such
            successor.

18          COUNTERPARTS

            This Deed may be executed in any number of counterparts and by
            facsimile transmission and by different parties on separate
            counterparts each of which will constitute an original and all the
            counterparts together will constitute the same instrument.

19          LAW AND JURISDICTION

19.1        LAW

            This Deed and the rights and obligations of the parties hereto shall
            be governed by and construed in accordance with English law.

19.2        JURISDICTION

19.2.1      SUBMISSION: Each of the parties to this Deed (other than the
            Security Trustee) agrees for the benefit of the Security Trustee
            that the courts of England shall have jurisdiction to hear and
            determine, any suit, action or proceeding, and to settle any
            dispute, which may arise out of or in connection with this Deed and,
            for such purposes, irrevocably submits to the jurisdiction of such
            courts.

19.2.2      FORUM: The Mortgagor irrevocably waives any objection which it might
            now or hereafter have to the courts referred to in clause 19.2.1
            being nominated as the forum to hear and determine any suit, action
            or proceeding, and to settle any dispute, which may arise out of or
            in connection with this Deed and agrees not to claim that any such
            court is not a convenient or appropriate forum.

19.2.3      SERVICE OF PROCESS: The Mortgagor agrees that the process by which
            any suit, action or proceeding is begun may be served on it by being
            delivered to Ashworth, Inc., c/o Ashworth UK Limited, 21 St Thomas
            Street, Bristol, BS 1 6JS.

19.2.4      OTHER COMPETENT JURISDICTIONS: The submission to the jurisdiction of
            the courts referred to in clause 19.2.1 shall not (and shall not be
            construed so as to) limit the right of the Security Trustee to take
            proceedings against the Mortgagor in any other court of competent
            jurisdiction nor shall the taking of proceedings in any one or more

                                       22
<PAGE>

            jurisdictions preclude the taking of proceedings in any other
            jurisdiction, whether concurrently or not.

19.2.5      CONSENT TO ENFORCEMENT: The Mortgagor hereby consents generally in
            respect of any legal action or proceeding arising out of or in
            connection with this Deed to the giving of any relief or the issue
            of any process in connection with such action or proceeding
            including, without limitation, the making, enforcement or execution
            against any property whatsoever (irrespective of its use or intended
            use) of any order or judgment which may be made or given in such
            action or proceeding.

                                       23
<PAGE>

IN WITNESS whereof the Mortgagor has duly executed this Deed as a deed and
intends to deliver and hereby delivers the same on the date first above written
and, prior to such delivery, this Deed has been duly signed on behalf of the
Security Trustee, in the manner appearing below.

THE MORTGAGOR

EXECUTED as a DEED by

ASHWORTH, INC.

By:____________________________________
         Terence W. Tsang

Its: Executive Vice President, Chief Operating
Officer, Chief Financial Officer, Chief
Accounting Officer and Treasurer

Address:    2765 Loker Avenue West
            Carlsbad, CA 92008
            USA

Fax:        (760) 476-8438

THE SECURITY TRUSTEE

SIGNED for and on behalf of
UNION BANK OF CALIFORNIA, N.A. AS
Security Trustee by:

____________________________________
Name: ______________________________
Title: _____________________________

Address:    530 B Street, 4th Floor
            San Diego, CA 92101-4407
            Mail Code: S-420

Fax:        (619) 230-3010

             [SIGNATURE PAGE TO EQUITABLE MORTGAGE OVER SECURITIES]

<PAGE>

                                   SCHEDULE 1

                                 THE SECURITIES

<TABLE>
<CAPTION>
                                 ISSUED SHARE         DESCRIPTION AND NUMBER    SHARE CERTIFICATE
       NAME OF COMPANY             CAPITAL                  OF SHARES               NUMBER(s)
       ---------------             -------                  ---------               ---------
<S>                             <C>                   <C>                       <C>
    Ashworth U.K., Limited      (pound)205,000        205,000 Ordinary Shares       1, 2, 3, 4
   (Company No.: 02862712)                               of (pound)1 each
</TABLE>

<PAGE>

                                   SCHEDULE 2

                           FORM OF NOMINEE UNDERTAKING

To:   Union Bank of California, N.A.
      [     ]

From: [     ]

                                                                          [Date]

Dear Sirs,

1           I/We refer to the Equitable Mortgage over Securities dated [ ] (such
            Mortgage, as the same may have been or may from time to time be
            amended, varied, supplemented, novated or replaced being referred to
            as "the Deed") and made between [          ] ("THE MORTGAGOR") and
            yourselves as Security Trustee. Terms defined in the Deed shall
            (unless otherwise defined in this Undertaking or the context
            otherwise requires) bear the same meanings in this Undertaking.

