<SUBMISSION>
<ACCESSION-NUMBER>0000936392-08-000032
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>10
<PERIOD>20071031
<FILING-DATE>20080114
<DATE-OF-FILING-DATE-CHANGE>20080114
<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-K
<ACT>34
<FILE-NUMBER>001-14547
<FILM-NUMBER>08529318
</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-K
<SEQUENCE>1
<FILENAME>a37077e10vk.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

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

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the fiscal year ended October&nbsp;31, 2007
</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number: 001-14547</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Ashworth, Inc.</B>
</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="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><BR>
(State or other jurisdiction of <BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><b>84-1052000</b><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>2765 LOKER AVENUE WEST, CARLSBAD, CA 92010</B><BR>
(Address of Principal Executive Office, including Zip Code)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>(760)&nbsp;438-6610</B><BR>
(Registrant&#146;s Telephone Number, including Area Code)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered pursuant to Section&nbsp;12(b) of the Act:</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="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 of each class <BR>
Common Stock, $.001 par value <BR>
Rights to Purchase Common Stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered<BR>
The NASDAQ Global Market</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered pursuant to Section&nbsp;12(g) of the Act: none</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act. Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the Registrant is not required to file reports pursuant to Section&nbsp;13 or
Section 15(d) of the Act. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 <FONT face="Wingdings">&#254;</FONT>&nbsp;No <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of Registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act (Check one).
</DIV>

<DIV align="center" style="font-size: 10pt">Large accelerated filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;Accelerated filer <FONT face="Wingdings">&#254;</FONT> &nbsp;&nbsp;Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company as defined in Rule&nbsp;12b-2 of the
Exchange Act. Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate market value of the Registrant&#146;s common stock held by non-affiliates based upon
the last reported sales price of its common stock on April&nbsp;30, 2007 as reported on the NASDAQ
Global Market was $101,059,949.65.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were 14,713,511 shares of common stock, $.001 par value, outstanding at the close of
business on December&nbsp;31, 2007.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





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

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

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








<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;1. BUSINESS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item&nbsp;1A. RISK FACTORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;1B. UNRESOLVED STAFF COMMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item&nbsp;2. PROPERTIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item&nbsp;3. LEGAL PROCEEDINGS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item&nbsp;9A. CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Item&nbsp;9B. OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Item&nbsp;11. EXECUTIVE COMPENSATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">PART IV</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">EXHIBIT INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv10wxapy.htm">EXHIBIT 10.(ap)</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv10wxaqy.htm">EXHIBIT 10.(aq)</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv21.htm">EXHIBIT 21</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv23w1.htm">EXHIBIT 23.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv31w1.htm">EXHIBIT 31.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv31w2.htm">EXHIBIT 31.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv32w1.htm">EXHIBIT 32.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a37077exv32w2.htm">EXHIBIT 32.2</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>





<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PART III of this Form 10-K incorporates certain information by reference from either the
Registrant&#146;s definitive proxy statement for its 2008 Annual Meeting of Stockholders or a Form
10-K/A to be filed with the Commission within 120&nbsp;days of October&nbsp;31, 2007, which information is
incorporated herein by reference.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CAUTIONARY STATEMENTS</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">This report contains certain forward-looking statements related to the Company&#146;s market position,
finances, operating results, marketing and business plans and strategies within the meaning of
Section&nbsp;27A of the Securities Act of 1933, as amended and Section&nbsp;21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements may contain the words &#147;believe,&#148;
&#147;anticipate,&#148; &#147;expect,&#148; &#147;predict,&#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, which speak only as of the date hereof. The Company undertakes no
obligation to update any forward-looking statements, whether as a result of new information,
changed circumstances or unanticipated events unless required by law. 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. For more information on the
risks to which the Company is subject, see Part&nbsp;I, Item&nbsp;1A. Risk Factors below.
</DIV>

<!-- link1 "PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<!-- link2 "Item&nbsp;1. BUSINESS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. BUSINESS.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GENERAL DEVELOPMENTS OF THE COMPANY</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth, Inc., based in Carlsbad, California, was incorporated in Delaware on March&nbsp;19, 1987.
As used in this report, the terms &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; &#147;Ashworth&#148; and the &#147;Company&#148; refer to
Ashworth, Inc., its predecessors, subsidiaries and affiliates, unless the context indicates
otherwise. The Company designs, markets, distributes and licenses quality sports apparel, headwear
and accessories under the Ashworth<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, The Game<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and Kudzu<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> labels. The Company holds a license to
design, source, market and sell Callaway Golf apparel primarily in the United States, Europe, and
Canada.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth earns revenues and income and generates cash through the design, marketing and
distribution of quality men&#146;s and women&#146;s sports apparel, headwear and accessories under the
Ashworth, Callaway Golf apparel, Kudzu and The Game 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, retail outlet stores, colleges and
universities, entertainment complexes, sporting goods dealers that serve the high school and
college markets, NASCAR/racing markets, outdoor sports distribution channels, and top
specialty-advertising firms for the corporate market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2007, the Company announced the appointment of Allan H. Fletcher to the position of
Chief Executive Officer and the appointment of Greg W. Slack to the position of Chief Financial
Officer. These announcements were part of a management reorganization which included the departure
of Peter M. Weil, the Company&#146;s former Chief Executive Officer and Director who resigned effective
October&nbsp;24, 2007. Eric R. Hohl, the Company&#146;s former Executive Vice President, Chief Financial
Officer and Treasurer also left his position at the Company effective October&nbsp;24, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;6, 2007, the Company, through its wholly-owned subsidiary Gekko Brands, LLC, entered
into two and five year employment and non-competition agreements with certain selling members of
Gekko Brands, LLC who are currently employees of Gekko Brands, LLC (the &#147;Gekko Employees&#148;). The
employment and non-competition agreements guarantee payment of the contingent consideration
installment payments for fiscal years 2007 and 2008, thereby amending Sections&nbsp;1.2(c) and 1.3 of
the Membership Interests Purchase Agreement, dated July&nbsp;6, 2004 (the &#147;Purchase Agreement&#148;),
relating to the acquisition of Gekko Brands, LLC by the Company. Under the Purchase Agreement, an
additional $6,500,000 would be
</DIV>

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

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


<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">paid to the Gekko Employees if the subsidiary achieved certain specified EBIT and other operating targets which were to be accounted for as
additional cost of the acquired entity. From July&nbsp;7, 2004 through October&nbsp;31, 2006, Gekko
Brands, LLC achieved the specified EBIT and other operating targets entitling the Gekko Employees
to additional consideration of $3,150,000 recorded as an adjustment to goodwill. Under the new
employment and non-competition agreements entered into with the Gekko Employees, the guaranteed
installment payments for fiscal years 2007 and 2008 totaling $3,350,000 will be accounted for as
compensation and recognized as expense on a straight-line basis over the term of the employment and
non-competition agreements.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our website address is <U>www.ashworthinc.com</U>. You may obtain free electronic copies of our
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports on the &#147;Investor Relations&#148; portion of our website, under the heading
&#147;SEC Filings.&#148; These reports are available on our website as soon as reasonably practicable after
we electronically file them with the Securities and Exchange Commission.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>ASHWORTH PRODUCTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth Men&#146;s Division designs Authentics<FONT style="font-variant: SMALL-CAPS"><SUP style="font-size: 85%; vertical-align: text-top">TM</SUP></FONT>, AWS<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>
(Ashworth Weather Systems<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>) and fashion collections. Each fashion collection typically
consists of knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and
accessories. Product design focuses on classic, timeless designs with emphasis on quality and
innovation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth Women&#146;s Division designs Authentics<FONT style="font-variant: SMALL-CAPS"><SUP style="font-size: 85%; vertical-align: text-top">TM</SUP></FONT>, AWS<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP> and
fashion collections. The collections focus on timeless, elegant designs that are functional and
sophisticated for the woman with a fashion sense and an active lifestyle.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf
Company to create lines of men&#146;s and women&#146;s Callaway Golf apparel. The first product offering was
designed for Fall 2002 and included three separate collections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Callaway Golf apparel men&#146;s Collection and Sport range includes classic and fashion lines
featuring knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and
accessories. The Collection range designs focus on sophisticated styling using luxury fabrics
while the Sport range designs aim to appeal to the active consumer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Callaway Golf apparel X Series product line combines fashion with technical performance
fabrication, and features knit shirts, pullovers, vests, jackets, pants, shorts, headwear and
waterproof rainwear.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Callaway Golf is a trademark of Callaway Golf Company. Ashworth, Inc. is an Official Apparel
Licensee of Callaway Golf Company. The multi-year agreement has various annual requirements for
marketing expenditures and royalty payments based on the level of net revenues.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>DISTRIBUTION CHANNELS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company warehouses and ships the majority of its products from its embroidery and
distribution centers in Oceanside, California; Phenix City, Alabama; and Basildon, England.
Product is also drop-shipped from off-shore factories directly to our subsidiaries, divisions and
international distributors.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently distributes and sells its products primarily through the following
distribution channels:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Golf Pro Shops, Resorts and Off-Course Golf Specialty Shops</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s core customers are golf pro shops located at golf courses and resorts as well as
off-course specialty retailers. The Company refers to this channel as the green grass distribution
channel which accounted for 33.2% of net sales in fiscal 2007. The Company currently distributes its
products in nearly all of the 50 states.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Collegiate Bookstores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Game brand products are marketed primarily under licenses to over 1,000 colleges and
universities, resorts and sporting goods team dealers that serve the high school and college
markets. The Game brand is one of the leading headwear brands in the College/Bookstore
distribution channel. During fiscal 2007, The Game accounted for 14.1% of net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. NASCAR and Outdoor Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Kudzu brand products are sold into NASCAR/racing markets and through outdoor sports
distribution channels, including fishing and hunting. The NASCAR/racing and outdoor sports
distribution channel accounted for 8.2% of net sales in fiscal 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Department Stores and Specialty Stores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently sells its Ashworth and Callaway Golf apparel products to selected
upscale department and specialty stores, including Macy&#146;s, Lord &#038; Taylor, Bloomingdale&#146;s, Belk, and
Nordstrom. During fiscal 2007, the Department and Specialty Stores distribution channel accounted
for 8.0% of our net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Corporate Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company markets its products to top specialty-advertising firms that re-sell the Company&#146;s
products to Fortune 500 companies and other corporations for use in their company stores, sales
meetings, catalogs and corporate events. Our Corporate distribution channel accounted for 12.2% of
our net sales during fiscal 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>International Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a wholly-owned subsidiary in Basildon, England that distributes Ashworth and
Callaway Golf apparel product to customers, either directly or through independent sales
representatives, in the United Kingdom and other European countries such as Germany, France, Spain,
Sweden, Ireland and Portugal. The Company distributes Ashworth and Callaway Golf apparel, headwear
and accessories in Canada through two separate divisions, operated by Fletcher Leisure Group, Inc.,
formerly Almec Leisure Group.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has entered into licensing and distribution agreements with various partners in
countries such as China, Japan, Hong Kong, Singapore, Taiwan, Australia and South Korea. Under
these agreements, the licensees import certain product lines from Ashworth and manufacture other
approved licensed products designed specifically for their market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also uses distributors to sell Ashworth products in other locations such as United
Arab Emirates, South Africa, Mexico, Guam and Saipan. The Company&#146;s International distribution
channel, which includes our wholly-owned European subsidiary, Canadian divisions, and international
licensees and distributors, accounted for 18.5% of our net sales in fiscal 2007.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Ashworth Retail Stores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates, through wholly-owned subsidiaries, 18 retail stores in Arizona,
California, Florida, Georgia, Illinois, Massachusetts, Nevada, New York, Texas, Utah, Virginia and
Washington. The main purpose of these stores is to help control and manage inventory by selling
prior season and irregular merchandise. The Company also sells its excess and irregular inventory
through select clearance retailers. During fiscal 2007, the Ashworth Retail Stores distribution
channel accounted for 5.8% of our net sales.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>SALES AND MARKETING</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s products are sold in the United States, Europe and Canada largely by independent
sales representatives who are not employees of the Company or its subsidiaries. At December&nbsp;31,
2007, the Company had approximately 154 independent and 25 employee sales representatives
worldwide. The Company also uses several different distributors and licensees in various
international locations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to add exposure and consumer credibility to its Ashworth brand, the Company has
contracts with golf celebrities who wear and endorse the Company&#146;s products. At October&nbsp;31, 2007,
these individuals included: Fred Couples, Chris DiMarco, Nick Watney, Steve Flesch, Nicole
Castrale, Brett Wetterwich and others. The Company uses these players and celebrities in
advertisements, in-store displays, and for trade shows, store and other special appearances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth marketing platform is designed to heighten brand awareness, brand strength and
brand growth globally through print, moving media, communications, promotional, tradeshow
initiatives and tour exposure.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth continued its in-store shop program in 2007 and has a distinct in-store presence in
many golf shops and department stores throughout the United States. This modular fixture program
is designed to help create an in-store shop for Ashworth and Callaway Golf apparel products coupled
with pictures and displays of our spokespersons and golf professionals.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to introduce new young customers to the Ashworth brand, the Company supports high
school and collegiate golf by providing team uniforms to selected high school, college and
university golf teams.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with its acquisition of Gekko, the Company began marketing to the collegiate sports
market. In an effort to create brand awareness and promote sell through at the consumer level, the
Company has promotional agreements with college sports coaches who wear and endorse The Game brand
products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s apparel business continues to be seasonal, with the highest revenues
traditionally in the period from January through July and the lowest revenues in the period from
August through December.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in fiscal 2007 were $202.2&nbsp;million which was a decrease of 3.5% from net revenues
of $209.6&nbsp;million in fiscal 2006. During the last three fiscal years, the Company had the
following domestic and international net revenues:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Years Ended October 31,</b></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2007</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2006</b></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2005</b></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated 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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Domestic, excluding Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">129,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,687</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">International:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Ashworth U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other international</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Note 1 of Notes to Consolidated Financial Statements, The Company and Summary of
Significant Accounting Policies, Business&#148; for revenues, operating income and identifiable assets
of Ashworth U.K., Ltd., and &#147;Note 12, Segment Information&#148; for market segment information.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s revenues from its international operations may be adversely affected by currency
fluctuations, taxation and laws or policies of the foreign countries in which the Company conducts
business, as well as laws and policies of the United States affecting foreign trade, investment and
taxation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For more information regarding the risks of currency fluctuations that could affect the
Company&#146;s ability to sell its products in foreign markets, the value in U.S. dollars of revenues
received in foreign currencies, the impact of such fluctuations on the Company&#146;s international
segment and strategies the Company may use to manage the risks presented by currency exchange rate
fluctuations, see &#147;Item&nbsp;7. Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations &#151; Liquidity and Capital Resources &#151; Currency Fluctuations,&#148; &#147;Item&nbsp;7A, Quantitative
and Qualitative Disclosures about Market Risk &#151; Foreign Currency Exchange Rate Risk,&#148; and &#147;Note 1
of Notes to Consolidated Financial Statements, Foreign Currency.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2007, the Company had a sales order backlog of approximately $63,187,000 from
independent third parties, which is approximately $4,170,000 or 7.1% higher than the comparable
backlog at December&nbsp;31, 2006. Backlog reflects sales orders that are placed with the Company prior
to the period in which the goods are to be shipped, as opposed to &#147;at-once&#148; sales orders that are
received in the period in which the goods are expected to be shipped. The current backlog covers
orders for goods expected to be shipped through approximately October&nbsp;2008. The amount of the
sales order backlog at a particular time is affected by a number of factors, including the timely
flow of product from suppliers which can impact the Company&#146;s ability to ship on time, and the
timing of customers&#146; orders. Accordingly, a comparison of sales order backlog from period to
period is not necessarily meaningful and may not be indicative of eventual actual shipments in any
period. In addition, sales orders may be changed or canceled prior to shipment, preventing the
Company from converting backlog into revenue.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>INVENTORY</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company seeks to maintain sufficient levels of inventory to support its Ashworth
Authentics and Callaway Classics programs, increased sales volume, and to meet increased customer
demand for at-once ordering. Disposal of excess prior season inventory is an ongoing part of the
Company&#146;s business, and inventory write-downs may impair the Company&#146;s financial performance in any
period. Certain inventory 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 grows.
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPETITION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The golf apparel market is not dominated by any single company, and is highly competitive both
in the United States and abroad. The Company competes not only with golf apparel manufacturers,
but also with other branded sports and sportswear apparel manufacturers, including Nike and Adidas,
that have entered the golf apparel market in recent years. Many of the Company&#146;s competitors have
greater financial resources. Ashworth competes with other golf apparel manufacturers on design,
product quality, customer service and brand image.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRODUCT SOURCING</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Full Package Finished Goods</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s products are manufactured to the Company&#146;s quality and styling specifications
and imported into the United States, Canada, and the United Kingdom as &#147;full package&#148; finished
goods produced by independent third party suppliers. Nearly all the Company&#146;s merchandised goods
are manufactured in Asia, including China, Hong Kong, Korea, Macao, Malaysia, the Philippines,
Taiwan, Thailand and Vietnam. We also manufacture goods with independent factories in Peru and
Mexico. Our largest single apparel manufacturer operates in Thailand and Hong Kong and accounted
for approximately 21% of the total fiscal 2007 apparel production. Our largest single headwear
manufacturer is located in China and accounted for approximately 50% of the total fiscal 2007 headwear production.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>In-House Embroidery</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company embroiders custom golf course, tournament, collegiate, NASCAR/racing, outdoor
sports, and corporate logos in its Oceanside, California, Phenix City, Alabama and Basildon,
England embroidery and distribution centers using approximately 124 multi-head, computer-controlled
embroidery machines with a total of approximately 832 sewing heads. The embroidery design libraries
contain over 117,000 Ashworth, Callaway, The Game, Kudzu and customer designs. Embroidery is
applied to both garments and finished headwear. On average, the Company embroiders 68,000 logos per
week on approximately 71,000 product units.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Duties and Quotas</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Virtually all of our merchandise imported into the United States, Canada and the United
Kingdom is subject to duties. Until January&nbsp;1, 2005, our apparel merchandise was also subject to
quotas. Quotas represent the right, pursuant to bilateral or other international trade
arrangements, to export amounts of certain categories of merchandise into a country or territory
pursuant to a visa or license. Under the Agreement on Textiles and Clothing, quotas on textile and
apparel products were eliminated on January&nbsp;1, 2005 for World Trade Organization (the &#147;WTO&#148;) member
countries, including the United States, Canada, United Kingdom and European countries.
Notwithstanding quota eliminations, China&#146;s accession agreement for membership in the WTO provides
that WTO member countries (including the United States, Canada and the United Kingdom) may
re-impose quotas on specific categories of products in the event it is determined that imports from
China have surged and are threatening to create a market disruption for such categories of products
(so-called &#147;safeguard quota provisions&#148;). In response to surging imports, in November&nbsp;2005 the
United States and China agreed to a new quota arrangement which will impose quotas on certain
textile products through the end of 2008. In addition, the European Union also agreed with China on
a new textile arrangement which imposed quotas through the end of 2007. The United States and other
countries may also unilaterally impose additional duties in response to a particular product being
imported (from China, Vietnam or other countries) in such increased quantities as to cause (or
threaten) serious damage to the relevant domestic industry (generally known as &#147;anti-dumping&#148;
actions). China has imposed an export tax on all textile products
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">manufactured in China. Although there can be no assurance, the Company does not believe this tax or quota will have a material
impact on our business.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth is also subject to other international trade agreements and regulations, such as the
North American Free Trade Agreement and the Andean Trade Promotion and Drug Eradication Act. In
addition, each of the countries in which our products are sold has laws and regulations covering
imports. The United States and the other countries in which our products are manufactured and sold
may, from time to time, impose new duties, tariffs, surcharges or other import controls or
restrictions, including the imposition of &#147;safeguard quota&#148;, or adjust presently prevailing duty or
tariff rates or levels. In an effort to minimize our potential exposure to import risk, the Company
actively monitors import restrictions and quota fill rates and if needed can shift production to
other countries or manufacturers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>TRADEMARKS AND LICENSE</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns and utilizes numerous trademarks, principal among which are the Ashworth
typed and design marks, the Golfman design mark, and the Weather Systems stylized mark. The
Ashworth typed and design marks, the Golfman design marks, the Weather Systems stylized mark and
Ashworth&#146;s two bar design have been registered on the Principal Register of the United States
Patent and Trademark Office for one or all of the following classes, apparel, shoes, leather goods
and/or golf bags. Additionally, the Company has several other pending trademark applications and
trademark registrations in the United States for the AWS and Two Bar Design marks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has registered the Ashworth typed and design marks, the Golfman design marks
and/or the Weather Systems stylized marks and has pending applications for apparel, shoes, leather
goods and/or golf bags internationally. The application process varies from country to country and can take
approximately one to three years to complete.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has EZ-TECH<FONT style="font-family: Symbol">&#226;</FONT> as a registered trademark in the United States, Australia,
Canada and the United Kingdom.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with its acquisition of Gekko, the Company acquired the registered trademarks of
The Game and Kudzu.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth regards its trademarks and other proprietary rights as valuable assets and believes
that they have significant value in the marketing of its products. Although Ashworth believes that
it has the exclusive right to use the trademarks and intends to vigorously protect its trademarks
against infringement, there can be no assurance that Ashworth can successfully protect the
trademarks from conflicting uses or claims of ownership in cases where the trademarks were used
and/or registered prior to Ashworth&#146;s lawful registrations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Callaway Golf is a trademark of Callaway Golf Company. The Company is an Official Apparel
Licensee of Callaway Golf Company. The Company has licensed the use of the Callaway Golf trademark
pursuant to a multi-year, exclusive licensing agreement to design, source and sell Callaway Golf
brand apparel primarily in the United States, Europe and Canada. The agreement, effective until
December&nbsp;31, 2010, provides for, among other matters, minimum annual royalty payments and other
sales and marketing commitments regardless of the Company&#146;s actual sales of Callaway-branded
products. It may be extended for one five-year term at Ashworth&#146;s sole discretion, provided that
Ashworth meets or exceeds certain performance requirements for calendar years 2008 and 2009.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>EMPLOYEES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2007, Ashworth had approximately 598 regular employees and 98 seasonal
temporary employees. We believe that relations between Ashworth and its employees are generally
good.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following are our current officers and former executive officers who resigned during
fiscal 2007 and their principal business experience for the past five years.
</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="30%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position with the Company</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Current Officers as of December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Allan H. Fletcher
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Edward J. Fadel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Greg W. Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer,<BR>
Principal Accounting Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Paul A. Bourgeois
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President, Sales</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Former Officers as of December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Winston E. Hickman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief<BR>
Financial Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Gary I. (&#147;Sims&#148;) Schneiderman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Peter E. Holmberg
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President &#151; Green Grass<BR>
Sales and Merchandising</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Peter M. Weil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</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">Eric R. Hohl
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Chief Financial<BR>
Officer and Treasurer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Current Officers as of December&nbsp;31, 2007:</B></U>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Allan H. Fletcher<BR>
Chief Executive officer</b></div>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><b>
Mr.&nbsp;Fletcher </B>was appointed Chief Executive Officer of the Company on October&nbsp;24, 2007. Mr.
Fletcher is the founder of Fletcher Leisure Group, Inc. (&#147;FLG&#148;), which has been one of Canada&#146;s
leading suppliers of branded golf apparel, sportswear and golf equipment for over 40&nbsp;years and is a
long-standing business partner of the Company. Mr.&nbsp;Fletcher was responsible for the operations and
strategic direction of FLG and served as its President until December&nbsp;2003 when he became and
continues to serve as the Chairman and Chief Executive Officer. Mr.&nbsp;Fletcher is also an officer of
Fletcher Leisure Group, Ltd., a management consulting company serving the golf industry, which
provides Mr.&nbsp;Fletcher&#146;s services to the
</DIV>


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

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Company under a consulting agreement. Mr.&nbsp;Fletcher&#146;s son,
Mark Fletcher, currently serves as the President of FLG and oversees its operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Edward J. Fadel<BR>
President</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Fadel </B>was appointed President of the Company effective May&nbsp;23, 2007. Mr.&nbsp;Fadel most recently
served as Vice President of Merchandising at Greg Norman / Reebok. Previously, from 2005 to 2006,
he served as Chief Strategist of Apparel at Ahead, Inc. where he formulated apparel and headwear strategies for
both the Ahead men&#146;s line and Kate Lord women&#146;s line. Prior to that, Mr.&nbsp;Fadel served as Senior
Vice President of Merchandising and Design at the Company from 2002 to 2004. Mr.&nbsp;Fadel joined the
Company in 2001 and served as Vice President &#151; Callaway Golf Apparel Merchandising &#038; Design until
his promotion in 2002. Mr.&nbsp;Fadel worked as a consultant with various apparel manufacturers from
2000 until 2001. Prior to that, Mr.&nbsp;Fadel founded and served as President of Elandale Golfwear, a
women&#146;s sportswear producer, from 1995 to 2000 and as President of Cutter &#038; Buck Big &#038; Tall (a
division of The Jeremy Dold Co.) from 1992 to 1995.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Greg W. Slack<BR>
Chief Financial Officer and Principal Accounting Officer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Slack </B>was appointed Chief Financial Officer and Principal Accounting officer on October&nbsp;24,
2007. He had previously served as the Company&#146;s Vice President &#151; Finance, Corporate Controller &#038;
Principal Accounting Officer until July&nbsp;2007. Prior to returning to the Company, Mr.&nbsp;Slack served
as Vice President of Finance of Pivotstor LLC from August&nbsp;1, 2007 to October&nbsp;23, 2007. Mr.&nbsp;Slack
initially joined the Company as Director of Internal Audit in October&nbsp;2005, was promoted to
Corporate Controller in February&nbsp;2006, promoted to Vice President &#151; Finance in July&nbsp;2006 and
appointed Principal Accounting Officer in October&nbsp;2006. From September&nbsp;2004 until October&nbsp;2005, Mr.
Slack worked on the Company&#146;s Sarbanes-Oxley project as an independent consultant. Mr.&nbsp;Slack was
with JMC Management, Inc. from December&nbsp;2001 through August&nbsp;2004, where he served as the Chief
Financial Officer from January&nbsp;2003 to August&nbsp;2004 and as the Controller from December&nbsp;2001 to
January&nbsp;2003. Prior to that, Mr.&nbsp;Slack held various accounting related positions at Bay Logics,
Inc. and PricewaterhouseCoopers LLP. He holds a Certified Public Accountant license from the State
of California and a B.S. degree in Accountancy from San Diego State University.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Paul A. Bourgeois<BR>
Senior Vice President of Sales</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><b>Mr.&nbsp;Bourgeois</b> was appointed Senior Vice President of Sales for all domestic sales channels on
October&nbsp;1, 2007. Mr.&nbsp;Bourgeois most recently served as Vice President of Sales and Marketing for
the E. Magrath/Byron Nelson Golf Division of VF Imagewear from May&nbsp;2005 to September&nbsp;2007. He was
responsible for developing all sales and marketing initiatives along with working very closely with
merchandising and design on product development. Prior to this, he was Vice President of Sales for
the Cutter &#038; Buck Golf Division and responsible for developing budgets, selling initiatives, and
all sales plans. Mr.&nbsp;Bourgeois spent nine years with Cutter &#038; Buck from June&nbsp;1995 to April&nbsp;2004
and was promoted to Vice President of Sales in March&nbsp;2002.
</DIV>


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

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

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




<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Former Officers as of December&nbsp;31, 2007:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Peter M. Weil<BR>
Chief Executive Officer and Director</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Weil </B>resigned his position as Chief Executive Officer and as a Director of the Company,
effective October&nbsp;24, 2007. He previously served as a full-time consultant and member of the
Company&#146;s Office of the Chairman (an interim executive body utilized until a new CEO was
identified) from September&nbsp;12, 2006 until October&nbsp;30, 2006 when he was appointed as Chief Executive
Officer. Mr.&nbsp;Weil was appointed to the Company&#146;s Board of Directors on May&nbsp;8, 2006 and continued
to serve as a member of the Board until his resignation. During Mr.&nbsp;Weil&#146;s tenure as the Company&#146;s
CEO, he was an inactive Partner of Lighthouse Retail Group LLC, a consulting firm specializing in
improving operating and positioning strategies for retailers. From 1996 to 2004, Mr.&nbsp;Weil served
as Senior Vice President/Director of Management Horizons (formerly, PricewaterhouseCoopers &#151;
retail consulting group). His consulting clients have included Hewlett Packard, Disney, Brooks Brothers, Nordstrom, Family Dollar and Loblaws. Mr.&nbsp;Weil previously held
Senior Vice President positions with Macy&#146;s, Marshalls and J Baker/Morse Shoe in merchandising and
supply chain management. Mr.&nbsp;Weil holds an M.B.A. from the Harvard Business School and a B.A. from
the University of Michigan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gary I. (&#147;Sims&#148;) Schneiderman<BR>
President</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Schneiderman </B>joined the Company in September&nbsp;2001 and resigned from his position with the
Company effective May&nbsp;21, 2007. Mr.&nbsp;Schneiderman was appointed President of the Company effective
September&nbsp;12, 2006. He served as Vice President of Sales for Ashworth and Callaway Golf apparel
Retail Sales until January&nbsp;2004, when he was promoted to Senior Vice President of Sales and became
responsible for Callaway Golf apparel Green Grass Sales. In September&nbsp;2005, Mr.&nbsp;Schneiderman was
promoted to Executive Vice President of Sales, Marketing and Customer Service. Prior to joining
the Company, Mr.&nbsp;Schneiderman served in a number of capacities at Tommy Hilfiger USA, including
National Sales Manager for men&#146;s sportswear. He served as a Regional Sales Manager for Pincus
Brothers Maxwell Tailored Clothing from 1985 to 1990.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Winston E. Hickman<BR>
Executive Vice President and Chief Financial Officer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><b>Mr.&nbsp;Hickman</b> joined the Company on February&nbsp;23, 2006 and resigned from his position with the Company
effective November&nbsp;17, 2006. Mr.&nbsp;Hickman most recently served as Executive Vice President and
Chief Financial Officer of REMEC, Inc., a NASDAQ-listed designer and manufacturer of advanced
wireless subsystems used in commercial and defense communications applications. Mr.&nbsp;Hickman joined
REMEC in 2003 from privately-held Paradigm Wireless System, Inc. where, beginning in 2000, he was
an investor, Chief Financial Officer and a member of the board of directors. Mr.&nbsp;Hickman has also
previously served as board member, Chief Financial Officer, and financial advisor to a number of
public and private companies. Mr.&nbsp;Hickman served as Chief Financial Officer of Pacific Scientific
Company, a NYSE-listed company, and earlier held senior financial positions at Rockwell
International, Allied-Signal, and Vans, Inc. Mr.&nbsp;Hickman holds an M.B.A. from the University of
Southern California and a B.A. from California State University, Long Beach.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Peter E. Holmberg<BR>
Executive Vice President &#151; Green Grass Sales and Merchandising</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Holmberg </B>resigned from the Company effective May&nbsp;21, 2007. He was appointed Executive Vice
President &#151; Green Grass Sales and Merchandising on October&nbsp;25, 2006. Mr.&nbsp;Holmberg joined the
Company in July&nbsp;1998 and served as the Director of Corporate Sales until December&nbsp;1999. He served
as Vice President of Corporate Sales from December&nbsp;1999 to August&nbsp;2001 when he was promoted to
Senior Vice President of Sales and had the added responsibility of Ashworth Green Grass Sales. Mr.
Holmberg then served as the Senior Vice President of Merchandising and Design from May&nbsp;2005 until
September&nbsp;2005 when he was promoted to Executive Vice President of Merchandising, Design and
Production.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Prior to joining the Company, Mr.&nbsp;Holmberg served as National Corporate Sales Manager
for Cutter &#038; Buck, Inc. from 1995 to 1998 and as Regional Manager and Buyer for Patrick James, Inc.
from 1992 to 1995. Mr.&nbsp;Holmberg was the proprietor of The Country Gentleman, an upscale retail
store in Bellevue, Washington, from 1975 to 1992.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Eric R. Hohl<BR>
Executive Vice President, Chief Financial Officer and Treasurer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Hohl </B>left his position as Executive Vice President, Chief Financial Officer and Treasurer of
the Company, effective October&nbsp;24, 2007. He was appointed Executive Vice President, Chief
Financial Officer and Treasurer effective March&nbsp;19, 2007. Mr.&nbsp;Hohl joined the Company from ISE Corporation where he
served as Chief Financial Officer since April&nbsp;2005. ISE Corporation designs, engineers and
assembles hybrid and hydrogen drive systems for heavy duty vehicles. From March&nbsp;2004 to April&nbsp;2005,
Mr.&nbsp;Hohl served as the Chief Financial Officer and Chief Operating Officer at B.B. Dakota, Inc., a
women&#146;s apparel company. From September&nbsp;2000 to February&nbsp;2004, Mr.&nbsp;Hohl served as Chief Financial
Officer for Ritz Interactive, Inc., an E-commerce company.
</DIV>

<!-- link2 "Item&nbsp;1A. RISK FACTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. RISK FACTORS.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s business 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:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Risks Related to Our Business</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>If we are unable to successfully retain executive leadership and other key personnel, the Company&#146;s
ability to successfully develop and market its products and operate its business may be harmed.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has experienced a high level of turnover in its executive leadership,
including the departures of its chief executive officer and its chief financial officer in October
2007. Both executive positions have been filled and, although the new executive management team is
experienced in the industry and familiar with the Company, they may encounter some difficulty
transitioning into their new positions and effectively managing the Company&#146;s business processes,
which may have a negative impact on the Company&#146;s near term results of operations and financial
position. Near term changes to the Company&#146;s executive officers or the inability to retain other
qualified management personnel could delay the development and introduction of new products, harm
the Company&#146;s ability to sell its products, damage the image of the Company&#146;s brands and/or prevent
the Company from executing its business strategy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our
products face intense competition.</B></div>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">
The market for golf apparel and sportswear is extremely competitive. The Company has several
strong competitors, including Nike and Adidas, which have greater financial resources and larger
market share and presence outside of the Company&#146;s core green grass market. Price competition or
industry consolidation could weaken the Company&#146;s competitive position. Our competitors&#146; product
offerings, technologies, marketing expenditures (including for advertising and endorsements),
pricing, costs of production, and customer service are areas of intense competition. This
competition, in addition to rapid changes in technology and consumer preferences in our markets,
constitutes a significant risk factor in our operations. If we do not adequately and timely
anticipate and respond to our competitors or our consumers, our costs may increase or the consumer
demand for our products may decline significantly.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to implement the Enterprise Resource Planning system may adversely affect the Company&#146;s
operations and financial results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2005, the Company signed purchase contracts for a new Enterprise Resource Planning
(&#147;ERP&#148;)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">system that was initially scheduled to be installed over the following two fiscal years.
In December&nbsp;2007, the new ERP system was placed into service in the United Kingdom. The initial
implementation of the system in the United Kingdom was originally scheduled for May&nbsp;2007, but was
delayed six months due to difficulties experienced in the final design and rollout phase of the
project. The Company intends to monitor and evaluate the operating benefits and efficiencies of
the system in the United Kingdom over the next several months before implementing the system at the
Company&#146;s corporate headquarters which is not expected to take place before October&nbsp;31, 2009. The
Company may continue to experience difficulties in implementing the new ERP system in the United
States and other related systems that could disrupt its ability to timely and accurately process
and report key components of the results of its consolidated operations, its financial position and
cash flows. Any disruptions or difficulties that may occur in connection with implementing the new
ERP system or any future systems could also adversely affect the Company&#146;s ability to complete the evaluation of its
internal control over financial reporting and attestation activities pursuant to Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002. System failure or malfunctioning may result in disruption of
operations and the inability to process transactions and could adversely affect the Company&#146;s
financial results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>If our embroidery and distribution center fails to operate as anticipated, the Company could incur
additional expense.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s results of operations would continue to be adversely affected if the Company&#146;s
embroidery and distribution center (the &#147;EDC&#148;) does not operate as anticipated or functionality
problems are encountered. We have been operating at an overall downtime percentage of under 2% for
the second half of fiscal 2006 and fiscal 2007. The EDC has operated substantially below its
designed production capacity since its inception on November&nbsp;1, 2004. A disaster recovery plan has
also been in place for major disasters since the first quarter of fiscal 2007. Nonetheless, major
long term functionality issues could occur. Any such operational problems may cause the Company to
incur additional expense, experience delays in customer shipments, or require the Company to lease
additional distribution space. In addition, the Company&#146;s results of operations could be
negatively impacted if future sales volume growth does not reach significantly higher 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 distribution facilities as soon as, or in the amounts,
anticipated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to determine adequate inventory levels may result in decreased operating margins and harm
our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company maintains high levels of inventory to support its Authentics 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
have materially impaired the Company&#146;s financial position in the past and may do so again in the
future. Particular inventories may be subject to multiple write-downs if the Company&#146;s initial
reserve estimates for inventory obsolescence or lack of sell-through prove to be too low.
Conversely, if we underestimate consumer demand for our products or if manufacturers fail to supply
the products that we require at the time we need them, we may experience inventory shortages.
Inventory shortages might delay shipments to customers or result in lost sales, negatively impact
retailer and distributor relationships, and diminish brand loyalty.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to meet certain performance requirements could cause the Company to lose its exclusive
licensing agreement with Callaway Golf.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 agreement provides for, among other
matters, minimum annual royalty payments and other sales and marketing commitments regardless of
the Company&#146;s actual sales of Callaway-branded products. In addition, the Company must meet
certain performance requirements for calendar years 2008 and 2009 in order to have the option to
extend the licensing agreement
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">for an additional five-year term after December&nbsp;31, 2010. If the
Company fails to meet these requirements, future agreements with Callaway Golf apparel may not be
available and the Company&#146;s revenues would materially decline.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Changes in the retail industry could cause a decrease in the number of retail stores in which our
products are carried.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In recent years, the retail industry has experienced consolidation and other ownership changes. In
the future, retailers in the United States and in foreign markets may undergo changes that could
decrease the number of stores that carry our products or increase the ownership concentration
within the department store retail industry, including: consolidating their operations; undergoing
restructurings or reorganizations; or realigning their affiliations. These situations concentrate
our credit risk in a relatively small number of retailers, and, if any of these retailers were to
experience a shortage of liquidity, it would increase the risk that their outstanding payables to
us may not be paid.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Sales of our product are dependent on the economy, popularity of golf, and weather conditions.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Demand for the Company&#146;s products may decrease significantly if the economy weakens, if the
popularity of golf decreases, if consolidation of golf properties continues, or if unusual weather
conditions or other factors cause a reduction in rounds played.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Development of fashions or styles that are not well received would negatively impact our revenues
and net profits.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Like other apparel manufacturers, the Company must correctly anticipate and help direct fashion
trends within its industry. The Company&#146;s results of operations and financial position would
suffer if the Company develops fashions or styles that are not well received in any season. In the
past, the Company has developed fashions and styles that were not well received by consumers,
resulting in slower than anticipated sell-through of the Company&#146;s products which required
significant markdown allowances that materially impaired the Company&#146;s financial position and
adversely affected the results of operations. The Company may experience similar circumstances in
the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Poor sell-through of the Company&#146;s products could cause reduced revenues and net profit.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company sells a significant portion of its products to customers in the department store retail
channel. If the department stores do not sell-through the Company&#146;s products in a timely manner,
they often request markdown allowances from the Company or delay future purchases of the Company&#146;s
products which could cause the Company to lose sales or receive lower margins. The Company&#146;s
products have experienced less than anticipated sell-through in the past and may do so again in the
future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our international sourcing involves inherent risks which could result in harm to our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company does not own or operate any manufacturing facilities and depends exclusively on
independent third parties for the manufacture of all our products. Our products are manufactured to
our specifications primarily by international manufacturers in Asian countries. Our largest single
apparel and manufacturer operates in Thailand and Hong Kong and accounted for approximately 21% of
our total apparel production during fiscal 2007. Our largest single headwear manufacturer is
located in China and accounted for approximately 50% of our total headwear production during fiscal
2007. The inability of a manufacturer to ship orders of our products in a timely manner or to meet
our quality standards could cause us to miss the delivery date requirements of our customers for
those items, which could result in cancellation of orders, refusal to accept deliveries or a
substantial reduction in purchase prices, any of which could have a material adverse effect on our
financial condition and results of operations.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Contractors may be unable to deliver the Company&#146;s products if necessary raw materials are not
available.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 and have lower gross profit margins.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure of our contractors to comply with labor laws and codes of conduct followed by the Company
could disrupt our shipments and damage our reputation.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company seeks to require its licensees and independent manufacturers to operate in compliance
with applicable laws and regulations, and certain codes of conduct. While our internal and vendor
operating guidelines promote ethical business practices and our staff periodically visits and
monitors the operations of our independent manufacturers, we do not control these manufacturers or
their labor practices. The violation of laws or codes of conduct by an independent manufacturer
used by the Company or one of our licensees, or the divergence of an independent manufacturer&#146;s or
licensee&#146;s labor practices from those generally accepted as ethical in the United States, could
interrupt, or otherwise disrupt the shipment of finished products to us or damage our reputation.
Any of these developments, in turn, could have a material adverse effect on our financial condition
and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Currency exchange rate fluctuations could result in higher costs and decreased margins.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company&#146;s international operations involve inherent risk which could result in harm to our
business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As a result of its international business, the Company is exposed to increased risks inherent in
conducting business outside of the United States. In addition to foreign currency risks and
increased difficulty in protecting the Company&#146;s intellectual property rights and trade secrets,
these risks include (i)&nbsp;unexpected government action or changes in legal or regulatory
requirements, (ii)&nbsp;social, economic or political instability, (iii)&nbsp;the effects of any
anti-American sentiments on the Company&#146;s brands or sales of the Company&#146;s products, (iv)&nbsp;increased
difficulty in controlling and monitoring foreign operations from the United States, including
increased difficulty in identifying and recruiting qualified personnel for its foreign operations,
and (v)&nbsp;increased exposure to interruptions in air carrier or shipping services which could
significantly adversely affect the Company&#146;s ability to obtain timely delivery of products from
international suppliers or to timely deliver its products to international customers. Although the
Company believes the benefits of conducting business internationally outweigh these risks, any
significant adverse change in circumstances or conditions could have a significant adverse effect
upon the Company&#146;s operations and its financial performance and condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company may be adversely affected by the financial health of our customers.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company is subject to periodic litigation which could result in unexpected expense of time and
resources.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is from time to time party to claims and litigation proceedings. Such matters are
subject to
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">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 financial position
and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to adequately protect our intellectual property rights could adversely affect our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s success depends to a significant degree upon its ability to protect and preserve its
intellectual property, including copyrights, trademarks, patents, service marks, trade secrets and
similar intellectual property. The Company relies on the intellectual property, patent, trademark
and copyright laws of the United States and other countries to protect its proprietary rights.
However, the Company may be unable to prevent third parties from using its intellectual property
without its authorization, particularly in those countries where the laws do not protect its
proprietary rights as fully as in the United States. The use of the Company&#146;s intellectual
property by others could reduce or eliminate any competitive advantage the Company has developed,
causing it to lose sales or otherwise harm its business. If it became necessary for the Company to
resort to litigation to protect these rights, any proceedings could be burdensome and costly and
the Company may not prevail.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to retain and continue to obtain high quality endorsers of our products could harm our
business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">One of the key elements of the Company&#146;s marketing strategy has been to obtain endorsements from
professional golfers and celebrities, which contributes to the authenticity and image of our
brands. Management believes that this strategy has been an effective means of gaining brand
exposure worldwide and creating broad appeal for our products. There can be no assurance that the
Company will be able to maintain its existing relationships with these individuals in the future or
that it will be able to attract new athletes and celebrities to endorse its products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our business is affected by seasonality and consumer discretionary spending, which could result in
fluctuations in our operating results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The apparel industry has historically been subject to substantial cyclical variations. As domestic
and international economic conditions change, trends in discretionary consumer spending become
unpredictable and could be subject to reductions due to uncertainties about the future. When
consumers reduce discretionary spending, purchases of specialty apparel may decline. A general
reduction in consumer discretionary spending due to a recession in the domestic and/or
international economies or uncertainties regarding future economic prospects could have a material
adverse effect on the Company&#146;s results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our substantial indebtedness could adversely affect our operations, financial condition and
the ability to enter into certain change of control transactions.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has a significant amount of indebtedness. As of October&nbsp;31, 2007, the Company had a
total of $60.8&nbsp;million of indebtedness. $30.9&nbsp;million of indebtedness that was outstanding under
the Company&#146;s term loan and revolving credit facility with Union Bank of California, N.A. (&#147;Union
Bank&#148;) was paid off by the Company on the date that the new senior revolving credit facility (the
&#147;Credit Facility&#148;) of up to $55.0&nbsp;million (subject to borrowing base availability), including a
$15.0&nbsp;million sub-limit for letters of credit (letters of credit will be 100% reserved against
borrowing availability) with Bank of America, N.A., (&#147;B of A&#148;) was consummated. The Company&#146;s
indebtedness under the Credit Facility could have important consequences, such as:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting our ability to obtain additional financing to fund growth,
acquisitions, working capital, capital expenditures, debt service requirements
or other cash requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting our operational flexibility due to the covenants in the Credit
Facility;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting our ability to invest operating cash flow in our business due to debt
service requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limiting our ability to compete with companies that are less leveraged and
that may be better positioned to withstand economic downturns;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increasing our vulnerability to economic downturns and changing market
conditions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>making us vulnerable to fluctuations in market interest rates, to the extent
that our debt is subject to floating interest rates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If our cash from operations is not sufficient to meet our expenses and obligations under the Credit
Facility, we may be required to refinance our debt, sell assets, borrow additional money or raise
equity.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect to generate the funds necessary to pay our expenses and to pay the principal and interest
on our outstanding debt from our operations. Because our business is seasonal, our borrowings under
the Company&#146;s revolving credit facility usually fluctuate during the year, generally peaking during
March through May.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our ability to generate cash to meet our expenses and debt service obligations will depend on our
future performance, which will be affected by financial, business, economic and other factors,
including potential changes in consumer preferences, the success of our products, pressure from
competitors and other matters discussed in this Annual Report on Form 10-K (including this &#147;Risk
Factors&#148; section). Many of these factors are beyond our control. Any factor that negatively affects
our results of operations, including our cash flow, may also negatively affect our ability to pay
the principal and interest on the Credit Facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we do not have enough cash to pay the Credit Facility, we may be required to amend it, refinance
it, sell assets, incur additional indebtedness or raise equity. We cannot assure you that we will
be able, at any given time, to take any of these actions on terms acceptable to us or at all.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restrictive covenants in the Credit Facility may restrict our operational flexibility. Our ability
to comply with these restrictions depends on many factors beyond our control.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Credit Facility includes certain covenants that, among other things, limits or restricts our
ability to:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>incur or guarantee additional debt;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>incur liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pay dividends, repurchase stock or make other distributions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sell assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make loans and investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enter into consolidations or mergers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enter into transactions with affiliates.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Credit Facility may also limit our ability to agree to certain change of control transactions,
because a &#147;change of control&#148; (as defined in the Credit Facility) will result in an event of
default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A breach of any of the covenants or restrictions contained in the Credit Facility could result in
an event of default under the Credit Facility in which case the amounts outstanding under the
Credit Facility could be declared immediately due and payable. If the payment of the indebtedness
is accelerated, we cannot assure you that our assets would be sufficient to repay in full that
indebtedness and any other indebtedness that would become due as a result of any acceleration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Credit Facility is subject to variable rates of interest, which could negatively impact the
Company&#146;s net profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrowings against the Credit Facility are at variable rates of interest and expose the Company to
interest rate risk. If interest rates increase, the Company&#146;s debt service obligations on the
variable rate indebtedness would increase even though the amount borrowed remained the same, and
its net income and cash flows would decrease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Anti-takeover devices may prevent a sale, or changes in the management, of the Company.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has in place several anti-takeover devices, including a stockholder rights plan that
may have
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">the effect of delaying or preventing a sale, or changes in the management, of the Company.
For example, the Company&#146;s bylaws require stockholders to give written notice of any proposal or
director nomination to the Company within a specified period of time prior to any stockholder
meeting.
</DIV>

<!-- link2 "Item&nbsp;1B. UNRESOLVED STAFF COMMENTS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1B. UNRESOLVED STAFF COMMENTS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">None.
</DIV>

<!-- link2 "Item&nbsp;2. PROPERTIES" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. PROPERTIES.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns an embroidery and distribution center (the &#147;EDC&#148;) and an adjacent undeveloped
seven acres of land, located in Oceanside, California. The EDC consists of approximately 203,000
square feet of useable office and warehouse space used by the Company to warehouse, embroider,
finish, package and distribute apparel and related accessories. The EDC was financed with an $11.7
million secured loan agreement with a remaining principal balance of $11.0&nbsp;million as of October
31, 2007, that carries a fixed interest rate of 5% amortized over 30&nbsp;years, due and payable on May
1, 2014. The Company leases its principal executive offices, which are located in Carlsbad,
California.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and its subsidiaries currently have the following material leases for
administrative and distribution facilities:
</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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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="3"><B>Lease</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Min./Current</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD nowrap align="center" colspan="3"><B>Square </B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Rent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Footage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Rent Per Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Per Month</B></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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left"><B>Administrative and Distribution Centers:</B></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:30px; text-indent:-15px">Carlsbad, CA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Essex, England</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Phenix City, AL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/06/12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,466</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and its subsidiaries also lease a total of approximately 53,000 square feet of
retail space for its 18 retail stores. The leases expire through August&nbsp;2016 and require total
current base rent per month of approximately $145,000 and total maximum base rent per month of
approximately $179,000. The Company also pays percentage rent based on revenues that exceed
certain breakpoints for all of the retail store leases. In addition, the Company leased a showroom
in New York at a fixed annual rent of $95,000 payable in monthly installments of $7,910. The lease
on the showroom expired in April&nbsp;2007; at that time the Company continued to lease the showroom on
a month to month basis through November&nbsp;2007. In December&nbsp;2007, the Company leased a showroom at a
new location in New York at a fixed annual rent of $143,550 payable in monthly installments of
$11,963 for the first three years and an annual rent of $156,600 payable in monthly installments of
$13,050 for the last two years. All of the leases require the Company to pay its pro rata share of
taxes, insurance and maintenance expenses. The Company guarantees a portion of several leases held
by Ashworth subsidiaries.
</DIV>
<!-- link2 "Item&nbsp;3. LEGAL PROCEEDINGS" -->
<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. LEGAL PROCEEDINGS</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;27, 2007, the Law Offices of Herbert Hafif filed a class action in the United
States District Court for the Central District of California alleging that the Company willfully
violated the Fair
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Credit Reporting Act by printing on credit or debit card receipts more than the
last five digits of the credit or debit card number and/or the expiration date. The plaintiff
sought statutory and punitive damages, attorney&#146;s fees and injunctive relief on behalf of the
purported class. The suit against Ashworth was one of hundreds of suits filed against different
retailers nationwide. The proposed class representative for the putative class filed his motion to
certify this matter as a class action. The Company filed an opposition to the motion and the court
entered an order denying the class certification. On November&nbsp;13, 2007, the parties entered into a
settlement on the record whereby Ashworth would pay the plaintiff $1,000 and the plaintiff would
dismiss his individual claim with prejudice. Ashworth admitted no liability and continues to
dispute any allegation that it willfully violated the Fair Credit Reporting Act. The parties subsequently entered into a written stipulation to that
effect and the court dismissed the complaint.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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 claims
and litigation cannot currently be ascertained, the Company does not believe that these 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>
<!-- link2 "Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company held its 2007 Annual Meeting of Stockholders on August&nbsp;30, 2007. The information
required by this Item&nbsp;4 was included in the Company&#146;s third quarter Form 10-Q which was filed on
September&nbsp;10, 2007 with the Securities and Exchange Commission and is incorporated into this Item&nbsp;4
by reference.
</DIV>
<!-- link1 "PART II" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>PART II</B>
</DIV>