2           I/We declare that I/we hold the securities listed in the Appendix
            ("THE NOMINEE SECURITIES") to your order subject to the terms and
            conditions of the Deed.

3           I/We declare that I/we am/are not and shall never be entitled to any
            interest, claim or lien in or over the Nominee Securities.

4           I/We will following notice from you to me/us [of the happening of
            any event or circumstance which entitles you to take any action by
            way of enforcement of your rights under the Deed] (such notice to be
            deemed conclusive and binding on me/us for all purposes) forthwith
            pay to you any dividends or other payments of money received by
            me/us in respect of the Nominee Securities and I/we hereby declare
            myself/ourselves as trustee of such dividends or other payments of
            money to hold the same, pending such payment, upon trust to pay the
            same to you in the manner aforesaid.

5           I/We will forthwith notify you of the contents of any communication
            or document received by me/us as holder of the Nominee Securities.

6           I/We will following notice from you to me/us [of the happening of
            any event or circumstance which entitles you to take any action by
            way of enforcement of your rights under the Deed] (such notice to be
            deemed conclusive and binding on me/us for all purposes) exercise,
            or refrain from exercising, all of my/our voting rights in respect
            of the Nominee Securities in accordance with your instructions
            provided that prior to the receipt of any such notice as aforesaid,
            I/we will not exercise such voting rights or

<PAGE>

            any other rights forming part of the Nominee Securities other than
            in accordance with the terms of the Deed.]

7           I/We will, forthwith upon receipt by me/us of any Derivative Assets
            in respect of the Nominee Securities, deliver to you all
            certificates and other documents constituting or evidencing title to
            such Derivative Assets and each part thereof together with
            instruments of transfer relating to the same complying with the
            provisions of clause 5.1.4 of the Deed and otherwise in such manner
            as you may require.

8           I/We hereby irrevocably appoint you, and each and every person to
            whom you shall from time to time have delegated the exercise of the
            power of attorney conferred by this paragraph 8 to be my/our
            attorney or attorneys and in my/our name and otherwise on my/our
            behalf and as my/our act and deed to sign, seal, execute, deliver
            and perfect and do all other deeds, instruments, acts and things
            which may be required (or which you shall consider requisite) for
            carrying out any obligation imposed on me/us by or pursuant to this
            Undertaking (including, any covenants for further assurance implied
            by section 1(2) of the Law of Property (Miscellaneous Provisions)
            Act 1994, which shall be deemed to be within this power as if I/we
            had legally mortgaged the Nominee Securities to you with full title
            guarantee) for carrying any sales or other dealing by you into
            effect, for conveying or transferring any legal estate, entitlement
            or other interest in the Nominee Securities or otherwise howsoever
            and generally for enabling you to exercise the respective powers
            conferred on you by or pursuant to this Undertaking or the Deed, as
            the case may be, or by law. You shall have full power to delegate
            the power conferred on you by this paragraph 8, but no such
            delegation shall include the subsequent exercise of such power by
            you or preclude you from making a subsequent delegation of such
            power to some other person. Any such delegation may be revoked by
            you at any time.

9           I/We shall ratify and confirm all transactions entered into by you
            or any delegate of yours in the exercise or purported exercise of
            the respective powers of any such person and all transactions
            entered into, documents executed and things done by you or any
            delegate by virtue of the power of attorney given by paragraph 8
            above.

10          The power of attorney granted by this Undertaking is granted
            irrevocably and for value as part of the security constituted by
            this Undertaking and the Deed to secure the proprietary interest of,
            and the performance of obligations owed to, to respective donee(s)
            within the meaning of the Powers of Attorney Act 1971.

11          This Undertaking shall be governed by and construed in accordance
            with English law.

<PAGE>

IN WITNESS whereof I/we have caused this Undertaking to be executed as a deed
the day and the year first before written.