<!-- link2 "Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES" -->
<DIV align="left"><A NAME="008"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt; margin-left: 42px; text-indent: -42px"><B>Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Market Information</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s common stock is traded on the NASDAQ Global Market under the symbol &#147;ASHW.&#148; The
following table sets forth the high and low sale prices on the NASDAQ Global Market for the
quarters indicated.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Fiscal 2007</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended January&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended April&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended July&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended October&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.19</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Fiscal 2006</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended April&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended July&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.17</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Holders</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has only one class of common stock. As of December&nbsp;31, 2007, there were 458
stockholders of record and approximately 3,200 beneficial owners of the Company&#146;s common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dividends have ever been declared with respect to the Company&#146;s common stock. In the past,
the Board of Directors has chosen to reinvest profits in the Company rather than declare a
dividend. The Company does not currently intend to pay cash dividends for the foreseeable future.
For restrictions on dividends see &#147;Item&nbsp;7 Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations &#151; Liquidity and Capital Resources.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Recent Sales of Unregistered Securities</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">There were no stock repurchases made during the quarter ended October&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See &#147;Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters&#148; below.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Performance Graph</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Set forth below is a line graph comparing the yearly percentage change in the cumulative total
stockholder returns on the Company&#146;s common stock over a five-year period with the cumulative total
return of the NASDAQ Stock Market (U.S. Companies) and the stocks of companies in the same Standard
Industrial Classification as the Company (SIC 2300-2399). The graph assumes that $100.00 was
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">invested on October&nbsp;31, 2002 in the Company&#146;s common stock and each index and that all dividends
were reinvested. The comparisons in the graph are not intended to forecast nor are they necessarily
indicative of possible future performance of the Company&#146;s common stock.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><b>COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*</b><BR>
Among Ashworth, Inc., The NASDAQ Composite Index<BR>
And SIC Code 2300 - 2399</div>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="a37077a3707701.gif" alt="(LINE GRAPH)">
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 22%">* $100
invested on 10/31/02 in stock or index-including reinvestment of
dividends.<BR>
Fiscal year ending October 31.</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="1%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="33" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/02</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/03</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/04</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/05</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/06</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10/31/07</B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
                        <TD style="border-top: 1px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Ashworth, Inc.</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">100.00</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">158.70</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">158.49</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">132.64</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">132.45</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">104.91</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">NASDAQ Composite</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">100.00</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">144.06</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">149.55</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">161.38</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">182.42</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">221.36</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">SIC Code 2300 - 2399</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">100.00</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">115.73</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">128.72</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">123.65</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">159.91</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">161.63</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="33" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>
<!-- link2 "Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statements of operations data set forth below with respect to the fiscal years ended
October&nbsp;31, 2007, 2006 and 2005 and the balance sheet data as of October&nbsp;31, 2007 and 2006 are
derived from, and should be read in conjunction with, the audited Consolidated Financial Statements
and the Notes thereto included elsewhere in this annual report on Form 10-K. The statement of
operations data set forth below with respect to the fiscal years ended October&nbsp;31, 2004 and 2003
and the balance sheet data as of October&nbsp;31, 2005, 2004 and 2003 are derived from audited financial
statements not included in this annual report on Form&nbsp;10-K. No dividends have been paid for any of
the periods presented.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="19" style="border-bottom: 0px solid #000000"><B>Years Ended October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004 (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19">(In thousands, except for per share amounts)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statements of Operations Data:</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">202,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">204,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">173,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,811</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,689</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(727</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average basic shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average diluted shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,198</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As of October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19">(In thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt (less current portion)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,555</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">On July&nbsp;6, 2004 the Company acquired Gekko Brands, LLC (Gekko). The financial information above includes the results of
operations for Gekko from July&nbsp;7, 2004 (approximately four months for fiscal year 2004) and 12&nbsp;months for fiscal years 2005,
2006 and 2007.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">For the years ended October&nbsp;31, 2007 and October&nbsp;31, 2005 the diluted net loss per share was
calculated using the basic weighted average shares outstanding as the effect of stock options would
be anti-dilutive due to the Company&#146;s loss position in those periods.</DIV></TD>
</TR>

</TABLE>


<!-- link2 "Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="010"></A></DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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 annual report on Form 10-K. For additional information, see &#147;Cautionary
Statements&#148; and &#147;Item&nbsp;1A. Risk Factors&#148; in Part&nbsp;I.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies and Estimates</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC&#146;s Financial Reporting Release No.&nbsp;60, &#147;<I>Cautionary Advice Regarding Disclosure About
Critical Accounting Policies</I>&#148; (&#147;FRR 60&#148;), encourages companies to provide additional disclosure and
commentary on those accounting policies considered to be critical. The Company has identified the
following
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">critical accounting policies that affect its significant judgments and estimates used in
the preparation of its consolidated financial statements.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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. 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>. Provisions are made for estimated sales returns and other
allowances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sales Returns, Markdowns and Other Allowances. </I>Management must make estimates of potential
future product returns and other allowances related to current period product revenues. Management
analyzes historical returns, current economic trends, changes in customer demand, and sell-through
of our products when evaluating the 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. Material differences
may result with respect to the amount and timing of our revenues for any period if management makes
different judgments or utilizes different estimates. The reserves for sales returns, markdowns and
other allowances amounted to $3.9&nbsp;million at October&nbsp;31, 2007 compared to $4.0&nbsp;million at
October&nbsp;31,&nbsp;2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Allowance for Doubtful Accounts. </I>Management must also make estimates of the collectability 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 while
considering the customer&#146;s financial condition. The Company has credit insurance to cover many of
its major accounts. Our trade accounts receivable balance was $34.5&nbsp;million, net of allowances for
doubtful accounts of $1.0&nbsp;million, at October&nbsp;31, 2007, as compared to the balance of $34.0
million, net of allowances for doubtful accounts of $1.1&nbsp;million, at October&nbsp;31, 2006. Allowances
for doubtful accounts as a percentage of trade accounts receivable was 2.9% at October&nbsp;31, 2007 and
3.1% at October&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Inventory. </I>The Company writes down its inventory by amounts equal to the difference between
the cost of inventory and the estimated net realizable value based on assumptions about the 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. Our inventory balance was $50.5
million, net of inventory write-downs of $4.6&nbsp;million, at October&nbsp;31, 2007, as compared to an
inventory balance of $45.0&nbsp;million, net of inventory write-downs of $3.5&nbsp;million, at October&nbsp;31,
2006. Inventory write-downs as a percentage of inventories were 8.3% at October&nbsp;31, 2007 compared
to 7.1% at October&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deferred Taxes. </I>SFAS No.&nbsp;109, <I>Accounting for Income Taxes</I>, establishes financial accounting
and reporting standards for the effect of income taxes. The objectives of accounting for income
taxes are to recognize the amount of taxes payable or refundable for the current year and deferred
tax liabilities and assets for the future tax consequences of events that have been recognized in
an entity&#146;s financial statements or tax returns. Judgment is required in assessing the future tax
consequences of events that have been recognized in our financial statements or tax returns.
Variations in the actual outcome of these
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">future tax consequences could materially impact our
financial position, results of operations or cash flows. Accruals for tax contingencies are
provided for in accordance with the requirements of SFAS No.&nbsp;5, <I>Accounting for Contingencies </I>(&#147;SFAS
5&#148;).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Share-based compensation. </I>The Company accounts for stock-based compensation in accordance
with SFAS No.&nbsp;123(R), <I>Share-Based Payment</I>. Under the fair value recognition provisions of this
statement, share-based compensation cost is measured at the grant date based on the value of the
award and is recognized as expense over the vesting period. Determining the fair value of
share-based awards at the grant date requires judgment. In addition, judgment is also required in
estimating the amount of share-based awards that are expected to be forfeited. If actual results
differ significantly from these estimates, stock-based compensation expense and our results of
operations could be materially impacted.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At October&nbsp;31, 2007 and 2006, 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 that 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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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, headwear and accessories under the
Ashworth, Callaway Golf apparel, Kudzu and The Game and 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, retail outlet stores,
colleges and universities, entertainment complexes, sporting goods dealers that serve the high
school and college markets, NASCAR/racing markets, outdoor sports distribution channels, and to top
specialty-advertising firms for the corporate market. All of the Company&#146;s apparel production in
fiscal 2007 was through &#147;full package&#148; purchases of ready-made goods with nearly all of the apparel
and all of the headwear being manufactured in Asian countries. The Company embroiders a majority
of these garments with custom golf course, tournament, collegiate and corporate logos for its
customers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;6, 2007, the Company, through its wholly-owned subsidiary Gekko Brands, LLC entered
into two and five year employment and non-competition agreements with certain selling members of
Gekko Brands, LLC who are currently employees of Gekko Brands, LLC (&#147;the Gekko Employees&#148;). The
employment and non-competition agreements guarantee payment of the contingent consideration
installment payments for fiscal years 2007 and 2008, thereby amending Sections&nbsp;1.2(c) and 1.3 of
the Membership Interests Purchase Agreement, dated July&nbsp;6, 2004 (the &#147;Purchase Agreement&#148;),
relating to the acquisition of Gekko Brands, LLC by the Company. Under the Purchase Agreement, an
additional $6,500,000 would be paid to the Gekko Employees if the subsidiary achieved certain
specified EBIT and other operating targets which were to be accounted for as additional cost of the
acquired entity. From July&nbsp;7, 2004 through October&nbsp;31, 2006, Gekko Brands, LLC (&#147;Gekko&#148;) achieved
the specified EBIT and other operating targets entitling the Gekko Employees to additional
consideration of $3,150,000 recorded as an adjustment to goodwill. Under the new employment and
non-competition agreements entered into with the Gekko Employees, the guaranteed installment
payments for fiscal years 2007 and 2008, totaling $3,350,000, will be accounted for as compensation
and recognized into expense on a straight-line basis over the term of the employment and

</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">non-competition agreements. From March&nbsp;1, 2007 through October&nbsp;31, 2007, the Company recorded
approximately $0.7&nbsp;million in compensation expense related to the employment agreements.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the financial close for the year ended October&nbsp;31, 2007, the Company performed its
annual assessment of its net deferred tax assets in accordance with Statement of Financial
Accounting Standard No.&nbsp;109, <I>Accounting for Income Taxes (&#147;SFAS 109</I>&#148;). SFAS 109 limits the ability
to use future taxable income to
support the realization of deferred tax assets when a company has experienced recent losses
even if the future taxable income is supported by detailed forecasts and projections. After
considering the Company&#146;s three-year cumulative losses for fiscal years ended October&nbsp;31, 2007,
2006, and 2005, the Company concluded that it could no longer rely on future taxable income as the
basis for realization of its net deferred tax asset.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, the Company recorded tax charges during fiscal year ended October&nbsp;31, 2007 of
$7.3&nbsp;million to increase a valuation allowance against deferred tax assets. These tax charges are
recorded in the provision for income taxes in the accompanying consolidated statements of
operations. The Company expects to continue to record the valuation allowance against its deferred
tax assets until other positive evidence is sufficient to justify realization.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Technology. </I>In December&nbsp;2005, the Company signed purchase contracts for a new Enterprise
Resource Planning (&#147;ERP&#148;) system. The current computer system was initially installed in 1993 and
lacks the sophistication required to efficiently operate a multi-currency, multi-subsidiary
business. The new ERP system is expected to provide management with timely, consolidated
information to gain better visibility into our business drivers. In December&nbsp;2007, the new ERP
system was placed into service in the United Kingdom. The initial implementation of the system in
the United Kingdom was originally scheduled for May&nbsp;2007 but was delayed six months due to
difficulties experienced in the final design and rollout phase of the project. The Company intends
to monitor and evaluate the operating benefits and efficiencies of the new ERP system in the United
Kingdom over an extended period before management begins implementing the system at the Company&#146;s
corporate headquarters which is not expected to take place before October&nbsp;2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Fiscal 2007 Compared To Fiscal 2006</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table discloses certain financial information for the periods presented,
expressed in terms of dollars, dollar change, percentage change and as a percent of total revenue
(all dollar amounts in millions):
</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&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 nowrap align="center" colspan="6">% of Total</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Change</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Revenue</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <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:30px; text-indent:-15px">Retail distribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28.2</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic green grass</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.6</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.7</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic outlet store</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.4</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">61.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">22.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth U. K.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.9</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other international</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.8</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">61.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">42.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">38.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">104.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">97.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(283.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166.7</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before provision for income
taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(711.1</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">287.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(15.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1510.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.0</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues were $202.2&nbsp;million for fiscal 2007, a decrease of 3.5% from net
revenues of $209.6&nbsp;million in fiscal 2006. The Company experienced decreases in all domestic and
international distribution channels except for the Company&#146;s outlet store and Collegiate channels.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues for the domestic segment (excluding Gekko) decreased 7.4% to $119.6&nbsp;million in
fiscal 2007 from $129.3&nbsp;million in fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues from the Company&#146;s retail distribution channel decreased $6.4&nbsp;million or 28.2% to
$16.3&nbsp;million in fiscal 2007 from $22.7&nbsp;million in fiscal 2006. The decrease in the Company&#146;s
retail distribution channel was primarily driven by prior management&#146;s decision to reduce the
presence of the Ashworth brand in this channel.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues from the domestic green grass and off-course specialty distribution channel
decreased $3.2&nbsp;million or 4.6% to $67.1&nbsp;million for fiscal 2007 from $70.3&nbsp;million in fiscal 2006.
For the year, revenues in the Company&#146;s golf channel were somewhat affected by customer
consolidation within the off-course specialty channel of distribution and continuing competitive
pressure.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues in the Company&#146;s domestic corporate distribution
channel decreased $1.2&nbsp;million
or 4.7% to $24.6&nbsp;million in fiscal 2007 from $25.8&nbsp;million in fiscal 2006. The decline in the
corporate distribution channel resulted from missed sales opportunities due to out-of-stock
positions in certain styles throughout the year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in the Company&#146;s domestic outlet store distribution channel increased $1.2
million or 11.4% to $11.7&nbsp;million in fiscal 2007 from $10.5&nbsp;million in fiscal 2006, primarily due
to the full year effect of the four new outlet locations opened during the second half of the
fiscal year 2006. Sales from comparable stores opened for more than a year were down 1.6%.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues for Gekko increased $3.4&nbsp;million or 8.1% to $45.2&nbsp;million in fiscal 2007 as
compared to $41.8&nbsp;million in the prior fiscal year, primarily due to increased sales of apparel and
headwear into the collegiate/bookstore channel and increases in tour events. These increases were
partially offset by a decrease in the NASCAR/racing and outdoor sporting channels.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues for Ashworth U.K., Ltd. decreased $0.8&nbsp;million or 2.9% to $27.2&nbsp;million in fiscal
2007 as compared to $28.0&nbsp;million in fiscal 2006. The decrease was primarily due to licensed sales
of the Ryder Cup Championship event played in September of 2006 not included in fiscal 2007
results. This decrease was partly offset by the favorable effect of exchange rate fluctuations of
$2.4&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the other international segment decreased $0.4&nbsp;million or 3.8% to $10.1
million in fiscal 2007 as compared to $10.5&nbsp;million in fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated gross profit margin for fiscal 2007 decreased 240 basis points to 38.5% as
compared to 40.9% in fiscal 2006. The decrease resulted principally from higher discounting to
clear excess inventory as well as the underutilization of the Company&#146;s Embroidery and Distribution
Center in Oceanside, California
due to lower sales volumes in the Company&#146;s domestic distribution channels (excluding Gekko).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative (&#147;SG&#038;A&#148;) expenses increased 5.3% to $85.8&nbsp;million in
fiscal 2007 compared to $81.5&nbsp;million in fiscal 2006. As a percentage of net revenues, SG&#038;A
expenses increased to 42.4% of net revenues in fiscal 2007 as compared to 38.9% in fiscal 2006.
The increase in SG&#038;A expenses was due to an approximate $1.9&nbsp;million increase in trade shows, sales
meetings and licensing fees, a net increase in employee severance of approximately $0.8&nbsp;million,
approximately $0.7&nbsp;million due to the full-year effect of the four new outlets stores added in the
second half of fiscal 2006 as well as recognition of approximately $0.7&nbsp;million of additional
compensation expense related to five officers of Gekko. This additional compensation resulted from
a change in the nature of certain contingent acquisition obligations which previously were
accounted for as additional purchase price of the acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net other expenses increased $0.4&nbsp;million to $3.0&nbsp;million in fiscal 2007 as compared to $2.6
million in fiscal 2006, primarily due to a net foreign currency translation loss in fiscal 2007 as
compared to a gain in fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rate applicable to the Company for fiscal 2007 decreased to (27.8%)
compared to the 45.7% effective income tax rate for fiscal 2006. The decrease in the effective
income tax rate for fiscal 2007 compared to fiscal 2006 results from an increase in the valuation
allowance against deferred tax assets, since it was determined to be likely that all or a portion
of the deferred tax assets will not be realized due to projected taxable losses.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Fiscal 2006 Compared To Fiscal 2005</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table discloses certain financial information for the periods presented,
expressed in terms of dollars, dollar change, percentage change and as a percent of total revenue
(all dollar amounts in millions):
</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&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 nowrap align="center" colspan="6">% of Total</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Change</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Revenue</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <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:30px; text-indent:-15px">Retail distribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">46.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic green grass</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18.4</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">42.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic outlet store</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">36.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total domestic, excluding Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.9</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">61.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">65.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth U. K.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other international</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.2</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">38.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">36.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">97.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">99.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">186.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160.0</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(238.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">90.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(233.3</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(242.9</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues were $209.6&nbsp;million for fiscal 2006, an increase of 2.3% from net
revenues of $204.8&nbsp;million in fiscal 2005. The increase was primarily due to increased net sales
in the Gekko and Ashworth UK, Ltd, subsidiaries and continued growth in the Company&#146;s retail,
corporate and Company-owned outlet store distribution channels, partially offset by a decline in
net revenues from the Company&#146;s golf-related distribution channel and the other international
segment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the domestic segment (excluding Gekko) decreased 2.9% to $129.3&nbsp;million in
fiscal 2006 from $133.2&nbsp;million in fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues from the Company&#146;s retail distribution channel increased $7.2&nbsp;million or 46.4% to
$22.7&nbsp;million from $15.5&nbsp;million in fiscal 2005, primarily driven by the Company&#146;s enhanced
merchandising strategy focused on classic key item products with a lower percentage of fashion
products. This change in product mix improved full priced sell-through of Spring/Summer product and
the Company effectively delivered Fall/Holiday products later in the season to maximize product
turn and profitability that resulted in lower experienced and projected requests from major
customers for margin assistance as compared to fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues from the domestic green grass and off-course specialty distribution channel
decreased $15.9&nbsp;million or 18.4% to $70.3&nbsp;million for fiscal 2006 from $86.2&nbsp;million in fiscal
2005, primarily due to the
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Company&#146;s decision to reduce the amount of off-price sales, increased
competitive pressure and a continued softness in the golf market. Despite the softness in demand,
the Company saw growth in both of its Ashworth AWS and Callaway X series technical performance
product offerings.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in the Company&#146;s domestic corporate distribution channel increased $2.0&nbsp;million
or 8.4% to $25.8&nbsp;million in fiscal 2006 from $23.8&nbsp;million in fiscal 2005. Growth in the corporate
distribution channel was attributable to certain sales promotions and the addition of technical
performance product offerings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in the Company&#146;s domestic outlet store distribution channel increased $2.8
million or 36.4% to $10.5&nbsp;million in fiscal 2006 from $7.7&nbsp;million in fiscal 2005, primarily due to
the opening of four new outlet locations during the second half of fiscal 2006 and the full year
effect of four outlets opened during fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for Gekko increased $4.3&nbsp;million or 11.4% to $41.8&nbsp;million in fiscal 2006 as
compared to $37.5&nbsp;million in fiscal 2005, primarily due to increased sales of apparel into the
collegiate/bookstore channel and the addition of a multi-year exclusive on-site merchandiser
license with the Kentucky Derby that began in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
revenues for Ashworth U.K., Ltd. increased $4.6&nbsp;million or 19.7% to $28.0&nbsp;million in
fiscal 2006 as compared to $23.4&nbsp;million in fiscal 2005, primarily due to a year-over-year increase
in both the Ashworth and Callaway Golf apparel brands in the golf, resort and corporate
distribution channels including an increase in net revenues associated with licensed product sales
contributed by the 2006 Ryder Cup championships event played in September&nbsp;2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the other international segment decreased $0.2&nbsp;million or 1.9% to $10.5
million as
compared to $10.7&nbsp;million in fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated gross profit margin for fiscal 2006 increased to 40.9% as compared to 37.6%
in fiscal 2005. The increase was primarily due to a decrease in granted markdown allowances in the
Company&#146;s domestic retail distribution channel driven by the Company&#146;s focus on classic key item
products with a lower percentage of fashion products. This strategy improved full priced
sell-through, reduced levels of domestic inventory and realized direct labor efficiencies at the
Company&#146;s EDC. These improvements in gross margin were partly offset by lower than forecasted full
priced sales in the Company&#146;s green grass distribution channel that directly contributed to the
under-utilization of the EDC&#146;s embroidery capacity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SG&#038;A
expenses increased 8.1% to $81.5&nbsp;million in fiscal 2006 compared to $75.4&nbsp;million in
fiscal 2005. As a percentage of net revenues, SG&#038;A expenses increased to 38.9% of net revenues in
fiscal 2006 as compared to 36.8% in fiscal 2005. Primary drivers of the higher SG&#038;A expense
included the net addition of four new Company stores and the full year effect of the four new
outlets added during fiscal 2005, expenses associated with the previously-announced resignation of
the Company&#146;s former Chairman and CEO and other organizational charges, consulting and legal fees
associated with the 2006 Annual Meeting of Stockholders and the strategic alternatives process, and
an increase in licensed/royalty products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
other expenses decreased $0.3&nbsp;million to $2.5&nbsp;million in
fiscal 2006 as compared to $2.8
million in fiscal 2005, primarily due to a net foreign currency transaction gain in fiscal 2006
compared to a net loss in the prior year, offset partly by an increase in interest expense due to
higher average borrowings on the revolving credit facility and incrementally higher interest rates
throughout fiscal 2006.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax (benefit)&nbsp;rate applicable to the Company for fiscal 2006 increased to
45.7% compared to the (43.6%) effective income tax (benefit)&nbsp;rate for fiscal 2005. The increase in
the effective income tax (benefit)&nbsp;rate for fiscal 2006 compared to fiscal 2005 results from an
increase in non-deductible permanent tax differences due principally to the accounting for
incentive stock options under SFAS 123R.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2006, the Company recorded net income of $1.0&nbsp;million or $0.07 per basic and
diluted share, as compared to a net loss of ($0.7) million or ($0.05) per basic and diluted share
in the prior year. The increase in net income in fiscal 2006 was primarily attributable to the
higher gross profit margins as outlined above.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Company&#146;s primary sources of liquidity have been generated from cash flows
from operations, the working capital line of credit with its bank and other financial alternatives
such as leasing. However, the Company has incurred losses in the recent periods and negative cash
flows from operations during fiscal year 2007. As of or for the year ended October&nbsp;31, 2007, the
Company incurred a net loss of $14.1&nbsp;million and cash and cash equivalents declined by $1.4&nbsp;million
compared to the balance at October&nbsp;31, 2006. The Company requires cash for capital expenditures
and other requirements associated with its domestic and international production, distribution and
sales activities, as well as for general working capital purposes. The Company&#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 early during this period to
provide product for shipment for the Spring/Summer selling season.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;11, 2008, the Company and its material domestic subsidiaries as co-borrowers
entered into and consummated a new senior revolving credit facility (the &#147;Credit Facility&#148;) of up
to $55.0&nbsp;million (subject
to borrowing base availability), including a $15.0&nbsp;million sub-limit for letters of credit
(letters of credit will be 100% reserved against borrowing availability) with Bank of America,
N.A., (&#147;B of A&#148;). Proceeds of $30.9&nbsp;million under the Credit Facility were used by the Company on
January&nbsp;11, 2008 to payoff its existing term loan, revolving credit facility and cash collateralize
all outstanding letters of credit with Union Bank of California, N.A., (&#147;Union Bank&#148;) and to pay
related fees and expenses. The Credit Facility is anticipated to be used in the future by the
Company to issue standby or commercial letters of credit and to finance ongoing working capital
needs. The Credit Facility expires on January&nbsp;11, 2012 and is collateralized by a substantial
portion of the assets of the Company and its subsidiaries party thereto (excluding real estate and
certain other assets).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans under the Credit Facility bear interest at a rate based either on (i)&nbsp;B of A&#146;s
referenced base rate or (ii)&nbsp;LIBOR (as defined in the Credit Facility), subject in each case to
performance pricing adjustments based on the Company&#146;s fixed charge coverage ratio that range
between LIBOR plus 1.25% and LIBOR plus 1.75%. Interest will be set at LIBOR plus 1.25% for the
first six months of the agreement and adjusting thereafter. The initial interest rate applicable
to borrowings under the Credit Facility is 7.25%.The Company also is required to pay customary fees
under the Credit Facility. At December&nbsp;31, 2007, the six month LIBOR was 5.95% All interest and
per annum fees are calculated on the basis of actual number of days elapsed in a year of 360&nbsp;days.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The borrowing base under the Credit Facility at any time equals the lesser of (i) $55.0
million, minus the amount of any outstanding letters of credit other than that have not been cash
collateralized and those that constitute charges owing to B of A, and (ii)&nbsp;the sum of (a)
eighty-five percent (85%) of the value of eligible
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">accounts receivable, provided, however that such
percentage shall be reduced by 1.0% for each whole percentage point that the dilution percent
exceeds 5.0%; plus (b)&nbsp;the least of (x) $45.0&nbsp;million, (y)&nbsp;between 65% and 70% (seasonal advance
rate) of the Company&#146;s eligible inventory and eligible in-transit inventory, plus a percentage of
slow moving inventory (set at 65% for the first year, and dropping to 0% by the fourth year) and
(z)&nbsp;85% of the appraised net orderly liquidation value of eligible inventory (including eligible
in-transit inventory and eligible slow moving inventory); minus (c)&nbsp;certain reserves; minus (d)
outstanding obligations under the loan facility anticipated to be provided by the Bank to Ashworth
U.K., Ltd., as described below (the &#147;UK Loan Facility&#148;) The borrowing base as of January&nbsp;11, 2008
was approximately $41.5&nbsp;million. Unused availability, as of January&nbsp;11, 2008,was approximately
$5.6&nbsp;million.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Credit Facility contains restrictive covenants limiting the ability of the Company and its
subsidiaries to take certain actions, including covenants limiting the Company&#146;s ability to incur
or guarantee additional debt, incur liens, pay dividends, repurchase stock or make other
distributions, sell assets, make loans and investments, prepay certain indebtedness, enter into
consolidations or mergers, and enter into transactions with affiliates. The Credit Facility limits
the ability of the Company to agree to certain change of control transactions, because a &#147;change of
control&#148; (as defined in the Credit Facility) is an event of default. The Credit Facility also
contains customary representations and warranties, affirmative covenants, events of default,
indemnities and other terms and conditions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing summary of the Credit Facility is qualified by reference to the Loan and
Security Agreement dated as of January&nbsp;11, 2008 attached as Exhibit&nbsp;10(aq) to the Company&#146;s Form
10-K filed with the Commission on January&nbsp;14, 2008. Please see the Loan and Security Agreement for
a more detailed description of the terms of the Credit Facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and B of A are currently in the process of negotiating a UK Loan Facility in an
amount anticipated to be up to $10.0&nbsp;million. The applicable interest rate and fees under the UK
Loan Facility are anticipated to be comparable to the applicable interest rate and fees under the
Credit Facility. As noted above, loans and letters of credit under the UK Loan Facility are
anticipated to reduce the borrowing base under the
Credit Facility. The Company believes that the UK Credit Facility will enhance the Company&#146;s
ability to meet its current and long-term operating needs in the UK. Although there can be no
assurance that the UK Loan Facility will be consummated on the above-referenced terms or at all,
the Company anticipates that the UK Credit Facility will be completed during the second quarter of
fiscal 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by operating activities of $4.6&nbsp;million for the fiscal year ended October&nbsp;31,
2007 was primarily attributable to an operating loss of $14.1&nbsp;million and an increase in inventory
of $5.7&nbsp;million, partly offset by non-cash depreciation and amortization expense of $6.3&nbsp;million,
decreases of current and deferred income tax assets of $5.2 and increases in trade payables and
other accrued liabilities of $3.3&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities of $5.6&nbsp;million for the fiscal year ended October&nbsp;31,
2007 was primarily attributable to implementation costs of the Company&#146;s new ERP system in the
United Kingdom and additional purchase price associated with the fiscal 2004 Gekko Brands, LLC
aquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities of $5.9&nbsp;million for the fiscal year ended October
31, 2007 was due primarily to net borrowings on the Company&#146;s line of credit of $5.6&nbsp;million,
proceeds from the exercise of stock options of $1.2&nbsp;million, net borrowings and principal payments
of notes payable and long-term debt of $1.6&nbsp;million and a decrease in restricted cash of $0.7
million. The effect on cash due to foreign currency exchange was a gain of $3.0&nbsp;million.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company anticipates that sufficient cash flows will be generated from operations so that
in combination with other financing alternatives available, including cash on hand, borrowings
under its new bank credit facility and leasing alternatives, the Company will be able to meet all
of its debt service, capital expenditures and working capital requirements for at least the next
twelve months.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;6, 2004, the Company entered into a loan agreement with Union Bank of California,
N.A., as the administrative agent, and two other lenders (collectively referred to as the &#147;Bank&#148;).
The loan agreement was comprised of a $20.0&nbsp;million term loan and a $35.0&nbsp;million revolving credit
facility, is due to expire on July&nbsp;6,&nbsp;2009 and is collateralized by substantially all of the assets
of the Company, other than the Company&#146;s EDC in Oceanside, California.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under this loan agreement, interest on the $20.0&nbsp;million term loan was 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 October&nbsp;31,&nbsp;2007, the bank&#146;s reference rate was 8.0%. The loan agreement also provides
for optional interest rates based on London inter-bank offered rates (&#147;LIBOR&#148;) for periods of at
least 30&nbsp;days in increments of $0.5&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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 $74.0&nbsp;million 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 $74.0&nbsp;million plus 90% of net income after
taxes (without subtracting losses) earned in each quarterly accounting period commencing after
January&nbsp;31,&nbsp;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 $16.5&nbsp;million at July&nbsp;6,&nbsp;2004 and increasing over time
to $27.0&nbsp;million 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 July&nbsp;31, 2004 and 1.25:1.00 thereafter. The loan agreement limits
annual lease and equipment rental expense associated with the Company&#146;s 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
distribution center. The loan agreement had an additional requirement where, for any period of 30
consecutive days, the total indebtedness under the revolving credit facility may not be more than
$15.0&nbsp;million. The loan agreement also limits the annual aggregate amount the Company may spend to
acquire shares of its common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;27, 2005 and September&nbsp;8, 2005, the Company entered into the Second and Third
Amendments, respectively, to the loan agreement. The Second Amendment to the loan agreement amended
Section&nbsp;6.12(e), Capital Expenditures, to increase the spending limitation to acquire fixed assets
from not more than $5&nbsp;million in any single fiscal year on a consolidated basis to a total of $20.0
million for fiscal years 2004 and 2005 together, for the acquisition of real property and equipment
in connection with the distribution center located in Oceanside, California. The Third Amendment
waived non-compliance with various financial covenants of the loan agreement, solely for the period
ended July&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;26, 2006, the Company entered into the Fourth Amendment to the loan to amend
several sections of the credit facility and to waive non-compliance with financial covenants at
October&nbsp;31, 2005. Under the terms of the revised loan agreement, the revolving loan commitment was
adjusted to $42.5&nbsp;million and the term loan commitment was adjusted to $6.8&nbsp;million. Based on the
revised loan agreement, the term loan commenced January&nbsp;31, 2006 and has equal monthly installments
of principal in the amount of $125,000, plus all accrued interest for each monthly installment
period, with a balloon installment for the entire unpaid principal balance and all accrued and
unpaid interest due in full on the maturity date of July&nbsp;6, 2009.
</DIV>

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

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with the signing of the Fourth Amendment, the Company borrowed $7.5&nbsp;million against
the revolving credit facility and paid down the term loan by the same amount. The Company also paid
bank fees totaling $125,000 related to the Fourth Amendment. The balance sheet at October&nbsp;31, 2005
and the cash flow statement for the year ended October&nbsp;31, 2005 in the accompanying financial
statements have been adjusted to record these transactions as if the Fourth Amendment had been in
effect as of October&nbsp;31, 2005. See &#147;Note 5 &#150; Line of Credit,&#148; in the accompanying notes to
Consolidated Financial Statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The loan agreement was also modified, pursuant to the Fourth Amendment, to reflect the change
to a borrowing base commitment. The primary requirements under the borrowing base denote that the
Bank shall not be obligated to advance funds under the revolving credit facility at any time that
Company&#146;s aggregate obligations to the Bank exceed the sum of (a)&nbsp;seventy five percent (75%) of the
Company&#146;s eligible accounts receivables, and (b)&nbsp;fifty-five percent (55%) of the Company&#146;s eligible
inventory. If at any time the Company&#146;s obligations to the Bank under the referenced facilities
exceed the permitted sum, the Company shall immediately repay to the Bank such excess. The
applicable rate schedule was adjusted to reflect an additional pricing tier based on the average
daily funded debt to EBITDA ratio. The Fourth Amendment also amended certain financial covenants
and maintenance requirements under the loan agreement as follows:
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Minimum tangible net worth equal to the sum of $75.0&nbsp;million; plus the sum of
90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January&nbsp;31, 2006; plus, the net proceeds
from any equity securities issued after the date of the Fourth Amendment, including
net proceeds from stock options exercised;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1.00, except for
the fiscal quarters ending January&nbsp;31 and April&nbsp;30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1.00;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital expenditures are not to exceed $7.0&nbsp;million in any fiscal year;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1.00; provided that, for the fiscal quarter
ending January&nbsp;31, 2006, the fixed charge
coverage ratio shall not be less than 0.80 to 1.00; and for purposes of determining
the fixed charge coverage ratio only, the Company&#146;s inventory write-down of $4.4
million shall be added back to EBITDA for the Company&#146;s fiscal quarter ending April
30, 2006 and the Company&#146;s maintenance capital expenditures shall be $4.0&nbsp;million
through the fiscal year ending October&nbsp;31, 2006; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15.0&nbsp;million
was eliminated.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company was not in compliance with the required quick asset ratio in the first quarter of
fiscal year 2006. The Company obtained a written waiver of the quick assets to current liabilities
covenant requirement from its lenders for the period ended January&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2007, the Company entered into the Sixth Amendment to the loan agreement with the
Bank to eliminate the ratio of quick assets to current liabilities covenant requirement and waive
non-compliance with financial covenants at January&nbsp;31, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At April&nbsp;30, 2007, the Company&#146;s fixed charge coverage ratio of (0.18) to 1:00 and minimum
tangible net worth of $79.8&nbsp;million were not in compliance with the Company&#146;s loan agreement
covenants.
</DIV>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;15, 2007, the Company obtained a written waiver of the fixed charge coverage
ratio and minimum tangible net worth covenant requirements from its lenders for the period ended
April&nbsp;30, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;27, 2007, the Company entered into the Eighth Amendment to its Revolving/Term Loan
Credit Agreement with Union Bank of California, N.A. dated July&nbsp;6, 2004.&nbsp; This and previous recent
amendments were necessary to align the covenant and collateral requirements of the agreement with
the Company&#146;s expected operating results during the remaining term of the agreement. The Eighth
Amendment modified certain provisions of the Loan Agreement, which include the following:
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The borrowing base calculation was changed and denotes that the Lenders shall not be
obligated to advance funds under the revolving credit facility at any time that the
Company&#146;s aggregate obligations to the Lenders exceed the sum of (a)&nbsp;eighty-five percent
(85%) of Borrower&#146;s Eligible Accounts, and (b)&nbsp;the lesser of (i)&nbsp;sixty-five percent (65%) of
Borrower&#146;s Eligible Inventory and (ii)&nbsp;eighty-five percent (85%) of the appraised net
recovery value of Borrower&#146;s Inventory, as such terms are defined in the amended Loan
Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A Control Account was established wherein any immediately available funds in the account
will be automatically applied to the Company&#146;s obligation under the revolving line of credit
to minimize the Company&#146;s interest expense.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A Minimum Borrowing Base Availability provision was added which states that the Company
must maintain a difference between the Borrowing Base and the aggregate outstanding
obligations under the Credit Agreement of at least $7.5&nbsp;million, except if the Company has
achieved at least two (2)&nbsp;consecutive quarters of a Fixed Charge Coverage Ratio in excess of
1:10 to 1:00. If the Company is not in compliance with this provision for five (5)
consecutive business days, this will constitute a &#147;Triggering Event&#148; and will result in the
Control Account becoming the property of the Company&#146;s bank as partial payment for the
Company&#146;s outstanding obligations under the Credit Agreement. Such a Triggering Event may be
cured by maintaining the difference of at least $7.5&nbsp;million for thirty (30)&nbsp;consecutive
days.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Minimum Tangible Net Worth requirement was modified and is now equal to the sum of at
least $70.0&nbsp;million; plus 50% of net income after income taxes (without subtracting losses)
earned in each quarterly accounting period commencing after April&nbsp;30, 2007; plus, the net
proceeds from any equity securities issued after the date of the Eighth Amendment (inclusive
of securities issued in connection
with stock-based compensation).</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Minimum Fixed Charge Coverage Ratio (FCCR)&nbsp;was set at no less than 1:10 to 1:00 for
periods after the earlier of two (2)&nbsp;consecutive quarters ended with a FCCR in excess of
1.10:1.00 or July&nbsp;31, 2008. The FCCR may be used in determining the Applicable Rate.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital Expenditures (including the total amount of any capital leases) are limited to
$4.0&nbsp;million in any one fiscal year on a consolidated basis. The Company may invest any net
proceeds from the sale of any existing real property and equipment used in connection with
the Company&#146;s Oceanside, California Embroidery and Distribution Center in like assets within
two (2)&nbsp;years of disposal of such assets and such investment will be in addition to the $4.0
million permitted in each fiscal year provided no event of default has occurred, is
continuing or would result after giving effect to such investment.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Applicable Rate schedule was modified and is now based on the Fixed Charge Coverage
Ratio or average daily Borrowing Base Availability instead of the Funded Debt to EBITDA
Ratio.</DIV></TD>
</TR>

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

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The revolving credit facility 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
the loan agreement totaled $1.5&nbsp;million at October&nbsp;31,&nbsp;2007 as compared to $2.9&nbsp;million outstanding
at October&nbsp;31,&nbsp;2006. The Company had $19.6&nbsp;million outstanding against the revolving credit
facility under this loan agreement at October&nbsp;31,&nbsp;2007, compared to $14.0&nbsp;million outstanding at
October&nbsp;31, 2006. The increase in borrowings under the revolving credit facility is primarily due
to decreased cash flow from operations. Net loss increased by $15.1&nbsp;million to $14.1&nbsp;million in
fiscal 2007 from a $1.0&nbsp;million net income in 2006. The Company had $4.1&nbsp;million outstanding on the
term loan at October&nbsp;31,&nbsp;2007 versus $5.6&nbsp;million as of October&nbsp;31, 2006. The decrease in
borrowings on the term loan is due to regular monthly payments of principal. At October&nbsp;31, 2007,
$11.9&nbsp;million was available for borrowings against the revolving credit facility under this loan
agreement, subject to borrowing base limitations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the fiscal year ended October&nbsp;31, 2007, the Company&#146;s capital expenditures were
approximately $4.15&nbsp;million which exceeded the annual capital expenditure limitation of $4.0
million permitted under the Company&#146;s Union Bank loan agreement as amended on July&nbsp;13, 2007 and on
January&nbsp;11, 2008, the Company paid off its loan balances with Union Bank and entered into a new
line of credit agreement with B of A.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;7, 2007, the Company entered into a capital lease agreement with Mazuma Capital to
purchase two trade show booths constructed to the Company&#146;s specification with total payments of
$683,837. The terms of the lease agreement call for 36&nbsp;monthly payments of $20,917 in advance with
a deposit for the last payment paid at the beginning of the lease. The last payment is due on
January&nbsp;1, 2010. The total interest paid over the life of the agreement will be $69,189. The
trade show booths have an estimated life of three years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended October&nbsp;31, 2006, the Company entered into a capital lease agreement for
the purchase of a software license. The lease began in April&nbsp;2006 for a 36&nbsp;month term, ending in
March&nbsp;2009 for $556,000. The lease agreement calls for 12 quarterly payments of $53,450 with an
imputed interest rate of 9.08%. The software license asset is expected to be placed into service
in the first quarter of fiscal year 2010. It will be depreciated over a three year life using the
straight-line method. During the fiscal year ended October&nbsp;31, 2005, the Company did not acquire
any equipment under capital leases.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2006 the Company entered into a lease agreement with Key Equipment Finance, a
Division of Key Corporate Capital, Inc. (&#147;KEF&#148; or the &#147;Lessor&#148;) for an IBM server with all
applicable software, accessories and upgrade package with total payments of $595,166. The terms of
the lease agreement
call for 42&nbsp;monthly payments of $14,171, in advance. The last payment will be made on
September&nbsp;30, 2009. The total interest paid over the life of the agreement will be $8,394. The
equipment has an estimated five year life. The Company has determined that the lease meets the
criteria for treatment as an operating lease.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;30, 2004, the Company agreed to a schedule with KEF thereby completing the Master
Equipment Lease Agreement (the &#147;Lease&#148;), dated as of June&nbsp;23, 2003, and previously entered into by
Ashworth and KEF. Under the terms of the Lease, the Company is leasing the equipment for the EDC in
Oceanside, California. The aggregate cost of the equipment was approximately $10.4&nbsp;million. The
initial term of the Lease is for ninety-one (91)&nbsp;months beginning on September&nbsp;1, 2004 and the
monthly rent payment is $128,800. At the end of the initial term, the Company will have the option
to (1)&nbsp;purchase all, but not less than all, equipment on the initial term expiration date at a
price equal to the greater of (a)&nbsp;the then fair market sale value thereof, or (b)&nbsp;12% of the total
cost of the equipment (plus, in each case, applicable sales taxes), (2)&nbsp;renew the Lease on a month
to month basis at the same rent payable at the expiration of the initial lease term, (3)&nbsp;renew the
Lease for a minimum period of not less than 12 consecutive months at the then current fair
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">market
rental value, or (4)&nbsp;return such equipment to the Lessor pursuant to, and in the condition required
by, the Lease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;25, 2002, the Company entered into an agreement to purchase the land and a
building, to be built to the Company&#146;s specifications for the EDC, in the Ocean Ranch Corporate
Center in Oceanside, California. The building was constructed with approximately 203,000 square
feet of useable office and warehouse space and is used by the Company to warehouse, embroider,
finish, package and distribute clothing products and related accessories. On April&nbsp;2,&nbsp;2004, the
Company completed the purchase of the new distribution center for approximately $13.7&nbsp;million and
entered into a secured loan agreement with a bank to finance $11.65&nbsp;million of the purchase price.
The loan is amortized over 30&nbsp;years, but is due and payable on May&nbsp;1,&nbsp;2014 with a balloon payment
of $9.6&nbsp;million. 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 are reported in the consolidated statements included in this annual report
on Form 10-K.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;6, 2007, the Company, through its wholly-owned subsidiary Gekko Brands, LLC, entered
into two and five year employment and non-competition agreements with certain selling members of
Gekko Brands, LLC who are currently employees of Gekko Brands, LLC (the &#147;Gekko Employees&#148;). The
employment and non-competition agreements guarantee payment of the contingent consideration
installment payments for fiscal years 2007 and 2008, thereby amending Sections&nbsp;1.2(c) and 1.3 of
the Membership Interests Purchase Agreement, dated July&nbsp;6, 2004 (the &#147;Purchase Agreement&#148;),
relating to the acquisition of Gekko Brands, LLC by the Company. Under the Purchase Agreement, an
additional $6,500,000 would be paid to the Gekko Employees if the subsidiary achieved certain
specified EBIT and other operating targets which were to be accounted for as additional cost of the
acquired entity. From July&nbsp;7, 2004 through October&nbsp;31, 2006, Gekko Brands, LLC achieved the
specified EBIT and other operating targets entitling the Gekko Employees to additional
consideration of $3,150,000 recorded as an adjustment to goodwill. Under the new employment and
non-competition agreements entered into with the Gekko Employees, the guaranteed installment
payments for fiscal years 2007 and 2008 totaling $3,350,000 will be accounted for as compensation
and recognized into expense on a straight-line basis over the term of the employment and
non-competition agreements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2007, common stock and capital in excess of par value increased by $2.1&nbsp;million
of which $1.2&nbsp;million is due to the issuance of 193,000 shares of common stock on the exercise of
options and $0.9&nbsp;million due to SFAS123R compensation expense. There was no related tax benefit
recorded in fiscal 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

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

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Contractual Obligations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our contractual obligations as of October&nbsp;31, 2007 (in 000&#146;s):
</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="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Less</B></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 nowrap align="center" colspan="2"><B>More</B></TD>
    <TD>&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="2"><B>Than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>3-5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>than 5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,962</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">742</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line of Credit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,615</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:15px; text-indent:-15px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</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:15px; text-indent:-15px">Operating lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Endorsement contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</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:15px; text-indent:-15px">Minimum licensing guarantees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,996</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:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">138,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">70,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Currency Fluctuations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth U.K., Ltd. is a wholly-owned subsidiary of the Company operating in England which
maintains its books of account in British pounds. Ashworth Canada and Ashworth Golf Apparel Canada
are divisions of the Company operating in Canada and maintain their books of account in Canadian
dollars. For consolidation purposes, the assets and liabilities of Ashworth U.K., Ltd., Ashworth
Canada and Ashworth Golf Apparel Canada are converted to U.S. dollars at the month-end exchange
rate and results of operations are converted using an average rate during the month. A
translation difference arises for share capital and retained earnings, which are converted at rates
other than the month-end rate, and this amount is reported in the stockholders&#146; equity section of
the balance sheets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth U.K., Ltd. sells the Company&#146;s products to other countries in Europe, with revenues
largely denominated in the local currency. Fluctuations in the currency rates between the United
Kingdom and those other countries give rise to a loss or gain that is reported in earnings. (See
&#147;Note 1 to Consolidated Financial Statements, Foreign Currency&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth Canada and Ashworth Golf Apparel Canada sell the Company&#146;s products within Canada
with the revenues denominated in Canadian dollars; ordinarily there is no transaction adjustment
for currency exchange rates for the Company for sales transactions. Ashworth U.K., Ltd., Ashworth
Canada and Ashworth Golf Apparel Canada purchase products from the Company in U.S. dollars;
therefore, there are transaction adjustments for currency exchange rates for purchase transactions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All export revenues by Ashworth, Inc. are U.S. dollar denominated and ordinarily there is no
transaction adjustment for currency exchange rates for the Company. However, with respect to
export revenues to Ashworth U.K., Ltd., Ashworth Canada and Ashworth Golf Apparel Canada, the
foreign entities
are at risk on their indebtedness to Ashworth, Inc. The foreign entities maintain their
accounts with Ashworth, Inc. in British pounds or Canadian dollars, but owe Ashworth, Inc. in U.S.
dollars. At the end of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">every accounting period, the debt is adjusted to British pounds or Canadian
dollars by multiplying the indebtedness by the closing British pound/U.S. dollar or U.S.
dollar/Canadian dollar exchange rate to ensure that the account has sufficient British pounds or
Canadian dollars to meet its U.S. dollar obligation. This re-measurement is either income or
expense in each entity&#146;s financial statements. When the financial statements of Ashworth U.K.,
Ltd., Ashworth Canada and Ashworth Golf Apparel Canada are consolidated with the financial
statements of Ashworth, Inc., the gain or loss on transactions that are of a long-term investment
nature is eliminated from the income statement and appears in the stockholders&#146; equity section of
the consolidated balance sheet under &#147;Accumulated other comprehensive income (loss).&#148;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company purchases nearly all of its products from offshore manufacturers. All of these
purchases were denominated either in U.S. dollars, or in British pounds for Ashworth U.K., Ltd.,
and consequently there was no foreign currency exchange risk related to these transactions apart
from the foreign currency exchange risk associated from translating the financial statements of
Ashworth U.K., Ltd from the functional currency of British pounds to the reporting currency of U.S.
dollars.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Inflation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that inflation has not had a material effect on our results of operations
during the three most recent fiscal years. There can be no assurance that a high rate of inflation
in the future would not have an adverse effect on the Company&#146;s results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>New Accounting Standards</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;15, 2007, the Financial Accounting Standards Board (the &#147;FASB&#148;) issued Statement
of Financial Accounting Standard No.&nbsp;159, <I>Fair Value Option for Financial Assets and Financial
Liabilities &#150; Including an Amendment of FASB Statement No.&nbsp;115 </I>(&#147;SFAS 159&#148;). The fair value option
established by SFAS 159 permits all entities to choose to measure eligible items at fair value at
specified elections dates. A business entity will report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent reporting date. SFAS
159 is effective as of the beginning of an entity&#146;s first fiscal year that begins after November
15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that
the entity makes that choice in the first 120&nbsp;days of that fiscal year and also elects to apply the
provisions of SFAS 157<I>, Fair Value Measurements</I>. The Company is currently evaluating the impact,
if any, this new standard will have on its consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, <I>Fair Value Measurements </I>(&#147;SFAS 157&#148;). SFAS
No.&nbsp;157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No.&nbsp;157
clarifies the definition of exchange price as the price between market participants in an orderly
transaction to sell an asset or transfer a liability in the market in which the reporting entity
would transact for the asset or liability, which market is the principal or most advantageous
market for the asset or liability. SFAS No.&nbsp;157 is effective for financial statements issued for
fiscal years beginning after November&nbsp;15, 2007, and interim periods within those fiscal years. The
Company is currently evaluating the impact, if any, this new standard will have on its consolidated
financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued Interpretation No.&nbsp;48, <I>Accounting for Uncertainty in Income
Taxes </I>(&#147;FIN 48&#148;). FIN 48 requires the use of a two-step approach for recognizing and measuring tax
benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in
income tax positions. The
Company was required to adopt FIN 48 effective November&nbsp;1, 2007. The cumulative effect of
initially
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">adopting FIN 48 will be recorded as an adjustment to opening retained earnings in the
year of adoption and will be presented separately. Only tax positions that meet the more than
likely than not recognition threshold at the effective date may be recognized on adoption of FIN
48. The Company is currently evaluating the impact this new standard will have on its future
results of operations and financial position.
</DIV>

<!-- link2 "Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Interest Rate Risk</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s debt consists of a term loan, mortgage note, notes payable, capital lease and
line of credit obligations which had a total balance of $35.8&nbsp;million at October&nbsp;31,&nbsp;2007. The
debt bears interest at fixed rates ranging from 3.5% to 9.08%, which approximates fair value based
on current rates offered for debt with similar risks and maturities. The Company had $19.6&nbsp;million
outstanding at October&nbsp;31, 2007 on its revolving line of credit with interest charged at the Bank&#146;s
reference rate plus a pre-defined spread based on the Company&#146;s funded debt to EBITDA ratio (the
&#147;Applicable Rate&#148;). At October&nbsp;31,&nbsp;2007, the Applicable Rate was 8.0%. A hypothetical 10%
increase in interest rates during the year ended October&nbsp;31, 2007 would have resulted in a $175,000
increase in net loss.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currency Exchange Rate Risk</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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 and its U.K. subsidiary enter 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. The contracts provide that, on specified dates, the Company would sell the bank a specified
number of British pounds in exchange for a specified number of U.S. dollars. Additionally, the
Company&#146;s U.K. subsidiary from time to time enters into similar contracts with its bank to hedge
against currency fluctuations between 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 had no
foreign currency related derivatives at October&nbsp;31, 2007 or 2006. 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.
</DIV>
<!-- link2 "Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following financial statements with respect to the Company are submitted herewith:
</DIV>

<DIV style="margin-top: 6pt">
<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%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent
Registered Public Accounting Firm, page F-1 and F-2.<BR></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Balance Sheets
&#150; October&nbsp;31, 2007 and 2006, pages F-3 and F-4.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Operations for the years ended October&nbsp;31, 2007, 2006 and
2005,
page F-5.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Stockholders&#146; Equity for the years ended October&nbsp;31, 2007,
2006 and 2005, page F-6.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Cash Flows for the years ended October&nbsp;31, 2007, 2006 and
2005,
pages F-7 and F-8.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Notes to Consolidated Financial Statements, pages F-9 through F-44.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

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

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


<DIV style="margin-top: 6pt"><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%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm, pages F-45.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Supplementary Schedule, page F-46.</DIV></TD>
</TR>