SIGNED and DELIVERED                  )
by [NAME OF NOMINEE]                  )
in the presence of:                   )

Witness' Signature            ___________________________

Name in blocks letters        ___________________________

Address                       ___________________________
                              ___________________________
                              ___________________________
                              ___________________________

Occupation                    ___________________________

<PAGE>

                                  THE APPENDIX

                             THE NOMINEE SECURITIES

<TABLE>
<CAPTION>
                                 ISSUED SHARE         DESCRIPTION AND NUMBER    SHARE CERTIFICATE
       NAME OF COMPANY             CAPITAL                  OF SHARES               NUMBER(s)
       ---------------             -------                  ---------               ---------
<S>                             <C>                   <C>                       <C>

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

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

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

---------------------------------------------------------------------------------------------------------
</TABLE>

                                       6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)(7)
<SEQUENCE>8
<FILENAME>a01811exv10wxzyx7y.txt
<DESCRIPTION>EXHIBIT 10.(Z)(7)
<TEXT>
<PAGE>
                                                                Exhibit 10(z)(7)

                                 FIRST AMENDMENT
                     TO REVOLVING/TERM LOAN CREDIT AGREEMENT

      This First Amendment to Revolving/Term Loan Credit Agreement (this
"Amendment") is entered into as of September 3, 2004, by and between Ashworth,
Inc., a Delaware corporation ("Borrower"), each lender from time to time party
to the Credit Agreement (as defined below) (collectively, the "Lenders" and
individually, a "Lender"), and UNION BANK OF CALIFORNIA, N.A., as Agent and as
U.K. Security Trustee (in such capacity, "Agent").

                                    RECITALS

      Borrower, Agent and the Lenders are parties to that certain Revolving/Term
Loan Credit Agreement dated as of July 6, 2004, as amended from time to time
(the "Credit Agreement"). The parties desire to amend the Credit Agreement in
accordance with the terms of this Amendment. Unless otherwise defined, all
initially capitalized terms in this Amendment shall be as defined in the Credit
Agreement.

      NOW, THEREFORE, the parties agree as follows:

      1. Lenders hereby waive Borrower's compliance with Section 6. 12(a) of the
Credit Agreement as in effect prior to the date of this Amendment, solely for
the period ended July 31, 2004.

      2. For the period ending October 31, 2004 only, Section 6.12(a) of the
Credit Agreement hereby is amended and restated to read as follows:

            "(a) Tangible Net Worth. Maintain on a consolidated basis Tangible
Net Worth equal to at least the sum of the following:

                  (i) Seventy Four Million Dollars ($74,000,000); plus

                  (ii) The net proceeds from any equity securities issued after
      the date of this Agreement. "

      3. For the period ending January 31, 2005 and thereafter, Section 6. 12(a)
of the Credit Agreement hereby is amended and restated to read as follows:

            "(a) Tangible Net Worth. Maintain on a consolidated basis Tangible
Net Worth equal to at least the sum of the following:

                  (i) Seventy Four Million Dollars ($74,000,000); plus

                  (ii) the sum of 90% of net income after income taxes (without
      subtracting losses) earned in each quarterly accounting period commencing
      on January 31, 2005; plus

                  (iii) the net proceeds from any equity securities issued after
      the date of this Agreement."

      4. No course of dealing on the part of Lenders, Agent or its officers, nor
any failure or delay in the exercise of any right by Agent or any Lender, shall
operate as a waiver thereof, and any single or partial exercise of any such
right shall not preclude any later exercise of any such right. Agent's or
Lenders' failure at any time to require strict performance by Borrower of any
provision of any Loan Document shall not affect any right of Lenders or Agent
thereafter to demand strict compliance and performance. Any suspension or waiver
of a right must be in writing signed by an officer of Agent, in accordance with
the terms of the Credit Agreement.


                                      -1-
<PAGE>


      5. The Credit Agreement, as amended hereby, shall be and remain in full
force and effect in accordance with its respective terms and hereby is ratified
and confirmed in all respects. Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power, or remedy of Agent or
Lenders under the Credit Agreement, as in effect prior to the date hereof.

      6. Borrower represents and warrants that the Representations and
Warranties contained in the Credit Agreement are true and correct as of the date
of this Amendment, and that, except as expressly waived hereby, no Event of
Default has occurred and is continuing.