</TABLE>
</DIV>
<!-- link2 "Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE" -->
<DIV align="left"><A NAME="013"></A></DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<!-- link2 "Item&nbsp;9A. CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="014"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9A. CONTROLS AND PROCEDURES.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>1. Evaluation of Disclosure Controls and Procedures</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains disclosure controls and procedures designed to ensure that information
required to be disclosed in the reports it files pursuant to the Securities Exchange Act of 1934,
as amended (the &#147;Exchange Act&#148;) are recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission, and that such
information is accumulated and communicated to the Company&#146;s management, including the Company&#146;s
Chief Executive Officer (&#147;CEO&#148;) and Chief Financial Officer (&#147;CFO&#148;) as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well designed and
operated, can only provide a reasonable assurance of achieving the desired control objectives, and
in reaching a reasonable level of assurance, management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management designed the disclosure controls and procedures to provide reasonable assurance of
achieving the desired control objectives.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company carried out an evaluation, under the supervision and with the participation of its
management, including the CEO and CFO, of the effectiveness of the design and operation of the
Company&#146;s disclosure controls and procedures as of October&nbsp;31, 2007. Based on this evaluation, the
Company&#146;s CEO and CFO concluded that the Company&#146;s disclosure controls and procedures are effective
as of October&nbsp;31, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We believe our financial statements fairly present in all material respects the financial position,
results of operations and cash flows for the interim and annual periods presented in our annual
report on Form 10-K and quarterly reports on Form 10-Q. The unqualified opinion of our independent
registered public accounting firm on our financial statements for the year ended October&nbsp;31, 2007
is included in this Form 10-K.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>2. Management&#146;s Report on Internal Control over Financial Reporting</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules&nbsp;13a-15(f) and 15d-15(f) under the Exchange
Act. Internal control over financial reporting refers to the process designed by, or under the
supervision of, the Company&#146;s CEO and CFO, and effected by the Company&#146;s Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, and includes those policies and procedures that:
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the Company&#146;s assets;</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that the Company&#146;s receipts and expenditures are being made
only in accordance with the authorization of the Company&#146;s management and directors;
and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company&#146;s assets that could have a
material effect on the financial statements.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended October&nbsp;31, 2007, management completed the corrective action to
remediate the material weakness discussed in Item&nbsp;9A, Controls and Procedures of its Form 10-K for
the fiscal year ended October&nbsp;31, 2006. Management tested the operational effectiveness of the
controls put in place or strengthened to eliminate this material weakness. As a result of these
measures, management believes the material weakness has been remediated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management has used the framework set forth in the report entitled <I>Internal Control&#151;Integrated
Framework </I>published by the Committee of Sponsoring Organizations of the Treadway Commission, known
as COSO, as a basis for evaluating the effectiveness of the Company&#146;s internal control over
financial reporting. As a result of this assessment, management has not identified any material
weakness in internal control over financial reporting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Control over Financial Reporting</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As disclosed in the Form 8-K filing dated October&nbsp;30, 2007, the Company&#146;s CEO and CFO resigned from
their positions with the Company effective October&nbsp;24, 2007. A new CEO and CFO were appointed on
this same date and have assumed the internal control duties of the prior CEO and CFO.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Except as noted above, there have been no significant changes in our internal control over
financial reporting (as such term is defined in Rule&nbsp;13a-15(f) and 15d-15(f) under the Exchange
Act) during the three months ended October&nbsp;31, 2007 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
</DIV>

<!-- link2 "Item&nbsp;9B. OTHER INFORMATION" -->
<DIV align="left"><A NAME="015"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9B. OTHER INFORMATION.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 "Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" -->
<DIV align="left"><A NAME="016"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;10 will be included in either the Company&#146;s Proxy
Statement for the 2008 Annual Meeting of Stockholders under the caption &#147;Directors and Executive
Officers&#148; or a Form 10-K/A which will be filed with the Securities and Exchange Commission no later
than February&nbsp;28, 2008 and is incorporated into this Item&nbsp;10 by reference.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a Code of Business Conduct and Ethics that applies to all directors
and employees, including the Company&#146;s principal executive, financial and accounting officers. The
Code of Business Conduct and Ethics is posted on the Company website at
<U>www.ashworthinc.com</U>. The Company intends to satisfy the requirements under Item&nbsp;5.05 of
Form 8-K regarding disclosure of amendments to provisions of our Code of Business Conduct and
Ethics that apply to our directors and senior financial and executive officers by posting such
information on the Company&#146;s website.
</DIV>
<!-- link2 "Item&nbsp;11. EXECUTIVE COMPENSATION" -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. EXECUTIVE COMPENSATION.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;11 will be included in either the Company&#146;s Proxy
Statement for the 2008 Annual Meeting of Stockholders under the caption &#147;Executive Compensation&#148; or
a Form 10-K/A which will be filed with the Securities and Exchange Commission no later than
February&nbsp;28, 2008 and is incorporated into this Item&nbsp;11 by reference.
</DIV>
<!-- link2 "Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS" -->
<DIV align="left"><A NAME="018"></A></DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;12 with respect to security ownership of certain
beneficial owners and management will be included in either the Company&#146;s Proxy Statement for the
2008 Annual Meeting of Stockholders under the caption &#147;Security Ownership of Certain Beneficial
Owners and Management&#148; or a Form 10-K/A which will be filed with the Securities and Exchange
Commission no later than February&nbsp;28, 2008 and is incorporated into this Item&nbsp;12 by reference.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>EQUITY COMPENSATION PLAN INFORMATION</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Securities Available for Issuance Under the Company&#146;s Equity Compensation Plans</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information with respect to the Company&#146;s equity compensation
plans as of October&nbsp;31, 2007, which plans are as follows: The
Company&#146;s 2007 Nonstatutory Stock Option Plan, the 2000 Equity Incentive Plan
(the &#147;2000 Plan&#148;), the Incentive Stock Option Plan (the &#147;ISO Plan&#148;), and the Nonqualified Stock
Option Plan (the &#147;NQO Plan&#148;). The ISO Plan and the NQO Plan were each terminated at the time of
adoption of the 2000 Plan in December&nbsp;1999, and no additional awards may be granted under such
terminated plans.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(c) Number of Securities</B></TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining Available for</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(a) Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Issuance under</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities to be Issued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(b) Weighted-average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity Compensation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>upon Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plans (Excluding</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities Reflected in</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Column (a))</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">919,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">&nbsp;</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<!-- link2 "Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;13 will be included in either the Company&#146;s Proxy
Statement for the 2008 Annual Meeting of Stockholders under the caption &#147;Certain Relationships and
Related Transactions&#148; or a Form 10-K/A which will be filed with the Securities and Exchange
Commission no later than February&nbsp;28, 2008 and is incorporated into this Item&nbsp;13 by reference.
</DIV>

<!-- link2 "Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES" -->
<DIV align="left"><A NAME="020"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;14 will be included in either the Company&#146;s Proxy
Statement for the 2008 Annual Meeting of Stockholders under the caption &#147;Independent Registered
Public Accounting Firm Fees and Services&#148; or a Form 10-K/A which will be filed with the Securities
and Exchange Commission no later than February&nbsp;28, 2008 and is incorporated into this Item&nbsp;14 by
reference.
</DIV>

<!-- link1 "PART IV" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<!-- link2 "Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K" -->
<DIV align="left"><A NAME="022"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;The following documents are filed as part of this report:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial Statements</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm<BR>
Consolidated Balance Sheets &#151; October&nbsp;31, 2007 and 2006<BR>
Consolidated Statements of Operations for the years ended October&nbsp;31, 2007, 2006 and
2005<BR>
Consolidated Statements of Stockholders&#146; Equity for the years ended October&nbsp;31, 2007, 2006
and 2005</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>


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

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


<DIV style="margin-top: 6pt"><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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV align="justify">Consolidated Statements of Cash Flows for the years ended October&nbsp;31, 2007, 2006 and 2005
Notes to Consolidated Financial Statements &#151; October&nbsp;31, 2007, 2006 and 2005<BR><BR></DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial Statement Schedule</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV align="justify">Report of Independent Registered Public Accounting Firm on Supplementary Schedule
Schedule&nbsp;II &#151; Valuation and Qualifying Accounts</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Exhibits.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">See Item (b)&nbsp;below.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">(b)&nbsp;Exhibits
</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="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"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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.
33-16714-D) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and incorporated herein by reference).
</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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&nbsp;14, 2000 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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&nbsp;10-K for the fiscal year ended October&nbsp;31, 1998 (File
No.001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(c)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amended and Restated Nonqualified Stock Option Plan dated November&nbsp;1, 1996 (filed as Exhibit
10(i) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Amended and Restated Incentive Stock Option Plan dated November&nbsp;1, 1996 (filed as Exhibit
10(j) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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 (filed as Exhibit&nbsp;10(z)(1) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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 (filed as Exhibit&nbsp;10(z)(2) to the Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31,
2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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(filed as Exhibit&nbsp;10(z)(3) to the Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31, 2004
(File No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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 (filed as Exhibit&nbsp;10(z)(4) to the Company&#146;s Form&nbsp;10-Q for the quarter
ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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 (filed as Exhibit&nbsp;10(z)(5) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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 (filed as Exhibit&nbsp;10(z)(6) to the Company&#146;s Form&nbsp;10-Q for
the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(e)(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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
(filed as Exhibit&nbsp;10(z)(7) to the Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31, 2004
(File No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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
31, 2000 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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
10-K for the fiscal year ended October&nbsp;31, 2002 (File No.&nbsp;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Promotion Agreement effective October&nbsp;31, 2002 by and among Ashworth, Inc., James W. Nantz,
III and Nantz Enterprises, Ltd. (filed as Exhibit&nbsp;10(q) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended January&nbsp;31, 2003 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Agreement for Lease dated May&nbsp;1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and
Juniper Developments Limited (filed as Exhibit&nbsp;10(s) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended April&nbsp;30, 2003 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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&nbsp;3, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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&nbsp;10-K for the fiscal year ended
October&nbsp;31, 2003 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amendment to License Agreement, effective March&nbsp;29, 2007, by and between Ashworth, Inc.
and Callaway Golf Company (filed as Exhibit&nbsp;99.1 to the Company&#146;s Form&nbsp;8-K on December&nbsp;7, 2007
(File No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amendment to License Agreement, effective December&nbsp;3, 2007, by and between Ashworth,
Inc. and Callaway Golf Company (filed as Exhibit&nbsp;99.2 to the Company&#146;s Form&nbsp;8-K on December&nbsp;7,
2007 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(m)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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
10-Q for the quarter ended April&nbsp;30, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley Co. (filed as Exhibit
99.2 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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&nbsp;8-K on July&nbsp;21, 2004 (File No.
001-14547) and incorporated herein by reference).</diV></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">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.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Form of Stock Option Agreement for issuance of stock option grants to each of the Company&#146;s
executive officers and non-employee directors on December&nbsp;21, 2004 (filed as Exhibit&nbsp;10.1 to
the Company&#146;s Form&nbsp;8-K on December&nbsp;22, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(p)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Stipulation and Agreement of Settlement regarding shareholder class-action lawsuit in which
the U.S. District Court entered a Final Approval of Settlement on November&nbsp;8, 2004 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;10Q on March&nbsp;11, 2005 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Second Amended and Restated Executive Employment Agreement with the Company&#146;s President and
Chief Executive Officer, Randall L. Herrel, Sr., effective as of February&nbsp;28, 2006 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and
incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Agreement as to Ashworth, Inc. Executive Employment Agreement with Randall L. Herrel, Sr.
effective September&nbsp;12, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on
September&nbsp;13, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amended and Restated Change In Control Agreement with the Company&#146;s President and Chief
Executive Officer, Randall L. Herrel, Sr., effective as of February&nbsp;28, 2006 (filed as Exhibit
10.2 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amended and Restated Employment Agreement with the Company&#146;s Executive Vice President of
Sales and Marketing, Mr.&nbsp;Gary I. &#147;Sims&#148; Schneiderman, effective as of February&nbsp;28, 2006 (filed
as Exhibit&nbsp;10.5 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amended and Restated Change In Control Agreement with the Company&#146;s Executive Vice
President of Sales and Marketing, , Mr.&nbsp;Gary I. &#147;Sims&#148; Schneiderman, effective as of February
28, 2006 (filed as Exhibit&nbsp;10.6 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Amended and Restated Employment Agreement with the Company&#146;s Executive Vice President,
Green Grass Sales and Merchandising, Peter E. Holmberg, effective as of October&nbsp;25, 2006
(filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on October&nbsp;31, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Amended and Restated Change in Control Agreement with the Company&#146;s Executive Vice
President, Merchandising, Design and Production, Peter E. Holmberg, effective as of February
28, 2006 (filed as Exhibit&nbsp;10.4 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Fourth Amendment effective as of January&nbsp;26, 2006 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 (filed as Exhibit&nbsp;10.5 to the Company&#146;s Form&nbsp;10-K on February&nbsp;1, 2006 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment Letter with the Company&#146;s Executive Vice President and Chief Financial Officer,
Winston E. Hickman, effective as of February&nbsp;23, 2006 (filed as Exhibit&nbsp;10.7 to the Company&#146;s
Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547)
and incorporated herein by reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(u)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Change in Control Agreement with the Company&#146;s Executive Vice President and Chief
Financial Officer, Winston E. Hickman, effective as of February&nbsp;23, 2006 (filed as Exhibit
10.8 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Release Agreement with the Company&#146;s Executive Vice President and Chief financial
Officer, Winston E. Hickman, dated November&nbsp;16, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s
Form&nbsp;8-K on November&nbsp;11, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Personal Services Agreement effective September&nbsp;12, 2005 by and between Ashworth, Inc. and
Peter M. Weil (filed as Exhibit&nbsp;10.2 to the Company&#146;s Form&nbsp;8-K on September&nbsp;13, 2006 (File
No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment Agreement with the Company&#146;s Chief Executive Officer, Peter M. Weil, dated
November&nbsp;27, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on November&nbsp;28, 2006 (File
No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Settlement Agreement, dated May&nbsp;5, 2006, by and among the Company and Knightspoint Partners
II, L.P., Knightspoint Capital Management II LLC, Knightspoint Partners LLC, Michael S.
Koeneke, David M. Meyer, Starboard Value and Opportunity Master Fund Ltd., Parche, LLC,
Admiral Advisors, LLC, Ramius Capital Group, LLC, C4S &#038; Co., LLC, Peter A. Cohen, Jeffrey M.
Solomon, Morgan B. Stark, Thomas W. Strauss, Black Sheep Partners, LLC, Brian Black, and Peter
M. Weil (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on May&nbsp;9, 2006 (File No.&nbsp;001-14547)
and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Form of Indemnification Agreement by and between the Company and its Directors, Officers and
Other Employees Designated by the Board (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on
December&nbsp;15, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Offer of Employment Agreement effective October&nbsp;10, 2005 by and between Ashworth, Inc. and
Greg. W. Slack. (filed as Exhibit&nbsp;10.(AA)(1) to the Company&#146;s Form&nbsp;10-K on January&nbsp;16, 2007
(File No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Change in Control Agreement effective as of February&nbsp;9, 2006 by and between Ashworth,
Inc. and Greg W. Slack. (filed as Exhibit&nbsp;10.(AA)(2) to the Company&#146;s Form&nbsp;10-K on January
16, 2007 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">Promotion and Retention Bonus Agreement effective February&nbsp;10, 2006 by and between
Ashworth, Inc. and Greg. W. Slack (filed as Exhibit&nbsp;10.(AA)(3) to the Company&#146;s Form&nbsp;10-K on
January&nbsp;16, 2007 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment Letter between Eric R. Hohl and the Company, dated March&nbsp;5, 2007 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on March&nbsp;7, 2007(File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(aa)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment Letter between Edward J. Fadel and the Company, dated May&nbsp;23, 2007 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on May&nbsp;25, 2007 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->48<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(ab)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Severance and Release Agreement between Gary I. (&#147;Sims&#148;) Schneiderman and the Company,
dated May&nbsp;25, 2007 (filed as Exhibit&nbsp;10.2 to the Company&#146;s Form&nbsp;8-K on May&nbsp;25, 2007 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ac)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Severance and Release Agreement between Peter E. Holmberg and the Company, dated May&nbsp;25,
2007 (filed as Exhibit&nbsp;10.3 to the Company&#146;s Form&nbsp;8-K on May&nbsp;25, 2007 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ad)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Personal services agreement between Ashworth, Inc., a Delaware corporation and its
successors or assignees, and Eric S. Salus (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on
June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated herein
by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ae)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and J. Neil Stillwell. (filed as Exhibit
10.1 to the Company&#146;s Form&nbsp;8-K on June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(af)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Calvin J. Martin, Jr. (filed as
Exhibit&nbsp;10.2 to the Company&#146;s Form&nbsp;8-K on June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ag)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Phil R. Stillwell. (filed as Exhibit
10.3 to the Company&#146;s Form&nbsp;8-K on June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ah)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Jeffery N. Stillwell. (filed as
Exhibit&nbsp;10.4 to the Company&#146;s Form&nbsp;8-K on June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ai)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Thomas Patrick Allison, Jr. (filed as
Exhibit&nbsp;10.5 to the Company&#146;s Form&nbsp;8-K on June&nbsp;6, 2007 (File No.&nbsp;001-14547) and incorporated
herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(aj)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Eighth Amendment effective as of July&nbsp;13, 2007 to the Revolving / Term Loan Credit Agreement
dated as of July&nbsp;6, 2004 by and between Ashworth, Inc., as Borrower, each lender from time to
time party thereto and Union Bank of California, N. A., as Agent (filed as Exhibit&nbsp;10.1 to the
Company&#146;s Form&nbsp;8-K on August&nbsp;2, 2007 (file No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ak)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment letter between Allan H. Fletcher and the Company, dated October&nbsp;24, 2007 (filed
as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on October&nbsp;30, 2007 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(al)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Non-statutory stock option plan and agreement dated as of October&nbsp;24, 2007 by and between
Ashworth, Inc. and optionee (filed as Exhibit&nbsp;10.2 to the Company&#146;s Form&nbsp;8-K filed on October
30, 2007 (File No.&nbsp;001-14547) and incorporated herein by
reference).</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->49<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">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(am)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Employment letter between Greg W. Slack and the Company, dated October&nbsp;24, 2007 (filed
as Exhibit&nbsp;10.3 to the Company&#146;s Form&nbsp;8-K on October&nbsp;30, 2007 (File No.&nbsp;001-14547) and
incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(an)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Separation and general release agreement between Peter M. Weil and the Company, dated
October&nbsp;24, 2007 (filed as Exhibit&nbsp;10.4 to the Company&#146;s Form&nbsp;8-K on October&nbsp;30, 2007 (File
No.&nbsp;001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ao)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Amendment to the Company&#146;s Code of Business Conduct and Ethics effective December&nbsp;12,
2007 (filed as Exhibit&nbsp;14.1 to the Company&#146;s Form&nbsp;8-K on December&nbsp;14, 2007 (File No.
001-14547) and incorporated herein by reference).</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(ap)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Consulting
agreement between Fletcher Leisure Group Ltd. and the Company, effective
January&nbsp;11, 2008.</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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(aq)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><div align="justify">Loan agreement, effective January&nbsp;11, 2008 by and between the Company and Bank of America,
N. A.</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the Registrant.</TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Registered Public Accounting Firm Consent.</TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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 Allan H. Fletcher.</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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 Greg W. Slack.</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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 Allan H. Fletcher.</div></TD>
</TR>
<TR valign="bottom" style="font-size:6pt"><!-- Blank Space -->
    <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"><div align="justify">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 Greg W. Slack.</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Management contract or compensatory plan or arrangement required to be filed as an Exhibit
pursuant to Item 15(b) of Form 10-K and applicable rules of the Securities and Exchange Commission.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.</DIV></TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>

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

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



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders of<BR>
Ashworth, Inc.

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets Ashworth, Inc. and subsidiaries as of
October&nbsp;31, 2007 and 2006 and the related consolidated statements of operations, stockholders&#146;
equity and cash flows for each of the years in the three-year period ended October&nbsp;31, 2007. We
also have audited Ashworth, Inc.&#146;s internal control over financial reporting as of October&nbsp;31, 2007
based on criteria established in <I>Internal Control &#151; Integrated Framework </I>issued by the Committee of
Sponsoring Organizations of the Treadway Commission (&#147;COSO&#148;). Ashworth, Inc.&#146;s management is
responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying management&#146;s report on internal control over financial
reporting. Our responsibility is to express an opinion on these financial statements and an
opinion on the Company&#146;s internal control over financial reporting based on our audits.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A Company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
Company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>


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

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

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Ashworth, Inc. and subsidiaries as of October&nbsp;31,
2007 and 2006, and the consolidated results of their operations and their cash flows for each of
the years in the three-year period ended October&nbsp;31, 2007, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, Ashworth, Inc.
maintained, in all material respects, effective internal control over financial reporting as of
October&nbsp;31, 2007, based on criteria established in <I>Internal Control &#151; Integrated Framework </I>issued
by COSO.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">/s/ Moss Adams LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Irvine, California<BR>
January&nbsp;14, 2008

</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">October&nbsp;31, 2007 and 2006

</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,508,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable &#151; trade, net (Note 1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,545,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,984,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable &#151; other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,529,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,971,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax refund receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,743,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,981,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,247,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,116,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,471,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,095,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment, at 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:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,732,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,732,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,503,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Production and distribution equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,309,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,970,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,640,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,629,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,334,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,124,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,958,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,980,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,832,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,515,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,126,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,806,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,245,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">160,414,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">(Continued)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>



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

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

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">October&nbsp;31, 2007 and 2006

</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and Stockholders&#146; Equity</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Line of credit payable (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,615,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt (Notes 5 and 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,117,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,728,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,724,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued 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: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Salaries and commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,442,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,077,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,235,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,681,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,380,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, net of current portion (Notes 5
and 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,844,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,671,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,469,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,965,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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:45px; text-indent:-15px">Common stock, $.001 par value; authorized
50,000,000 shares; issued and
outstanding 14,713,000 and 14,520,000 shares
in 2007 and
2006, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,256,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,333,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,080,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,030,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,637,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,634,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">160,414,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>


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

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

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Operations

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2007, 2006 and 2005

</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,422,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,787,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,875,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,767,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,813,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,913,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,475,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,441,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,047,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,921,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,897,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,372,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net foreign currency exchange gain (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(222,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(199,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(228,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,002,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,585,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,760,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,049,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,288,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,067,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14,116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average shares outstanding:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,576,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,576,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>



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




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2007, 2006 and 2005

</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&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 nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Capital in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Excess of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Par Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Income (Loss)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
October&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,706,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,109,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,922,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,216,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368,000</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">2,064,000</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">2,064,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on options exercised</DIV></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">520,000</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">520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive loss:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></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>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,238,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
October&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,074,000</TD>
    <TD>&nbsp;</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">44,755,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,382,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,562,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,531,000</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">2,532,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;16 - profit disgorgement</DIV></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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on options exercised</DIV></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">533,000</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">533,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FAS 123R Compensation Expense</DIV></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">481,000</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">481,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss):</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,000</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">951,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,570,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
October&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,256,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,333,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,634,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,000</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">1,183,000</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">1,183,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;16 - profit disgorgement</DIV></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>
    <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:15px; text-indent:-15px">Tax benefit on options exercised</DIV></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>
    <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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FAS 123R Compensation Expense</DIV></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">886,000</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">886,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss):</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></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>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,116,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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 nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,066,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance,
October&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,713,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,080,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99,637,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>


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

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Statements of Cash Flows

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2007, 2006 and 2005

</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14,116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net income (loss)&nbsp;to net cash provided by (used in)
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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,842,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,118,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">(Gain) loss on disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in net deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,572,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,439,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Provision for doubtful accounts, markdowns and sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,664,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,061,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Non-cash inventory writedowns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,337,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Tax benefit from exercise of stock options</DIV></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">520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Excess tax benefits from share-based payment arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(533,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Stock compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,000</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:30px; text-indent:-15px">Changes in assets and 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,318,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,815,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,101,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,737,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in net income tax receivable/payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,626,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,193,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(388,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,564,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,974,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,004,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(425,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,475,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,304,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,841,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(181,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash (used in) provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,612,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(883,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net purchases of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,149,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,464,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,576,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property, plant and equipment</DIV></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">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of Intangibles</DIV></TD>
    <TD>&nbsp;</TD>
<TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,000</TD>
    <TD nowrap>)</TD>

    <TD>&nbsp;</TD>
<TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,385,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,225,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(560,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,614,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,805,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,131,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(328,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Borrowings on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,065,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,650,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,900,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,450,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,150,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,400,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank overdrafts</DIV></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">715,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">683,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</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:30px; text-indent:-15px">Principal payments on notes payable and long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,939,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,349,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,423,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,183,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,487,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,064,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restrictions on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(654,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Excess tax benefit from share-based payment arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,000</TD>
    <TD>&nbsp;</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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,868,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,032,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,787,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,553,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(475,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,404,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,702,000</TD>
    <TD nowrap>)</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,839,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,541,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,104,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,839,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">(Continued)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>



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

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

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Statements of Cash Flows

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2007, 2006 and 2005

</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of cash flow information:</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,132,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,716,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,643,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes paid, net of refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,152,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(297,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,779,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of non-cash financing 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of
term loan from borrowings against line of credit (Note 5) </DIV></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">7,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(683,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(556,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See accompanying notes to consolidated financial statements
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(1)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>The Company and Summary of Significant Accounting Policies</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Business</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Ashworth, Inc. (the &#147;Company&#148;), based in Carlsbad, California, designs, markets and
distributes quality men&#146;s and women&#146;s sports apparel, headwear and accessories under the
Ashworth<FONT style="font-family: Symbol">&#226;</FONT>, Callaway Golf apparel, Kudzu<FONT style="font-family: Symbol">&#226;</FONT> and The Game<FONT style="font-family: Symbol">&#226;</FONT> 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, retail outlet stores, colleges and universities, entertainment complexes,
sporting goods dealers that serve the high school and college markets, NASCAR/racing markets,
outdoor sports distribution channels, and to top specialty-advertising firms for the corporate
market.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf
Company to design, market and distribute complete lines of men&#146;s and women&#146;s Callaway Golf
apparel. The agreement allows Ashworth to sell Callaway Golf apparel primarily in the United
States, Europe, Canada and Australia. The initial Callaway Golf apparel products shipped in
April&nbsp;2002.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company has wholly-owned subsidiaries that currently own and operate 18 Company outlet
stores. A wholly-owned United Kingdom subsidiary distributes the Company&#146;s products in
Europe. The Company established one division in 1998 to sell and distribute its Ashworth
products in Canada and a second division in 2002 to distribute its Callaway Golf apparel in
Canada.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company, together with its subsidiaries and divisions, had aggregate net foreign revenues
in Europe, Canada, Singapore, United Arab Emirates, Australia, Japan, Taiwan, Mexico, Hong
Kong, South Africa and other countries of approximately $37,351,000, $38,472,000 and
$34,101,000 in the years ended October&nbsp;31, 2007, 2006 and 2005, respectively. The Company&#146;s
wholly-owned United Kingdom subsidiary, Ashworth U.K., Ltd., had net revenues of $27,236,000,
$27,987,000 and $23,416,000 and operating income of $1,070,000, $1,436,000 and $1,976,000 in
the years ended October&nbsp;31,&nbsp;2007, 2006 and 2005, respectively. Ashworth U.K., Ltd. had
identifiable assets of $25,733,000 and $22,517,000 as of October&nbsp;31, 2007 and 2006,
respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Principles of Consolidation</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The consolidated financial statements include the accounts of the Company and all of its
subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cash and Cash Equivalents</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company considers all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Accounts Receivable</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company extends credit to customers in the normal course of business, subject to
established credit limits. Accounts receivable, net, in the consolidated balance sheets
consists of amounts due from customers net of allowances for doubtful accounts and reserves
for sales returns, markdowns and other allowances. The allowance for doubtful accounts is
determined by reviewing accounts receivable aging and evaluating individual customer
receivables, considering customers&#146; financial condition, credit</DIV></TD>
</TR>

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

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

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued

</DIV>


<DIV style="margin-top: 6pt"><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="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">history and current economic conditions. The following table summarizes the activity in the allowance
for doubtful accounts for the years ended October&nbsp;31, 2007, 2006 and 2005:</DIV></TD>
</TR>

</TABLE>
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,106,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,170,000</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">627,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(807,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(659,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(477,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</td>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,106,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,243,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Management analyzes historical returns, current economic trends, changes in customer demand
and sell-through of our products when evaluating the adequacy of the reserves for sales
returns, markdowns and other allowances. See &#147;Note 1 &#150; Summary of Significant Accounting
Policies and Business &#150; Revenue Recognition,&#148; below.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Inventories</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes
materials, labor, freight-in and overhead. Inventory write-downs are permanent reductions of
cost until the inventory is sold. Below is a summary of the components of net inventories at
October&nbsp;31, 2007 and 2006:
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw Materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">135,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished Goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,394,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,878,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,529,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,971,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Inventories are presented net of inventory write-downs at October&nbsp;31, 2007 and 2006 of
$4,602,000 and $3,449,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Other Current Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company had $654,000 in restricted cash as of October&nbsp;31, 2006 recorded in other current
assets. The restricted cash was reserved for payment under a rabbi trust agreement with a
former CEO and disbursed in May&nbsp;2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Property, Plant and Equipment</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Property, plant and equipment are stated at cost.
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Depreciation and amortization have been provided using straight-line and accelerated methods
over the following estimated useful lives:
</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="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Buildings and improvements
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">20 to 30&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Production and distribution equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5 to 12&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Furniture and equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">3 to 7&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Leasehold improvements
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Shorter of life of lease or useful life</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">All maintenance and repair costs are charged to operations as incurred. When assets are sold
or otherwise disposed of, the costs and accumulated depreciation or amortization are removed
from the accounts and any resulting gain or loss is reflected in operations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Goodwill and Intangible Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company accounts for goodwill and other intangible assets in accordance with Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;142 <I>&#147;Goodwill and Other Intangible Assets&#148; </I>(&#147;SFAS
No.&nbsp;142&#148;), which requires that goodwill and intangibles with indefinite lives no longer be
amortized, but instead be tested for impairment at least annually at the reporting unit level.
If impairment is indicated, a write-down to fair value (normally measured by discounting
estimated future cash flows) is recorded. Intangible assets with finite lives are amortized
primarily on the straight-line basis over their estimated useful lives.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Other Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company had $272,000 and $251,000 in restricted cash as of October&nbsp;31, 2007 and 2006,
respectively, recorded in other assets. The restricted cash is in an interest bearing account
on deposit with the Company&#146;s bank pursuant to the lease agreement for the office and
distribution facility in Basildon, England. The lessor has access to the bank account should
the Company fail to pay its monthly rent. The cash will be on deposit for a maximum of five
years from the inception of the lease agreement, which was May&nbsp;1, 2003.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Advertising Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Advertising costs, which consist primarily of product advertising, are included in selling,
general and administrative expenses and are expensed in the period the costs are incurred.
Advertising expenses for the years ended October&nbsp;31, 2007, 2006 and 2005 were $2,354,000,
$2,045,000 and $1,867,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company makes certain payments for cooperative advertising for specific placements in
customers&#146; advertisements and catalogues and includes these costs in the selling, general and
administrative line item of its statements of operations. Included in advertising expenses
are cooperative advertising expenses of $379,000, $783,000 and $667,000 for the years ended
October&nbsp;31, 2007, 2006 and 2005, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Shipping and Handling Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Shipping expenses, which consist primarily of payments made to freight companies, are reported
in selling, general and administrative expenses. Shipping expenses for the years ended
October&nbsp;31,&nbsp;2007, 2006 and 2005 were $2,490,000, $2,609,000 and $3,091,000, respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Income Taxes</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Stock-Based Compensation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On November&nbsp;1, 2005, the Company adopted SFAS No.&nbsp;123 (revised 2004), <I>Share-Based Payment</I>
(&#147;SFAS No.123R&#148;)<I>, </I>which addresses the accounting for stock-based payment transactions in
which an enterprise receives director and employee services in exchange for (a)&nbsp;equity
instruments of the enterprise or (b)&nbsp;liabilities that are based on the fair value of the
enterprise&#146;s equity instruments or that may be settled by the issuance of such equity
instruments. In January&nbsp;2005, the SEC issued Staff Accounting Bulletin (&#147;SAB&#148;) No.&nbsp;107,
which provides supplemental implementation guidance for SFAS No.&nbsp;123R. SFAS No.&nbsp;123R
eliminates the ability to account for stock-based compensation transactions using the
intrinsic value method under Accounting Principles Board (&#147;APB&#148;) Opinion No.&nbsp;25, <I>Accounting
for Stock Issued to Employees, </I>and instead generally requires that such transactions be
accounted for using a fair-value-based method. The Company uses the Black-Scholes-Merton
(&#147;BSM&#148;) option-pricing model to determine the fair value of stock-based awards under SFAS
No.&nbsp;123R, consistent with that used for pro forma disclosures under SFAS No.&nbsp;123, <I>Accounting
for Stock-Based Compensation </I>(&#147;SFAS No.&nbsp;123&#148;). The Company has elected the modified
prospective transition method permitted by SFAS No.&nbsp;123R and, accordingly, prior periods
have not been restated to reflect the impact of SFAS No.&nbsp;123R. The modified prospective
transition method requires that stock-based compensation expense be recorded for all new and
unvested stock options that are ultimately expected to vest as the requisite service is
rendered beginning on November&nbsp;1, 2005, the first day of the Company&#146;s fiscal year 2006.
Stock-based compensation expense for awards granted prior to November&nbsp;1, 2005 is based on
the grant date fair value as determined under the pro forma provisions of SFAS No.123. The
Company has recorded an incremental stock-based compensation expense of $886,000 and
$481,000 during fiscal 2007 and fiscal 2006, respectively, as a result of the adoption of
SFAS No.&nbsp;123R. In accordance with SFAS No.&nbsp;123R, beginning in the first quarter of fiscal
2006 the Company has presented excess tax benefits from the exercise of stock-based
compensation awards as a financing activity in the consolidated statements of cash flows.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">There was not any income tax benefit related to stock-based compensation expense during
fiscal 2007. As of October&nbsp;31, 2007, $419,000 of total unrecognized compensation cost
related to stock options is expected to be recognized over a weighted-average period of two
and a half years. This compensation cost to be recognized in future periods as of October
31, 2007 does not consider or include the effect of stock options that may be issued in
subsequent periods.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Prior to the adoption of SFAS No.&nbsp;123R, the Company measured compensation expense for its
employee and non-employee director stock-based compensation plans using the intrinsic value
method prescribed by APB Opinion No.&nbsp;25. The Company applied the disclosure provisions of
SFAS No.&nbsp;123 as amended by SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation-Transition
and Disclosure, </I>as if the fair-value-based method had been applied in measuring compensation
expense. Under APB Opinion No.&nbsp;25, when the exercise price of the Company&#146;s employee and
non-employee
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-12<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued



</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">director stock options was equal to or greater than the market price of the
underlying stock on the date of the grant, no compensation expense was recognized.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following table illustrates the effect on net income after taxes and net income per
common share as if the Company had applied the fair-value recognition provisions of SFAS No.
123R to stock-based compensation for the year ended October&nbsp;31, 2005:
</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="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss) &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Stock-based employee and non-employee director compensation expense
determined under the fair-value-based method for all awards, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,457,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss) &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,184,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per common share &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per common share &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">SFAS No.&nbsp;123R requires the use of a valuation model to calculate the fair value of
stock-based awards. The Company has elected to use the BSM option-pricing model, which
incorporates various assumptions including volatility, expected life, interest rates and
dividend yields. The expected volatility is based on the historic volatility of the
Company&#146;s common stock over the last 10&nbsp;years commensurate with the estimated expected life
of the Company&#146;s stock options. The expected life of an award is based on historical
experience and on the terms and conditions of the stock awards granted to employees and
directors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The assumptions used for the fiscal years ended October&nbsp;31, 2007, 2006 and 2005 and the
resulting estimates of weighted-average fair value of options granted during those periods
are as follows:
</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="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">4.53 &#151; 5.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.64 &#151; 3.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.55 &#151; 3.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">3.99% &#151; 5.18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">4.45% &#151; 5.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">2.89% &#151; 4.30</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">37.2% &#151; 38.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">37.7% &#151; 38.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">42.7% &#151; 44.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yields</DIV></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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted -average fair value of options
granted during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.63</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company did not reflect any stock-based employee compensation expense in the
consolidated financial statements for the fiscal year ended October&nbsp;31, 2005 presented in
the above table.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-13<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued



</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Earnings Per Share</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Basic earnings per common share is computed by dividing income available to common
stockholders by the weighted-average number of shares of common stock outstanding during the
period. Diluted earnings per common share is computed by dividing income available to common
stockholders by the weighted-average number of shares of common stock outstanding during the
period plus the number of additional shares of common stock that would have been outstanding
if the dilutive potential shares of common stock had been issued. The dilutive effect of
outstanding options is reflected in diluted earnings per share by application of the
treasury stock method. Under the treasury stock method, an increase in the fair market value
of the Company&#146;s common stock can result in a greater dilutive effect from outstanding
options. For the 12&nbsp;months ended October&nbsp;31, 2007, 2006 and 2005 shares subject to
outstanding options totaled 41,000, 114,000 and 317,000 respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following table sets forth the computation of basic and diluted earnings per share based
on the requirements SFAS No.&nbsp;128, <I>Earnings Per Share</I>:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Numerator for basic and diluted
income per share &#151; income
available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14,116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic income
per share &#151; weighted-average shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,576,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for diluted income
per share &#151; adjusted weighted-average
shares and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,617,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,189,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Diluted income (loss)&nbsp;per share for the years ended October&nbsp;31, 2007 and October&nbsp;31, 2005 is
calculated using basic weighted-average shares as the denominator because the effect of stock
options would be anti-dilutive due to the Company&#146;s loss position. The diluted
weighted-average shares outstanding computation excludes 589,000, 323,000 and 643,000 options
whose impact would have an anti-dilutive effect in 2007, 2006 and 2005, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Long-Lived Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company reviews the carrying amount of long-lived assets or groups of assets, excluding
goodwill, for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The determination of any impairment includes a
comparison of the estimated future undiscounted operating cash flows anticipated to be
generated during the remaining life of the asset or group of assets to the net carrying value
of the asset or group of assets.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Foreign Currency</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s reporting currency is the U.S. dollar. Assets and liabilities of the
Company denominated in foreign currencies are translated at the rate of exchange at the
balance sheet date, while
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued


</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">revenue and expenses are translated using the average exchange rate.
Gains and losses on foreign currency transactions are recognized as incurred. Gains and losses
on re-measurement of transactions denominated in currency other than the functional currency
of individual subsidiaries are recognized at each balance sheet date. Cumulative translation
adjustments resulting from the translation of the financial statements of foreign subsidiaries
are included as a separate component of stockholders&#146; equity. 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. The Company
periodically uses forward exchange contracts designated as cash flow hedges to protect against
the foreign currency exchange rate risks inherent in its forecasted revenues and cost of sales
denominated in other than local currencies. Foreign currency derivatives are used only to meet
the Company&#146;s objectives of minimizing variability in the Company&#146;s operating results arising
from foreign exchange rate movements. The Company does not enter into foreign exchange
contracts for speculative purposes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">From time to time, the Company and its subsidiaries enter into short-term foreign
exchange contracts with its bank to hedge against the impact of currency fluctuations. Such
contracts are designated at inception to the related foreign currency exposures being hedged,
which include anticipated Euro denominated sales and U. S. dollar denominated intercompany
inventory purchases by the Company&#146;s wholly-owned U.K. subsidiary. These contracts have
maturity dates that do not normally exceed 12&nbsp;months. The Company estimates the fair value of
derivatives based on quoted market prices and records all derivatives on the balance sheet at
fair value. The Company had no foreign currency related derivatives at October&nbsp;31, 2007, 2006
or 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For derivative instruments designated as cash flow hedges, the Company initially records
the effective portions of the gain or loss on the derivative instrument in accumulated other
comprehensive income (&#147;OCI&#148;) as a separate component of stockholders&#146; equity and subsequently
reclassifies these amounts into earnings in the period during which the hedged transaction is
recognized in earnings. The Company records the ineffective portion of the gain or loss, if
any, in other income or expense immediately. The Company reports the effective portion of cash
flow hedges in the same financial statement line item as the changes in value of the hedged
item. For the years ended October&nbsp;31, 2007, 2006 and 2005, the Company had no activity in
accumulated other comprehensive income related to cash flow hedges and therefore no gains or
losses were reclassified into earnings related to cash flow hedges.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For foreign currency forward contracts designated as cash flow hedges, the Company measures
effectiveness by comparing the cumulative change in the hedge contract with the cumulative
change in the hedged item, both of which are based on forward rates. Assessments of hedge
effectiveness are performed using the dollar offset method and applying a hedge effectiveness
ratio between 80% and 125%. During fiscal years ended October&nbsp;31, 2007, 2006 and 2005, the
Company did not discontinue any cash flow hedges for which it was probable that a forecasted
transaction would not occur.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Revenue Recognition</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company recognizes revenue at the time products are shipped based on its terms of FOB
shipping point, where risk of loss and title transfer to the buyer 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
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued


</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">evidence of a sale arrangement exists, delivery of the product has
occurred, the price is fixed or determinable, and payment is reasonably assured. Provision is
made currently for estimated sales returns, markdowns and other allowances and is included in
net revenues in the accompanying statements of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Management analyzes historical returns, current economic trends, changes in customer demand
and sell-through of our products when evaluating the adequacy of the reserves for sales
returns, markdowns and other allowances. Significant management judgments and estimates must
be made and used in connection with establishing the reserves for sales returns, markdowns and
other allowances in any accounting period. Material differences may result in the amount and
timing of our revenues for any period if management makes different judgments or utilizes
different estimates. The following table summarizes the activity in reserve for sales returns,
markdowns and other allowances for the years ended October&nbsp;31, 2007, 2006 and 2005:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,082,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,268,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision
for sales returns, markdowns and
other allowances </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,509,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,142,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,511,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,687,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,167,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,672,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR STYLE="FONT-SIZE: 10PT">
<TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,904,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,082,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Asset Purchase Agreements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">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. 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 October&nbsp;31, 2007, the Company had fully utilized all acquired
APCs and does not intend
to enter into any new contracts for APCs in exchange for prior season&#146;s slower moving
inventory at this time. There were no barter revenues for the years ended October&nbsp;31, 2007,
2006 and 2005. Barter expenses for the years ended October&nbsp;31, 2007, 2006 and 2005 were $0, $0
and $631,000, respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued


</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Shipping and Handling Revenue</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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>.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cost of Goods Sold</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company includes FOB 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 transfer 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.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Royalty Expenses</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Royalty expenses are recognized as incurred and are included in the selling, general and
administrative expenses line item in the accompanying consolidated financial statements. For
the years ended October&nbsp;31, 2007, 2006 and 2005, royalty expenses were $7,073,000, $6,204,000
and $5,463,000, respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Legal Fees</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company expenses costs of settlement, damages and costs of defense when incurred. Costs
that are probable and estimable are accrued. For the years ended October&nbsp;31, 2007, 2006 and
2005, legal fees were $1,214,000, $1,451,000 and $725,000, respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Use of Estimates</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The preparation of consolidated 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 and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Fair Value of Financial Instruments</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The fair value of the Company&#146;s line of credit and long-term debt approximates the carrying
value based on borrowing rates currently available to the Company for bank loans with similar
terms and maturities. The carrying value of all other financial instruments potentially
subject to valuation risk (principally consisting of cash and cash equivalents, accounts
receivable, accounts payable, bank overdrafts and forward exchange contracts) also approximate
fair value due to the short-term nature of those instruments.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(2)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Employment and Non-Compete agreements with Gekko Brands, LLC Employees</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On June&nbsp;6, 2007, the Company, through its wholly-owned subsidiary Gekko Brands, LLC (&#147;Gekko&#148;)
entered into two and five year employment and non-competition agreements with certain selling
members of Gekko who are currently employees of Gekko (&#147;the Gekko Employees&#148;). The employment
and non-competition agreements guarantee payment of the contingent consideration installment
payments for fiscal years 2007 and 2008, thereby amending Sections&nbsp;1.2(c) and 1.3 of the</DIV></TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued


</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Membership Interests Purchase Agreement, dated July&nbsp;6, 2004 (the &#147;Purchase Agreement&#148;),
relating to the acquisition of Gekko by the Company. Under the Purchase Agreement, an
additional $6,500,000 would be paid to the Gekko Employees if the subsidiary achieved certain
specified EBIT and other operating targets which were to be accounted for as additional cost
of the acquired entity. From July&nbsp;7, 2004 through October&nbsp;31, 2006, Gekko achieved the
specified EBIT and other operating targets entitling the Gekko Employees to additional
consideration of $3,150,000 recorded as an adjustment to goodwill. Under the new employment
and non-competition agreements entered into with the Gekko Employees, the guaranteed
installment payments for fiscal years 2007 and 2008 totaling $3,350,000 will be accounted for
as compensation and recognized into expense on a straight-line basis over the term of the
employment and non-competition agreements.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(3)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Goodwill and Other Intangible Assets.</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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,
trade names and customer-related intangibles during the year ended October&nbsp;31, 2007, 2006 and
2005 were due to the acquisition of Gekko on July&nbsp;6, 2004. Under terms of the Gekko Membership
Interest Purchase Agreement (the &#147;Purchase Agreement&#148;), up to an additional $6,500,000 in
additional consideration could have been paid to certain selling members of Gekko if the
subsidiary achieves certain defined earnings before interest and taxes (&#147;EBIT&#148;) and other
operating targets through Ashworth&#146;s fiscal year 2008. The Company accounts for such
contingent payments as additional costs of the acquired entity at the time the contingency was
resolved. For the years ended October&nbsp;31, 2006 and 2005 Gekko achieved the specified EBIT
targets entitling certain selling members to additional consideration in the amount of
$1,385,000 and $1,225,000. The additional consideration is included in goodwill at October&nbsp;31,
2007, 2006 and 2005, respectively. For the year ended October&nbsp;31, 2005 the Company recorded
approximately $20,000 to goodwill related to pre-acquisition contingencies that were resolved
within one year from the date of acquisition. At October&nbsp;31, 2007, 2006 and 2005, goodwill,
all of which is in the Gekko segment, totaled $15,250,000, $15,250,000 and $13,865,000,
respectively. The Company anticipates that the entire amount of goodwill will be deductible
for income tax purposes.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On June&nbsp;6, 2007, the Company, through its wholly-owned subsidiary Gekko entered into two and
five year employment and non-competition agreements with certain selling members of Gekko who
are the Gekko Employees as described above in Note 2 of Notes to Consolidated Financial
Statements.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following sets forth the intangible assets, excluding goodwill, by major category:
</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="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">October 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">October 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Book</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Book</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indefinite life:</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tradenames</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finite life:</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer lists</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,530,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(767,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">763,000</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="left">&nbsp;</TD>
    <TD align="right">(541,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">989,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-competes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,238,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,000</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="left">&nbsp;</TD>
    <TD align="right">(1,011,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer sales backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,582,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,373,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,502,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,307,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,374,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,568,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,806,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,294,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,049,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,245,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Intangible assets with finite lives are amortized using the straight-line method over the
estimated useful life. At October&nbsp;31, 2007, the estimated useful lives and weighted-average
useful lives for finite-lived intangible assets were as follows:
</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="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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="3">Estimated</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Useful Life</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Avg. Useful</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Years)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Life (Years)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finite life:</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:30px; text-indent:-15px">Customer lists</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3-7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-competes</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">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer sales backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">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">5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">During the years ended October&nbsp;31, 2007, 2006 and 2005, aggregate amortization expense was
approximately $519,000, $442,000 and $544,000, respectively. Amortization expense related to
intangible assets at October&nbsp;31, 2007 in each of the next five fiscal years is expected to be
as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">392,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

<TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,106,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(4)&nbsp;Leases</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On February&nbsp;7, 2007, the Company entered into a capital lease agreement with Mazuma Capital to
purchase two trade show booths constructed to the Company&#146;s specification with total payments
of $683,837. The terms of the lease agreement call for 36&nbsp;monthly payments of $20,917 in
advance with a deposit for the last payment paid at the beginning of the lease. The last
payment is due on January&nbsp;1, 2010. The total interest paid over the life of the agreement
will be $69,189. The trade show booths have an estimated life of three years.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">During the year ended October&nbsp;31, 2006, the Company entered into a capital lease agreement for
the purchase of a software license. The lease began in April&nbsp;2006 for a 36&nbsp;month term, ending
in March&nbsp;2009 with total payments of $556,000. The lease agreement calls for 12 quarterly
payments of $53,450 with an imputed interest rate of 9.08%. The software license asset is
expected to be placed into service in the first quarter of fiscal year 2010. It will be
amortized over a three year life using the straight-line method. During the years ended
October&nbsp;31, 2005 and 2004, the Company did not acquire any equipment under capital leases.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">At October&nbsp;31, 2007 and 2006, the accompanying consolidated balance sheets include the
following licensing agreement and furniture and equipment under existing capital leases:
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">684,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Software License</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(411,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(83,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total furniture and equipment under capital lease, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">829,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">473,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Amortization of assets held under capital leases is included in depreciation and amortization
expense.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On April&nbsp;30, 2006, the Company entered into a lease agreement with Key Equipment Finance, a
Division of Key Corporate Capital, Inc. (&#147;KEF&#148; or the &#147;Lessor&#148;) for an IBM server with all
applicable software, accessories and upgrade package with total lease payments of $586,772.
The terms of the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-20<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">lease agreement call for 42&nbsp;monthly payments of $14,171, in advance. The
last payment will be made on September&nbsp;30, 2009. The Company has determined that the lease
with KEF meets the criteria for treatment as an operating lease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On August&nbsp;30, 2004 the Company agreed to a schedule with KEF thereby completing the Master
Equipment Lease Agreement, dated as of June&nbsp;23, 2003, previously entered into by Ashworth and
KEF. Under the terms of the schedule, the Company leases equipment for its distribution center
in Oceanside, California. The aggregate cost of the equipment is approximately $10.4&nbsp;million.
The initial term of the lease is for ninety-one (91)&nbsp;months beginning on September&nbsp;1, 2004 and
the monthly rent payment is $129,000. At the end of the initial term, the Company will have
the option to (1)&nbsp;purchase all, but not less than all, equipment on the initial term
expiration date at a price equal to the greater of (a)&nbsp;the then fair market sale value
thereof, or (b)&nbsp;12% of the total cost of the equipment (plus, in each case, applicable sales
taxes); (2)&nbsp;renew the lease on a month to month basis at the same rent payable at the
expiration of the initial lease term; (3)&nbsp;renew the lease for a minimum period of not less
than 12 consecutive months at the then current fair market rental value; or (4)&nbsp;return such
equipment to the Lessor pursuant to, and in the condition required by, the lease. The Company
has determined that the lease meets the criteria for treatment as an operating lease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and its subsidiaries also lease certain other production, warehouse and outlet
store facilities, as well as certain production and office equipment, under operating leases.
These leases expire in various fiscal years through August&nbsp;2016. Rent expense recognized on a
straight-line basis for the years ended October&nbsp;31, 2007, 2006
and 2005 was $7,146,000, $6,752,000 and $6,158,000, respectively. Future minimum lease payments under non-cancelable
operating leases and future minimum capital lease payments as of October&nbsp;31, 2007 are:
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Operating</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Years Ending October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leases</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leases</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">465,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,301,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,180,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,078,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,001,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,728,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,182,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,470,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less amount representing interest at rates
of 6.3665% and 9.0792%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value of future minimum capital lease
payments (Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">829,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(5)&nbsp;Line of Credit Agreement</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">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 loan agreement is
comprised
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of a $20.0&nbsp;million term loan and a $35.0&nbsp;million revolving credit facility, which expires
on July&nbsp;6,&nbsp;2009 and is collateralized by substantially all of the assets of the Company other
than the Company&#146;s EDC.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Under this loan agreement, interest on the $20.0&nbsp;million term loan was 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 October&nbsp;31,&nbsp;2007, the bank&#146;s reference rate was 8.00%. The loan
agreement also provides for optional interest rates based on London inter-bank offered rates
(&#147;LIBOR&#148;) for periods of at least 30&nbsp;days in increments of $0.5&nbsp;million.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">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 requirements that the Company maintain (1)&nbsp;a minimum tangible
net worth of $74.0&nbsp;million 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 $74.0&nbsp;million plus 90% of net
income after taxes (without subtracting losses) earned in each quarterly accounting period
commencing after January&nbsp;31,&nbsp;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)
a minimum earnings before interest, income taxes, depreciation and amortization (&#147;EBITDA&#148;)
determined on a rolling four quarter basis ranging from $16.5&nbsp;million at July&nbsp;6,&nbsp;2004 and
increasing over time to $27.0&nbsp;million 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 July&nbsp;31, 2004 and 1.25:1.00
thereafter. The loan agreement limits annual lease and equipment rental expense associated
with the Company&#146;s 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 distribution
center. The loan agreement had an additional requirement where, for any period of 30
consecutive days, the total indebtedness under the revolving credit facility may not be more
than $15.0&nbsp;million. The loan agreement also limits the annual aggregate amount the Company
may spend to acquire shares of its common stock.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On May&nbsp;27, 2005 and September&nbsp;8, 2005, the Company entered into the Second and Third
Amendments, respectively, to the loan agreement. The Second Amendment to the loan agreement
amended Section&nbsp;6.12(e), Capital Expenditures, to increase the spending limitation to acquire
fixed assets from not more than $5.0&nbsp;million in any single fiscal year on a consolidated basis
to a total of $20.0&nbsp;million for fiscal years 2004 and 2005 together, for the acquisition of
real property and equipment in connection with the distribution center located in Oceanside,
California. The Third Amendment waived non-compliance with various financial covenants of the
loan agreement, solely for the period ended July&nbsp;31, 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On January&nbsp;26, 2006, the Company entered into the Fourth Amendment to the loan agreement to
amend several sections of the credit facility and to waive non-compliance with financial
covenants at October&nbsp;31, 2005. Under the terms of the revised loan agreement, the revolving
credit facility was adjusted to $42.5&nbsp;million and the term loan commitment was adjusted to
$6.8&nbsp;million. Based on the revised loan agreement, the term loan shall commence January&nbsp;31,
2006 and have equal monthly installments of principal in the amount of $125,000, plus all
accrued interest for each monthly installment period, with a balloon installment for the
entire unpaid principal balance and all accrued and unpaid interest due in full on the
maturity date of July&nbsp;6, 2009.
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Concurrent with the signing of the Fourth Amendment, the Company borrowed $7.5&nbsp;million against
the revolving credit facility and paid down the term loan by the same amount. The Company also
paid bank fees totaling $125,000 related to the Fourth Amendment. The balance sheet at
October&nbsp;31, 2005 and the cash flow statement for the year ended October&nbsp;31, 2005 in the
accompanying financial statements have been adjusted to record these transactions as if the
Fourth Amendment had been in effect as of October&nbsp;31, 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The loan agreement was also modified, pursuant to the Fourth Amendment, to reflect the change
to a borrowing base commitment. The primary requirements under the borrowing base denote that
the bank shall not be obligated to advance funds under the revolving credit facility at any
time that Company&#146;s aggregate obligations to the bank exceed the sum of (a)&nbsp;seventy five
percent (75%) of the Company&#146;s eligible accounts receivables, and (b)&nbsp;fifty-five percent (55%)
of the Company&#146;s eligible inventory. If at any time the Company&#146;s obligations to the bank
under the referenced facilities exceed the permitted sum, the Company shall immediately repay
to the bank such excess. The applicable rate schedule was adjusted to reflect an additional
pricing tier based on the average daily funded debt to EBITDA ratio. The Fourth Amendment
also amended certain financial covenants and maintenance requirements under the loan agreement
as follows:
</DIV>