      7. As a condition to the effectiveness of this Amendment, Agent shall have
received, in form and substance satisfactory to Agent, the following:

                  (a) this Amendment, duly executed by Borrower;

                  (b) all reasonable Attorney Costs incurred through the date of
this Amendment, which may be debited from any of Borrower's accounts; and

                  (c) such other documents, and completion of such other
matters, as Agent may reasonably deem necessary or appropriate.

      8. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.



                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]]


                                      -2-
<PAGE>


      IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.


                                        ASHWORTH, INC.

                                        By:  /s/Terence W. Tsang

                                        Title: Its Executive Vice President,
                                        Chief Operating Officer, Chief Financial
                                        Officer, Chief Accounting Officer and
                                        Treasurer


                                        UNION BANK OF CALIFORNIA, N.A., as Agent

                                        By: /s/L.D. Hart

                                        Name: L.D. Hart

                                        Title: Vice President


                                        UNION BANK OF CALIFORNIA, N.A., as U.K.
                                        Security Trustee

                                        By: /s/L.D. Hart

                                        Name: L.D. Hart

                                        Title: Vice President


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

                                        By: /s/L.D. Hart

                                        Name: L.D. Hart

                                        Title: Vice President


                       [SIGNATURE PAGE TO FIRST AMENDMENT
                    TO REVOLVING/TERM LOAN CREDIT AGREEMENT]

                        [SIGNATURES CONTINUED NEXT PAGE]


<PAGE>


                                        BANK OF THE WEST

                                        By: /s/Jacob A. Lenhof

                                        Name: Jacob A. Lenhof

                                        Title: Vice President


                                        COLUMBUS BANK AND TRUST

                                        By: /s/M. Kent Fleming

                                        Name: M. Kent Fleming

                                        Title: Senior Vice President



                       [SIGNATURE PAGE TO FIRST AMENDMENT
                    TO REVOLVING/TERM LOAN CREDIT AGREEMENT]

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>9
<FILENAME>a01811exv31w1.txt
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.1

I, Randall L. Herrel, Sr., Chairman, President and Chief Executive Officer of
Ashworth, Inc., certify that:

      1.    I have reviewed this report on Form 10-Q of Ashworth, Inc.;

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

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

      4.    The registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
            registrant and have:

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

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

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

      5.    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions):

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

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

Date: September 14, 2004

                                /s/Randall L. Herrel, Sr.
                                -------------------------
                                Randall L. Herrel, Sr.
                                Chairman, President and Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>10
<FILENAME>a01811exv31w2.txt
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.2

I, Terence W. Tsang, Executive Vice President, Chief Operating Officer and Chief
Financial Officer of Ashworth, Inc., certify that:

      1.    I have reviewed this report on Form 10-Q of Ashworth, Inc.;

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

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

      4.    The registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
            registrant and have:

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

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

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

      5.    The registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation of internal control over
            financial reporting, to the registrant's auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions):

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

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

Date: September 14, 2004

                            /s/Terence W. Tsang
                            -------------------
                            Terence W. Tsang
                            Executive Vice President, Chief Operating Officer,
                            Chief Financial Officer and Treasurer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>a01811exv32w1.txt
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Randall L. Herrel, Sr., in my capacity as Chairman, President and Chief
Executive Officer of Ashworth, Inc. (the "Registrant"), do hereby certify in
accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

      1. the Quarterly Report of the Registrant, on Form 10-Q for the quarter
ended July 31, 2004 (the "Report"), to which this certification is attached as
an exhibit fully complies with the requirements of Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934; and

      2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant.

Dated: September 14, 2004        /s/Randall L. Herrel, Sr.
                                 -------------------------
                                 Randall L. Herrel, Sr.,
                                 Chairman, President and Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>12
<FILENAME>a01811exv32w2.txt
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Terence W. Tsang, in my capacity as Executive Vice-President, Chief Operating
Officer, Chief Financial Officer and Treasurer of Ashworth, Inc. (the
"Registrant"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of
my knowledge:

      1. the Quarterly Report of the Registrant, on Form 10-Q for the quarter
ended July 31, 2004 (the "Report"), to which this certification is attached as
an exhibit fully complies with the requirements of Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934; and

      2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant.

Dated: September 14, 2004     /s/Terence W. Tsang
                              -------------------
                              Terence W. Tsang
                              Executive Vice-President, Chief Operating Officer,
                              Chief Financial Officer and Treasurer

</TEXT>
</DOCUMENT>
</SUBMISSION>