<DIV style="margin-top: 6pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Minimum tangible net worth equal to the sum of $75.0&nbsp;million; plus the sum
of 90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January&nbsp;31, 2006; plus, the net proceeds
from any equity securities issued after the date of the Fourth Amendment including
net proceeds from stock options exercised;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1.00, except for
the fiscal quarters ending January&nbsp;31 and April&nbsp;30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1.00;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital expenditures are not to exceed more than $7.0&nbsp;million in any fiscal
year;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1.00; provided that, for the fiscal quarter ending January&nbsp;31, 2006, the fixed
charge coverage ratio shall not be less than 0.80 to 1.00; and for purposes of
determining the fixed charge coverage ratio only, the Company&#146;s inventory write-down
of $4.4&nbsp;million shall be added back to EBITDA for the Company&#146;s fiscal quarter ending
April&nbsp;30, 2006 and the Company&#146;s maintenance capital expenditures shall be $4.0
million through the fiscal year ending October&nbsp;31, 2006; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15.0&nbsp;million
was eliminated.</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company was not in compliance with the required quick asset ratio in the first quarter of
fiscal year 2006. The Company obtained a written waiver of the quick assets to current
liabilities covenant requirement from its lenders for the period ended January&nbsp;31, 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On March&nbsp;7, 2007, the Company entered into the Sixth Amendment to the loan agreement with the
Bank to eliminate the ratio of quick assets to current liabilities covenant requirement and
waive non-compliance with financial covenants at January&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">At April&nbsp;30, 2007, the Company&#146;s fixed charge coverage ratio of (0.18) to 1:00 and minimum
tangible net worth of $79.8&nbsp;million were not in compliance with the Company&#146;s loan agreement
covenants. On June&nbsp;15, 2007, the Company obtained a written waiver of the fixed charge
coverage ratio and minimum
</DIV>

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

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">tangible net worth covenant requirements from its lenders for the period ended April&nbsp;30, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On July&nbsp;27, 2007, the Company entered into the Eighth Amendment to its Revolving/Term Loan
Credit Agreement with Union Bank of California, N.A. dated July&nbsp;6, 2004.&nbsp; This and previous
recent amendments were necessary to align the covenant and collateral requirements of the
agreement with the Company&#146;s expected operating results during the remaining term of the
agreement. The Eighth Amendment modified certain provisions of the Loan Agreement, which
include the following:
</DIV>

<DIV style="margin-top: 6pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The borrowing base calculation was changed and denotes that the Lenders shall not
be obligated to advance funds under the revolving credit facility at any time that the
Company&#146;s aggregate obligations to the Lenders exceed the sum of (a)&nbsp;eighty-five percent
(85%) of Borrower&#146;s Eligible Accounts, and (b)&nbsp;the lesser of (i)&nbsp;sixty-five percent
(65%) of Borrower&#146;s Eligible Inventory and (ii)&nbsp;eighty-five percent (85%) of the
appraised net recovery value of Borrower&#146;s Inventory, as such terms are defined in the
amended Loan Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A Control Account was established wherein any immediately available funds in the
account will be automatically applied to the Company&#146;s obligation under the revolving
line of credit to minimize the Company&#146;s interest expense.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A Minimum Borrowing Base Availability provision was added which states that the
Company must maintain a difference between the Borrowing Base and the aggregate
outstanding obligations under the Credit Agreement of at least $7.5&nbsp;million, except if
the Company has achieved at least two (2)&nbsp;consecutive quarters of a Fixed Charge
Coverage Ratio in excess of 1:10 to 1:00. If the Company is not in compliance with this
provision for five (5)&nbsp;consecutive business days, this will constitute a &#147;Triggering
Event&#148; and will result in the Control Account becoming the property of the Company&#146;s
bank as partial payment for the Company&#146;s outstanding obligations under the Credit
Agreement.
Such a Triggering Event may be cured by maintaining the difference of at least $7.5
million for thirty (30)&nbsp;consecutive days.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Minimum Tangible Net Worth requirement was modified and is now equal to the
sum of at least $70.0&nbsp;million; plus 50% of net income after income taxes (without
subtracting losses) earned in each quarterly accounting period commencing after April
30, 2007; plus, the net proceeds from any equity securities issued after the date of the
Eighth Amendment (inclusive of securities issued in connection with stock-based
compensation).</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Minimum Fixed Charge Coverage Ratio (FCCR)&nbsp;was set at no less than 1:10 to
1:00 for periods after the earlier of two (2)&nbsp;consecutive quarters ended with a FCCR in
excess of 1.10:1.00 or July&nbsp;31, 2008. The FCCR may be used in determining the
Applicable Rate.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital Expenditures (including the total amount of any capital leases) are
limited to $4.0&nbsp;million in any one fiscal year on a consolidated basis. The Company may
invest any net proceeds from the sale of any existing real property and equipment used
in connection with the Company&#146;s Oceanside, California Embroidery and Distribution
Center in like assets within two (2)&nbsp;years of disposal of such assets and such
investment will be in addition to the $4.0&nbsp;million permitted in each fiscal year
provided no event of default has occurred, is continuing or would result after giving
effect to such investment.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Applicable Rate schedule was modified and is now based on the Fixed Charge
Coverage Ratio or average daily Borrowing Base Availability instead of the Funded Debt to
EBITDA Ratio.</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The revolving credit facility 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 the loan agreement totaled $1.5&nbsp;million at October&nbsp;31,&nbsp;2007 as compared to
$2.9&nbsp;million outstanding at
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">October&nbsp;31,&nbsp;2006. The Company had $19.6&nbsp;million outstanding
against the revolving credit facility under this loan agreement at October&nbsp;31,&nbsp;2007,
compared to $14.0&nbsp;million outstanding at October&nbsp;31,&nbsp;2006 and $4.1&nbsp;million outstanding on
the term loan at October&nbsp;31,&nbsp;2007 compared to $5.6&nbsp;million at October&nbsp;31, 2006. At October
31, 2007, $11.9&nbsp;million was available for borrowings against the revolving credit facility
under the loan agreement, subject to the borrowing base limitations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the fiscal year ended October&nbsp;31, 2007, the Company&#146;s capital expenditures were
approximately $4.15&nbsp;million which exceeded the annual capital expenditure limitation of $4.0
million permitted under the Company&#146;s Union Bank loan agreement as amended on July&nbsp;13, 2007
and on January&nbsp;11, 2008, the Company paid off its loan balances with Union Bank and entered
into a new line of credit agreement with B of A. See Note 14 of Notes to Consolidated
Financial Statements.
</DIV>


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




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(6)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Long-term Debt</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Amounts outstanding under long-term debt agreements at October&nbsp;31, 2007 and 2006 consist of
the following:</DIV></TD>
</TR>

</TABLE>
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Term loan payable to a bank, bearing interest at 5.4%, payable
in monthly payments of $333,000 plus interest through December
31, 2005 and $125,000 plus interest thereafter and through
maturity of July&nbsp;6, 2009, collateralized by substantially all
of the Company&#146;s assets, excluding real estate. (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,083,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,583,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px">Note payable to a bank, bearing interest at 5.0%, payable in
monthly principal and interest payments of $63,000 through
April&nbsp;2014, with a balloon payment of approximately $9,700,000
payable at maturity of May&nbsp;1, 2014; collateralized by
land and building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,042,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,228,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subordinated note payable to a third party, bearing simple
interest at 3.5%, payable in annual principal payments of
$250,000 plus interest on the outstanding principal balance due
June&nbsp;30, 2006, 2007 and 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px">Note payable to a finance company, bearing interest at 3.9%,
payable in monthly payments of principal and interest $471
through maturity of July&nbsp;26, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations (Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,204,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,788,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,360,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,117,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,844,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,671,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Future maturities of long-term debt and capital lease obligations at October&nbsp;31, 2007 are as
follows:</DIV></TD>
</TR>

</TABLE>
</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="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Years Ending October 31,</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: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,360,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,962,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,204,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(7)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Employees&#146; </B><B>401(k)</B><B> Plan</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company maintains a defined contribution retirement plan covering substantially all
full-time employees. Company contributions, which are voluntary and at the discretion of the
Company&#146;s Board of Directors, are currently being made at 50% of the amount the employee
contributes up to 3% of compensation. The Company&#146;s expense for the years ended October&nbsp;31,
2007, 2006 and 2005 was $404,000, $314,000 and $249,000, respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(8)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Stockholders&#146; Equity</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Common Stock Options</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On December&nbsp;14, 1999, the Company adopted the Ashworth, Inc. 2000 Equity Incentive Plan which
was subsequently amended (as amended to date, the &#147;2000 Plan&#148;). The stockholders adopted the
2000 Plan on March&nbsp;24, 2000 and concurrently terminated the Company&#146;s Incentive Stock Option
Plan, the Founders&#146; Nonqualified Stock Option Plan and the Nonqualified Stock Option Plan
(together, the &#147;Terminated Plans&#148;). With the adoption of the 2000 Plan and the concurrent
termination of the Terminated Plans, the Company reduced the aggregate number of shares
available for issuance under its stock plans from 2,041,439 under the Terminated Plans to
1,900,000 shares of common stock under the 2000 Plan. On December&nbsp;12, 2000, the Company filed
Form S-8 (File No.&nbsp;333-51730) to register the 1,900,000 shares of common stock available for
issuance under the 2000 Plan.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">As of October&nbsp;31, 2007, of the 1,900,000 shares of common stock available for issuance under
the 2000 Plan, the Company had outstanding options covering 919,000 shares of common stock
with exercise prices ranging from $4.99 to $11.78 and expiration dates between November&nbsp;2010
and September&nbsp;2017. At October&nbsp;31, 2007, a total of 285,000 shares of common stock remained
available for issuance pursuant to awards granted under the 2000 Plan. As of October&nbsp;31,
2007, the Company had no options covering shares of common stock outstanding under the
Terminated Plans.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On October&nbsp;24, 2007 the Company adopted the 2007 Nonstatutory Stock Option Plan (the &#147;2007
Nonstatutory Plan&#148;). As of October&nbsp;31, 2007, of the 200,000 shares of common stock available
for issuance under the 2007 Nonstatutory Plan, the Company had outstanding options covering
100,000 shares of common stock with an exercise price of $5.48 and an expiration date of
October&nbsp;24, 2017.</DIV></TD>
</TR>

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

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The following is a summary of stock option activity under the 2000 Plan, Terminated Plans and
the 2007 Nonstatutory Plan for the fiscal years ended October&nbsp;31, 2005, October&nbsp;31, 2006 and
October&nbsp;31, 2007:
</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="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&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 nowrap align="center" colspan="3"><B>Shares</B></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 nowrap align="center" colspan="3"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Option exercise price per share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Aggregate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></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 nowrap align="center" colspan="3">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual Term</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Intrinsic</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Range</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(in Years)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,652,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</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">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,012,588</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.87</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.07</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(368,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.03</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">10.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,531,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(403,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</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">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.19</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October
31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">902,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.55</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">9.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.90</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(446,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">8.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,387,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(249,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.59</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">11.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.78</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October
31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">871,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.48</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">8.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.73</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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(193,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">8.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(175,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.40</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">10.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.54</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 style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October
31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.99</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Exercisable,
October&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">737,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.99</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercisable,
October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">756,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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:30px; text-indent:-15px">Exercisable,
October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</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">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883,364</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&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>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company incurred stock-based employee compensation expense of $886,000, $481,000 and $0 in
fiscal years 2007, 2006 and 2005, respectively.
</DIV>



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

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

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The following is a summary of stock options outstanding at October&nbsp;31, 2007:</DIV></TD>
</TR>

</TABLE>
</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="15%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Options outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options exercisable</B></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="3"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="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="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Range of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>exercise prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(shares)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>life (years)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(shares)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$4.99  &#151;  $&nbsp;&nbsp;6.99</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$7.00  &#151;  $&nbsp;&nbsp;8.99</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">531,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$9.00  &#151;  $11.89</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD COLSPAN="2" align="right" style="border-top: 1px solid #000000">&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 colspan="2" align="right" style="border-top: 1px solid #000000">&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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">737,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8.25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD COLSPAN="2" align="right" style="border-top: 3px double #000000">&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 colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On October&nbsp;26, 2005, the Company&#146;s Board of Directors approved the accelerated vesting of all
currently outstanding, &#147;out-of-the-money,&#148; unvested stock options (the &#147;Options&#148;) to purchase shares of common stock of the Company. These Options were previously awarded to directors,
officers and employees under the 2000 Plan. These Options have an exercise price greater than
$6.97, the closing price on October&nbsp;26, 2005, which is the effective date of the acceleration.
Outstanding unvested options that are &#147;in-the-money&#148; were not subject to acceleration and will
continue to vest in accordance with their normal schedule.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Options to purchase approximately 328,000 shares of Ashworth, Inc. common stock, which would
otherwise have vested from time to time over the next three years, became immediately
exercisable as a result of the Board of Directors&#146; actions. One of the purposes of the
accelerated vesting was to reduce future stock option compensation expense that the Company
would otherwise have recognized in its results of operations with the
adoption of SFAS No.&nbsp;123R. The number of shares and exercise prices of the Options subject to the acceleration were unchanged. The
remaining terms for each of the Options granted remained the same.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">At October&nbsp;31, 2007 and 2006, the number of shares of common stock underlying exercisable
options was 737,000 and 756,000, respectively, and the weighted-average exercise price of
those options was $8.25 and $8.12, respectively.</DIV></TD>
</TR>

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

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The following is a summary of unvested stock options:</DIV></TD>
</TR>

</TABLE>
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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="3"><B>Weighted-Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Grant Date</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Fair Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(606,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(137,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(295,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The grant-date fair value of stock options issued to employees and directors granted during
fiscal 2007, 2006 and 2005 was $1,367,000, $634,000 and $1,702,000, respectively. As of
October&nbsp;31, 2007, the total unrecognized compensation cost related to unvested shares was
$419,000, which is expected to be recognized over a weighted-average period of 2.5&nbsp;years,
based on the vesting schedules.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Comprehensive Income</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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 components of other
comprehensive income for the periods presented:</DIV></TD>
</TR>

</TABLE>
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,050,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left"><B>(9)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Commitments and Contingencies</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Promotional Agreements with PGA Professionals and a Television Personality</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company has promotional agreements with several PGA professionals, including Fred Couples,
a related party at the time of the agreement; Jim Nantz, a television personality and member
of the Company&#146;s Board of Directors until March&nbsp;24, 2004, a related party; and a management
company. Under the terms of these agreements, the Company is or was obligated to pay cash or
other compensation and, in some cases, to issue options to purchase shares of the Company&#146;s
common stock.</DIV></TD>
</TR>

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

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


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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The aggregate annual compensation expense recognized under these agreements using the
straight-line method in fiscal 2007, 2006 and 2005 was $414,000, $1,652,000 and $1,837,000,
respectively. Cash payments made to related parties under these agreements during the years
ended October&nbsp;31, 2007, 2006 and 2005 totaled $1,628,000, $1,328,000 and $1,602,000,
respectively. In fiscal year 2007, the Company made cash payments of $1,628,000 for
promotional agreements, including $1,000,000 paid to Fred Couples. The Company is obligated
to make this annual $1,000,000 payment if Mr.&nbsp;Couples plays a minimum of 15 PGA tournaments
during the year. In fiscal year 2007, Fred Couples played two tournaments, obligating the
Company to make cash payments of $133,000 (two-fifteenths of $1,000,000) to him in fiscal year
2008. Future minimum commitments under these agreements are as follows:</DIV></TD>
</TR>

</TABLE>
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Minimum</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Payments to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Minimum</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Related</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year Ending October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Payments</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Parties</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">304,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,134,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2012</DIV></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:60px; text-indent:-15px">Thereafter</DIV></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 style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,438,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,133,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U><B>Executive Employment Agreements, Termination of Employment and Change in Control
Arrangements</B></U></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company previously entered into executive employment agreements with: Allan H. Fletcher,
the Chief Executive Officer, Edward J. Fadel, the President, Greg W. Slack, the Chief
Financial Officer, Peter M. Weil, former Chief Executive Officer, Winston E. Hickman, former
Executive Vice President, Chief Financial Officer and Treasurer; Peter E. Holmberg, former
Executive Vice President of Green Grass Sales and Merchandising; Gary I. &#147;Sims&#148; Schneiderman,
former President, and Eric R. Hohl, former Executive Vice President, Chief Financial Officer and Treasurer.
Messrs.&nbsp;Weil, Hickman, Holmberg, Schneiderman and Hohl ceased employment with the Company
effective October&nbsp;24, 2007, November&nbsp;17, 2006, May&nbsp;21, 2007, May&nbsp;21, 2007 and October&nbsp;24,
2007, respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Agreements With Current Executive Officers</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The employment agreement between the Company and Mr.&nbsp;Fletcher, dated October&nbsp;24, 2007, and the
stock options granted to Mr.&nbsp;Fletcher under the 2007 Nonstatutory Plan on October&nbsp;24, 2007
have been terminated.</DIV></TD>
</TR>

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

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Effective January&nbsp;11, 2008, the Company entered into a consulting agreement with Fletcher
Leisure Group, Ltd., a New York corporation (&#147;FLG Ltd.&#148;), under which FLG Ltd. provides the
services of a management consultant to act as the Company&#146;s Chief Executive Officer (the &#147;FLG
Ltd. Consulting Agreement&#148;). The initial management consultant designated by FLG Ltd. is Mr.
Fletcher, and FLG Ltd. may not designate any other management consultant without the Company&#146;s
written permission. The Company paid FLG Ltd. a one-time fee of $75,000 upon execution of the
FLG Ltd. Consulting Agreement and will pay FLG Ltd. a consulting fee of $9,000 per month
during the term of the FLG Ltd. Consulting Agreement. FLG Ltd. is also eligible to receive a
cash incentive fee, the amount of which will be determined by the Company&#146;s Compensation and
Human Resource Committee based on achievement of objectives for FLG Ltd. and the Company set
out in the Company&#146;s annual business plan. For the 2008 fiscal year, the target incentive fee
will be $500,000, assuming achievement of all objectives. If the Company terminates the FLG
Ltd. Consulting Agreement without cause during a fiscal year, the Company will pay FLG Ltd. a
pro rata portion of the incentive fee determined by the Compensation and Human Resources
Committee to have been earned for such fiscal year. In addition, the Company granted FLG Ltd.
100,000 options to purchase shares of the Company&#146;s common stock at an exercise price of $5.48
per share. Half of the options vest on October&nbsp;24, 2008, and the remaining options vest on
October&nbsp;24, 2009. The options will vest immediately upon termination of the FLG Ltd.
Consulting Agreement without cause or a change of control of the Company and will terminate
upon the earlier of one year after the termination of the FLG Ltd. Consulting Agreement and
ten years after the date of grant.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company will also reimburse FLG Ltd. for the rental of reasonable residential or hotel
accommodations in the Carlsbad, California area while the management consultant is providing
services to the Company at the Company&#146;s headquarters (if the Company does not itself make
such accommodations available).</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The FLG Ltd. Consulting Agreement contains terms customary for a consulting agreement
regarding confidentiality of the proprietary information of the Company, the assignment of
intellectual property to the Company, reimbursement of business expenses and FLG Ltd.&#146;s status
as an independent contractor.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The FLG Ltd. Consulting Agreement may be terminated at will by either party. The Company may
terminate the FLG Ltd. Consulting Agreement for cause in certain circumstances, with the
result that the options granted under the FLG Ltd. Consulting Agreement will be terminated
immediately and FLG Ltd. will not be entitled to a pro rata portion of the incentive fee
earned during that fiscal year. Under the FLG Ltd. Consulting Agreement, &#147;cause&#148; means
material breach of the FLG Ltd. Consulting Agreement by FLG Ltd., any act or acts of personal
dishonesty by FLG Ltd. or the management consultant, the conviction of FLG Ltd. or the
management consultant of a felony, violation of the Company&#146;s policies or code of conduct by
FLG Ltd. or the management consultant, violation by FLG Ltd. or the management consultant of
any confidentiality or non-competition agreement with the Company or any of the Company&#146;s affiliates, or the willful misconduct of
FLG Ltd. or the management consultant that is injurious to the Company. If FLG Ltd.
terminates the FLG Ltd. Consulting Agreement because the duties to be performed by FLG Ltd.
are reduced in scope, the termination will be deemed a termination by the Company without
cause.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In connection with Mr.&nbsp;Fadel&#146;s appointment as President, the Company entered into an
employment agreement (the &#147;Fadel Employment Agreement&#148;) with Mr.&nbsp;Fadel that provides for
compensation which includes: an annual base salary of $240,000; eligibility for up to a target
bonus of 40% of base salary, with the actual payment subject to the board&#146;s discretion and in
accordance with any applicable bonus plan; the grant of options to purchase 40,000 shares of
the Company&#146;s common stock, with an exercise</DIV></TD>
</TR>

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

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">price equal to the closing price of the Company&#146;s
common stock on May&nbsp;23, 2007 and with half of the options vesting on each of the first two
anniversaries of Mr.&nbsp;Fadel&#146;s employment with the Company (and which immediately vest upon Mr.
Fadel&#146;s termination without cause); and, a monthly auto allowance of $1,000, a monthly housing
allowance of $2,500 for 12&nbsp;months and coverage under the Company&#146;s benefits programs. If Mr.
Fadel is terminated without cause as defined in the Fadel Employment Agreement and he delivers
a fully executed release and waiver of all claims against the Company, the severance
provisions of the Employment Agreement grant him a lump sum payment of 25% to 50% of his then
current annual salary, depending on the timing and circumstances of his termination.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In connection with Mr.&nbsp;Slack&#146;s appointment as Chief Financial Officer, the Company entered
into an employment agreement with Mr.&nbsp;Slack (the &#147;Slack Employment Agreement&#148;) on October&nbsp;24,
2007. The Slack Employment Agreement provides for compensation consisting of, among other
things, an annual base salary of $225,000; a target bonus of $112,500 for fiscal year 2008 at
the discretion of the Company&#146;s Board of Directors; a clothing allowance in accordance with
Company policy; and an auto-mobile allowance of $750 per month.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Slack Employment Agreement also provides for a severance payment, in the event that Mr.
Slack is terminated without cause and Mr.&nbsp;Slack delivers to the Company and thereafter does
not revoke a release and waiver of all claims against the Company. In such case, the severance
payment would be 50% of Mr.&nbsp;Slack&#146;s then-current annual base salary, if such termination
occurs on or prior to the one-year anniversary of Mr.&nbsp;Slack&#146;s employment with the Company, or
100% of Mr.&nbsp;Slack&#146;s then-current annual base salary, if such termination occurs after Mr.
Slack&#146;s one-year anniversary of employment with the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company also authorized entry into its form indemnity agreement with Mr.&nbsp;Slack, which
provides for indemnification by the Company on the same terms described above with respect to
Mr.&nbsp;Fletcher&#146;s indemnity agreement. The foregoing description of the Slack Employment
Agreement is qualified in its entirety by the terms of such agreement, which was filed as
Exhibit&nbsp;10.3 to the Form 8-K filed on October&nbsp;30, 2007 and is incorporated herein by
reference.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On September&nbsp;20, 2007, the Company entered into an employment agreement with Paul Bourgeois
(the &#147;Bourgeois Employment Agreement&#148;) appointing him as the Senior Vice President, Sales,
effective October&nbsp;1, 2007. The Bourgeois Employment Agreement provides for compensation of
$7,692 paid bi-weekly; a performance bonus opportunity of 30% of annual base salary under
certain circumstances; an automobile expense allowance of $500 each month; a clothing
allowance in accordance with Company policy and a residential allowance of $2,000 each month
for a period of six months, which is reimbursable to the Company if Mr.&nbsp;Bourgeois resigns
within the first two years of employment.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Agreements With Former Executive Officers</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On November&nbsp;27, 2006, the Company entered into an employment agreement effective as of October
30, 2006 with Peter M. Weil (the &#147;Weil Employment Agreement&#148;) appointing him as the Chief
Executive Officer of Ashworth, Inc. The Weil Employment Agreement provided for compensation
consisting of, among other things: an annual base salary of $400,000; a performance bonus
opportunity of 50% of annual base salary under certain circumstances; a grant of options to
purchase 100,000 shares of the Company&#146;s common stock, with 50% of the options vesting on each
of the first two anniversaries of the grant date; eligibility to participate in the Company&#146;s
401(k) plan; coverage under the Company&#146;s medical, dental and life insurance benefits
programs; a clothing allowance in accordance with Company policy; an automobile allowance of
$1,250 per month; and, an allowance for reasonable residential expenses, in lieu of moving
expenses, and until such time as the Compensation and Human Resources</DIV></TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Committee or the Board takes further action, which included housing and all reasonable expenses (to be grossed up for
taxes, if applicable). If Mr.&nbsp;Weil is terminated without Cause (as defined in the Weil
Employment Agreement), then Mr.&nbsp;Weil would receive (1)&nbsp;severance compensation in an amount
equal to 12&nbsp;months of his then current annual base salary and (2)&nbsp;accelerated vesting of all
stock options granted under the Weil Employment Agreement. Mr.&nbsp;Weil&#146;s option vesting will
also be accelerated as a result of a change of control. In the event that Mr.&nbsp;Weil became
disabled (as defined in the Weil Employment Agreement) during the term of this Agreement for a
continuous period up to 90&nbsp;days, or upon termination of his employment as a result of his
death, the Company was obligated to pay a pro rata share of the annual bonus in the year in
which Mr.&nbsp;Weil was disabled or died.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On October&nbsp;24, 2007, the Company entered into a separation and release agreement with Mr.&nbsp;Weil
(the &#147;Weil Separation Agreement&#148;). Under the Weil Separation Agreement, Mr.&nbsp;Weil is entitled
to a severance payment of $400,000 paid as follows: $100,000 on January&nbsp;2, 2008, with the
balance of $300,000 paid thereafter in 19 equal semi-monthly installments on the 15th and last
day of every month. The Weil Separation Agreement, provided certain requirements are met, also
provides for the acceleration of Mr.&nbsp;Weil&#146;s unvested stock options and an extension of the
exercise period of such options until one year following Mr.&nbsp;Weil&#146;s separation.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On February&nbsp;23, 2006, the Company entered into an employment agreement with Winston E. Hickman
(the &#147;Hickman Employment Agreement&#148;) which terminated in connection with his resignation
effective November&nbsp;17, 2006. The Hickman Employment Agreement provided for: a base salary of
$300,000; a target bonus of 50% of base salary, with the actual payment subject to the Board&#146;s
discretion; the grant of options to purchase 50,000 shares of the Company&#146;s common stock, with
half of the options vesting on each of the first two anniversaries of Mr.&nbsp;Hickman&#146;s employment
with the Company; and coverage under the Company&#146;s benefits programs. No bonus was awarded to
Mr.&nbsp;Hickman for fiscal 2006. The Hickman Employment Agreement also provided that if Mr.
Hickman had been terminated without Cause or resigned under certain specified circumstances,
Mr.&nbsp;Hickman would have been entitled to: a lump sum payment of either one-half or all of his
then current annual salary, depending on the timing and circumstances of his termination or
resignation; a pro rata bonus; and immediate vesting of a pro rata number of stock options.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In connection with Mr.&nbsp;Hickman&#146;s resignation effective November&nbsp;17, 2006 as Executive Vice
President and Chief Financial Officer, the Company entered into a release agreement with Mr.
Hickman (the &#147;Hickman Release Agreement&#148;) on November&nbsp;16, 2006 whereby Mr.&nbsp;Hickman provided a
standard release of any claims, complaints and lawsuits against the Company and other related
entities and persons. The Hickman Release Agreement also provided that Mr.&nbsp;Hickman will
receive continuing medical, dental and Exec-U-Care insurance coverage for a period of 18
months from December&nbsp;1, 2006 through May&nbsp;31, 2008 in exchange for ten (10)&nbsp;full days of
consulting services to be provided by Mr.&nbsp;Hickman on reasonable and mutually agreed upon dates
between November&nbsp;20, 2006 and May&nbsp;30, 2008, to assist with a professional transition of
Executive Vice President and Chief Financial Officer responsibilities and to advise on related
matters.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Effective October&nbsp;25, 2006, the Company and Mr.&nbsp;Holmberg entered into the Amended and Restated
Employment Agreement (the &#147;Holmberg Employment Agreement&#148;). Under the Holmberg Employment
Agreement, Mr.&nbsp;Holmberg was to receive an annual base salary of
$225,000 and was eligible to earn an annual bonus up to a maximum of 40% of his annual base salary based and conditioned on
the Company&#146;s achievement of certain financial targets. Among other things, Mr.&nbsp;Holmberg also
received an automobile allowance of $1,000 per month. If Mr.&nbsp;Holmberg were to be terminated
within two years of the effective date of the Holmberg Employment Agreement as a result of a
Qualifying Termination (as defined in the Holmberg Employment Agreement) and if </DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-34 <!-- /Folio -->
</DIV>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Mr. Holmberg delivered and did not revoke a fully executed release and waiver of all claims against the
Company, then the Company was obligated to pay Mr.&nbsp;Holmberg the equivalent of 12&nbsp;months of
his then-current annual base salary, which was to be in lieu of any other severance payment
benefits that otherwise may at that time be available under the Company&#146;s applicable policies;
provided, however, that the Holmberg Employment Agreement was not intended to modify or
supersede the change in control agreement between the Company and Mr.&nbsp;Holmberg.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On May&nbsp;25, 2007, the Company entered into a severance and release agreement with Mr.&nbsp;Holmberg
(the &#147;Holmberg Severance Agreement&#148;) which provided for a modification of prior employment
agreements and arrangements with Mr.&nbsp;Holmberg. Under the Holmberg Severance Agreement, Mr.
Holmberg was entitled to a lump sum severance payment of $112,500 and an automobile allowance
of $6,000 and agreed to provide a customary release of all claims against the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On September&nbsp;7, 2005, the Company entered into an employment agreement with Gary I. &#147;Sims&#148;
Schneiderman (the &#147;Sims Employment Agreement&#148;). The Sims Employment Agreement with Mr.
Schneiderman provided for: a minimum base salary of $300,000; bonuses to be determined by the
Board on the basis of merit and the Company&#146;s financial success and progress up to a maximum
of 82.5% of his base salary; three guaranteed minimum non-compete/retention payments of
$85,000 on September&nbsp;12, 2005, $85,000 on November&nbsp;24, 2005 and $40,000 following the close of
final accounting records for 2006; stock options to purchase 20,000 shares for each of fiscal
years 2005, 2006 and 2007; an automobile allowance of $1,000 per month and a club membership.
The Sims Employment Agreement also provided that if a Qualifying Termination (as defined in
the agreement) occurs, Mr.&nbsp;Schneiderman would be entitled to receive severance payments equal
to 12&nbsp;months of his then-current annual base salary, an additional cash payment of $50,000,
payment of insurance premiums for a period of 12&nbsp;months, and immediate vesting of all options.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On May&nbsp;25, 2007, the Company entered into a severance and release agreement with Mr.
Schniderman (the &#147;Sims Severance Agreement&#148;) which provided for a modification of prior
employment agreements and arrangements with Mr.&nbsp;Sims. Under the Sims Severance Agreement, Mr.
Schniderman is entitled to the continuation of bi-weekly payments of his base salary,
automobile allowance and club dues for nine (9)&nbsp;months, the continuation of his employee
insurance benefits for twelve (12)&nbsp;months and a waiver of the requirement for Mr.&nbsp;Schniderman
to reimburse the Company for the cost of the club membership of $45,000. Mr.&nbsp;Sims agreed to
provide a customary release of all claims against the Company. Mr.&nbsp;Schniderman is also
entitled to acceleration of 20,000 outstanding stock options that were not yet vested, which
are deemed vested as of May&nbsp;21, 2007.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Effective March&nbsp;19, 2007, the Company and Eric R. Hohl entered into an employment agreement
(the &#147;Hohl Employment Agreement&#148;) that appointed Mr.&nbsp;Hohl the Executive Vice President, Chief
Financial Officer and Treasurer. The Hohl Employment Agreement provided for compensation which
included: an annual base salary of $240,000; eligibility for up to a target bonus of 40% of
base salary, with the actual payment subject to the Board&#146;s discretion and in accordance with
any applicable bonus plan; the grant of options to purchase 40,000 shares of the Company&#146;s
common stock, with an exercise price equal to the closing price of the Company&#146;s common stock
on March&nbsp;19, 2007, and with half of the options vesting on each of the first two anniversaries of Mr.
Hohl&#146;s employment with the Company; and coverage under the Company&#146;s benefits programs. If Mr.
Hohl is terminated without cause as defined in the Hohl Employment Agreement and he delivers a
fully executed release and waiver of all claims against the Company, the severance provisions
of the Hohl Employment Agreement grant him: a lump sum payment of 25% to 50% of his then
current annual salary, depending on the timing and circumstances of his termination and
immediate vesting of the above stock options.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-35 <!-- /Folio -->
</DIV>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Effective October&nbsp;24, 2007, Eric R. Hohl left his position as Executive Vice President, Chief
Financial Officer and Treasurer of the Company. Pursuant to the terms of the Hohl Employment
Agreement, the vesting for 40,000 stock options was accelerated and will be exercisable for 90
days after his departure for incentive stock options and 180&nbsp;days after his departure for
non-qualified options. Mr.&nbsp;Hohl delivered a fully executed release and waiver of all claims
against the Company and subsequently received a one-time severance payment from the Company of
$96,000.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Legal Proceedings</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On February&nbsp;27, 2007, the Law Offices of Herbert Hafif filed a class action in the United
States District Court for the Central District of California alleging that the Company
willfully violated the Fair Credit Reporting Act by printing on credit or debit card receipts
more than the last five digits of the credit or debit card number and/or the expiration date.
The plaintiff sought statutory and punitive damages, attorney&#146;s fees and injunctive relief on
behalf of the purported class. The suit against Ashworth was one of hundreds of suits filed
against different retailers nationwide. The proposed class representative for the putative
class filed his motion to certify this matter as a class action. The Company filed an
opposition to the motion and the court entered an order denying the class certification. On
November&nbsp;13, 2007, the parties entered into a settlement on the record whereby Ashworth would
pay the plaintiff $1,000 and the plaintiff would dismiss his individual claim with prejudice.
Ashworth admitted no liability and continues to dispute any allegation that it willfully
violated the Fair Credit Reporting Act. The parties subsequently entered into a written
stipulation to that effect and the court dismissed the complaint.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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
claims and litigation cannot currently be ascertained, the Company does not believe that these
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></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Licensing Agreement with Callaway Golf Company</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement (the &#147;License
Agreement&#148;) with Callaway Golf Company (&#147;Callaway&#148;) to design, market and distribute complete
lines of men&#146;s and women&#146;s Callaway Golf apparel. The agreement allows Ashworth to sell
Callaway Golf apparel primarily in the United States, Europe and Canada. The initial Callaway
Golf apparel products shipped in April&nbsp;2002. The multi-year agreement has various minimum
annual requirements for marketing expenditures and royalty payments based on the level of net
revenues. The Company believes that revenues from the Callaway Golf apparel product line will
be sufficient to cover such minimum royalty payments. The agreement is effective until
December&nbsp;31, 2010 and, at Ashworth&#146;s sole discretion, may be extended for one five-year term
provided that Ashworth meets or exceeds certain minimum requirements for calendar years 2008
and 2009, that Ashworth gives notice of its intention to renew by January&nbsp;1, 2010 and that
Ashworth is not in material breach of the agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On March&nbsp;29, 2007, the Company and Callaway entered into a second amendment to the License
Agreement between the Company and Callaway, dated May&nbsp;14, 2001. Among other things, the
second amendment to the License Agreement clarified the relationship of the parties in certain
respects, updated the licensed trademarks to reflect Callaway&#146;s current product lineup and
changed the territories in which the Company may market products under the License Agreement.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-36 <!-- /Folio -->
</DIV>

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

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On December&nbsp;3, 2007, the Company and Callaway entered into a third amendment to the License
Agreement. Among other things, the third amendment created a new mid-price retail channel,
with new trademarks for use in that channel, and changed the royalty payments owed to Callaway
to a flat percentage of net sales of products sold under the License Agreement. Under the
third amendment, the Company will pay royalties at two separate rates, one for the mid-price
channel and another for all other sales channels. The flat royalty rates replaced the tiered
royalty rates formerly paid by the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(10)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Related-Party Transactions</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In October&nbsp;2007, the Company announced the appointment of Allan H. Fletcher to the position of
Chief Executive Officer. Mr.&nbsp;Fletcher is the founder of Fletcher Leisure Group, Inc. (&#147;FLG&#148;)
which has been one of Canada&#146;s leading suppliers of branded golf apparel, sportswear and golf
equipment for over 40&nbsp;years and is a long-standing business partner of the Company. The
Company distributes Ashworth and Callaway Golf apparel, headwear and accessories in Canada
through two separate divisions operated by FLG. Mr.&nbsp;Fletcher was responsible for the
operations and strategic direction of FLG and served as its President until December&nbsp;2003 when
he became the Chairman of FLG. Mr.&nbsp;Fletcher&#146;s son, Mark Fletcher, currently serves as the
President of FLG and oversees its operations.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On August&nbsp;15, 2007, the Company entered into an agreement with FLG pursuant to which the
Company has the exclusive right to distribute Sunice licensed products in the U.K., Ireland
and selected countries of Continental Europe through Ashworth&#146;s U.K. subsidiary for a fee
equal to 10% of net sales of Sunice product. Under the agreement, terminable by the Company at
the end of one year, FLG is responsible for all design and production and has agreed to
deliver Sunice products to Ashworth on a consignment basis. During such first year Ashworth
agreed to pay FLG 105% of the actual documented costs of the production and delivery of the
Sunice products upon the sale of such products by Ashworth to third-party customers. The
Company made no payments to FLG in fiscal 2007 but has a payable balance of $81,000 due to FLG
at October&nbsp;31, 2007.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company leases its Phenix City, Alabama distribution facility from STAG II Phenix City,
LLC, which purchased the building in fiscal 2006 from 16 Downing, LLC, which was a related
party owned by certain members of Gekko Brands, LLC&#146;s management. Total payments under the
operating lease for this facility made during the years ended October&nbsp;31, 2007, 2006 and 2005
were $457,000, $400,000 and $400,000, respectively. The lease agreement requires monthly
payments of $38,060 through June&nbsp;6, 2012.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Seidensticker (Overseas) Limited (&#147;Seidensticker&#148;), a supplier of inventoried products to us,
owned approximately 1.65% of our outstanding common stock at October&nbsp;31, 2007. Additionally,
the President and Chief Executive Officer of Seidensticker (Overseas) Limited was elected to
the Company&#146;s Board of Directors effective January&nbsp;1, 2006. During the years ended October&nbsp;31,
2007, 2006 and 2005, we purchased approximately $1,151,000, $1,571,000 and $5,800,000 of
products from Seidensticker. We believe that the terms upon which we purchased the inventoried
products from Seidensticker are consistent with the terms offered to other, unrelated parties.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On May&nbsp;5, 2006, the Company entered into a settlement agreement (the &#147;Agreement&#148;) with
Knightspoint Partners II, L.P. and certain other entities and individuals, including Mr.&nbsp;David
M. Meyer and Michael S. Koeneke (collectively, the &#147;Knightspoint Group&#148;) under which, among
other matters, the Company agreed to appoint Mr.&nbsp;Meyer and Mr.&nbsp;Weil and a mutually agreeable
third director to its Board of Directors (the &#147;Board&#148;). Pursuant to the Agreement, the
Company reimbursed Knightspoint </DIV></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-37 <!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to
Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Group for its actual expenses incurred in connection with the proxy contest in the amount of
approximately $165,000. Mr.&nbsp;Meyer is a managing member of Knightspoint Partners LLC, an
affiliate of Knightspoint Partners II, L.P. Mr.&nbsp;Meyer currently serves as The Chairman of the
Company&#146;s Board of Directors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On September&nbsp;12, 2006, concurrent with his appointment to the Office of the Chairman, Mr.
Weil, who is the former CEO and a Director of the Board, entered into an agreement with the
Company to provide consulting services on corporate management and operations and
decision-making within the Office of the Chairman (the &#147;Weil Agreement&#148;). Mr.&nbsp;Weil was paid
approximately $48,000 for such services for the period of September&nbsp;12, 2006 through October
29, 2006. Mr.&nbsp;Weil also received an option grant to purchase 25,000 shares with an exercise
price of 100% of then-current fair market value, 12,900 of which vested and 12,100 were
terminated as of October&nbsp;30, 2006 pursuant to the terms of the Weil Agreement. The Weil
Agreement was terminated upon Mr.&nbsp;Weil&#146;s appointment as Chief Executive Officer effective
October&nbsp;30, 2006. Mr.&nbsp;Weil departed the Company on October&nbsp;24, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(11)&nbsp;Income Taxes</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The provision for income taxes for the years ended October&nbsp;31, 2007, 2006 and 2005 is as
follows:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current provision (benefits):</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(285,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(262,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">404,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">254,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">341,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred provision (benefit):</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,356,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,074,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,573,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,439,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit related to option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">537,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,067,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-38 <!-- /Folio -->
</DIV>

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s income (loss)&nbsp;before provision for income taxes was allocated between domestic
and foreign tax jurisdictions for the years ended October&nbsp;31, 2007, 2006 and 2005 as follows:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12,697,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(145,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,126,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,648,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,898,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">838,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,049,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,288,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">U.S. income taxes were not provided for on a cumulative total of approximately $5.0&nbsp;million of
undistributed earnings for certain non-U.S. subsidiaries. Determination of the amount of
unrecognized deferred tax liability for temporary differences related to investments in these
non-U.S. subsidiaries that are essentially permanent in duration is not practicable. The
Company currently intends to reinvest these earnings in operations outside the U.S.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The components of the Company&#146;s deferred income tax assets and liabilities as of October&nbsp;31,
2007 and 2006 are as follows:
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax 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:30px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">324,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">379,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,622,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">810,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other nondeductible accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,982,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,747,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other deductible capitalized cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal and State Credit Carryovers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,210,000</TD>
    <TD>&nbsp;</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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,155,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,094,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Valuation Allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,434,000</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:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,721,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,094,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax 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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductible capitalized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,760,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,382,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,562,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total gross deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,142,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,942,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-39 <!-- /Folio -->
</DIV>

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
temporary differences described above represent differences between the tax basis of assets or
liabilities and their reported amounts in the financial statements that will result in taxable
or deductible amounts in future years when the reported amounts of the assets or liabilities
are recovered or settled. A portion of the deferred tax assets recognized relates to federal,
state and foreign deferred tax assets. Because the Company operates in multiple state and
foreign jurisdictions, it considered the need for a valuation allowance on a federal, state
and foreign basis, taking into account the effects of local tax law. Where a valuation
allowance was not recorded, the Company believes that there was sufficient positive evidence
to support its conclusion not to record a valuation allowance.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company has recorded a net deferred income tax liability of $1,421,000 and a net deferred
income tax asset of $1,152,000 as of October&nbsp;31, 2007 and 2006, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Management believes that it is more likely than not that the Company will not utilize a
majority of the net deferred tax assets in the future because the Company has a recent history
of cumulative tax losses, and has therefore booked a valuation allowance of $7,434,000.
Management believes that the Company&#146;s businesses will be profitable and will generate taxable
income in the near term for federal and foreign purposes; however, there can be no assurance
that the Company will generate taxable income or that all of deferred tax assets will be
utilized. The realization of this net asset may be dependent on the Company&#146;s ability to
generate sufficient taxable income in future years. Since realization is not assured,
management believes it is not more likely than not that the net deferred income tax asset will
be realized.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A reconciliation of the provision for income taxes at the statutory rate to the Company&#146;s
effective rate is as follows:
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computed income tax (benefit)&nbsp;at the expected
statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,757,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">596,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(438,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income tax (benefit), net of federal tax benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(592,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nondeductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign tax jurisdiction rate differential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credits generated and used</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(262,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(345,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(382,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subpart F income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in Valuation Allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,304,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,000</TD>
    <TD>&nbsp;</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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,067,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company has unused foreign tax credits at October&nbsp;31, 2007 of $545,000 that expire 2017,
but currently has a full valuation allowance against the credits since future tax benefits may
not be realized due to cumulative tax losses. The Company also has unused alternative minimum
tax credits at October&nbsp;31, 2007 of $12,000 that do not expire, but currently has a full
valuation allowance against the credits since future tax benefits may not be realized due to
cumulative tax losses. In addition, the Company has an unused Federal net operating loss
carryover at October&nbsp;31, 2007 of $3,159,000 and state net operating loss carryovers of
$494,000 that will expire by 2027, and currently has a full valuation
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-40 <!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">allowance against the credits since future tax benefits may not be realized due to cumulative
tax losses. The utilization of the net operating losses and tax credit carryforwards may be
further limited in the future if an ownership change occurs, as defined under Internal Revenue
Code Section&nbsp;382.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(12)&nbsp;Segment Information</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company has the following four reportable segments: Domestic; Gekko Brands, LLC; Ashworth
U.K., Ltd.; and Other International. Management evaluates segment performance based primarily
on revenues and income from operations. Interest income and expense, unusual or infrequent
items, and income tax expense are evaluated on a consolidated basis and are not allocated to
the Company&#146;s business segments. Segment information is summarized as follows as of and for
the years ended October&nbsp;31, 2007, 2006 and 2005:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-41 <!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued
</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">119,630,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">129,360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,176,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,208,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,768,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,511,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,236,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,987,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,416,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,485,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,685,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14,178,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,837,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7,914,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,699,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,095,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,540,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,976,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,643,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,870,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8,047,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,472,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures:</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,511,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,676,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,443,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">963,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,149,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,464,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,576,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,715,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92,337,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102,745,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,597,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,217,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,733,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,999,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,749,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,592,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,753,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">160,414,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,714,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets, at 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65,533,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,937,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58,206,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,209,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,301,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,306,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,683,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,977,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">97,492,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,829,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">87,484,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill:</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,865,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,086,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,707,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,869,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,801,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,556,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-42 <!-- /Folio -->
</DIV>

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

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(13)&nbsp;Results By Quarter (Unaudited)</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The unaudited results by quarter for the years ended October&nbsp;31, 2007 and 2006 are shown
below:
</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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>October 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38,272,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59,864,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">49,461,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54,592,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,617,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,241,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,883,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,026,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,155,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,533,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,649,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,779,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average basic
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,602,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,660,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average diluted
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,602,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,660,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Year ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Quarter</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(1)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,612,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">66,020,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52,816,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,152,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,883,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,626,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,328,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,355,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average basic
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,404,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average diluted
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,560,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,624,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The diluted EPS amounts for the first, second, third and fourth quarters of
the year ended October&nbsp;31 2007 and the first and fourth quarters of the year ended
October&nbsp;31, 2006 were calculated using the basic weighted-average shares as the
effect of stock options would be anti-dilutive due to the Company&#146;s loss position in
those quarters.</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>(14)&nbsp;Subsequent Events</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On January&nbsp;11, 2008, the Company and its material domestic subsidiaries as co-borrowers
entered into and consummated a new senior revolving credit facility, (the &#147;Credit Facility&#148;),
of up to $55.0&nbsp;million (subject to borrowing base availability), including a $15.0&nbsp;million
sub-limit for letters of credit (letters of credit will be 100% reserved against borrowing
availability) with Bank of America, N.A., (&#147;B of A&#148;). Proceeds of $30.9&nbsp;million under the
Credit Facility were used by the Company on January&nbsp;11, 2008 to payoff its existing term loan,
revolving credit facility and cash collateralize all outstanding letters of credit with Union
Bank of California, N.A., (&#147;Union Bank&#148;) and to pay related fees and expenses. The Credit
Facility is anticipated to be used in the future by the Company to issue standby or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-43 <!-- /Folio -->
</DIV>

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

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">commercial letters of credit and to finance ongoing working capital needs. The Credit Facility
expires on January&nbsp;11, 2012 and is collateralized by a substantial portion of the assets of
the Company and its subsidiaries party thereto (excluding real estate and certain other
assets).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Loans under the Credit Facility bear interest at a rate based either on (i)&nbsp;B of A&#146;s
referenced base rate or (ii)&nbsp;LIBOR (as defined in the Credit Facility), subject in each case
to performance pricing adjustments based on the Company&#146;s fixed charge coverage ratio that
range between LIBOR plus 1.25% and LIBOR plus 1.75%. Interest will be set at LIBOR plus 1.25%
for the first six months of the agreement and adjusting thereafter. The initial interest rate
applicable to borrowings under the Credit Facility is 7.25%. The Company also is required to
pay customary fees under the Credit Facility. At December&nbsp;31, 2007, The six month LIBOR was
5.95% All interest and per annum fees are calculated on the basis of actual number of days
elapsed in a year of 360&nbsp;days.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The borrowing base under the Credit Facility at any time equals the lesser of (i) $55.0
million, minus the amount of any outstanding letters of credit other than that have not been
cash collateralized and those that constitute charges owing to B of A, and (ii)&nbsp;the sum of (a)
eighty-five percent (85%) of the value of eligible accounts receivable, provided, however that
such percentage shall be reduced by 1.0% for each whole percentage point that the dilution
percent exceeds 5.0%; plus (b)&nbsp;the least of (x) $45.0&nbsp;million, (y)&nbsp;between 65% and 70%
(seasonal advance rate) of the Company&#146;s eligible inventory and eligible in-transit inventory,
plus a percentage of slow moving inventory (set at 65% for the first year, and dropping to 0%
by the fourth year) and (z)&nbsp;85% of the appraised net orderly liquidation value of eligible
inventory (including eligible in-transit inventory and eligible slow moving inventory); minus
(c)&nbsp;certain reserves; minus (d)&nbsp;outstanding obligations under the loan facility anticipated to
be provided by the Bank to Ashworth U.K., Ltd., as described below (the &#147;UK Loan Facility&#148;)
The borrowing base as of January&nbsp;11, 2008 approximately $41.5&nbsp;million. Unused availability,
taking into account outstanding letters of credit, as of January&nbsp;11, 2008, was approximately
$5.6&nbsp;million.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Credit Facility contains restrictive covenants limiting the ability of the Company and its
subsidiaries to take certain actions, including covenants limiting the Company&#146;s ability to
incur or guarantee additional debt, incur liens, pay dividends, repurchase stock or make other
distributions, sell assets, make loans and investments, prepay certain indebtedness, enter
into consolidations or mergers, and enter into transactions with affiliates. The Credit
Facility limits the ability of the Company to agree to certain change of control transactions,
because a &#147;change of control&#148; (as defined in the Credit Facility) is an event of default. The
Credit Facility also contains customary representations and warranties, affirmative covenants,
events of default, indemnities and other terms and conditions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The foregoing summary of the Credit Facility is qualified by reference to the Loan and
Security Agreement dated as of January&nbsp;11, 2008 attached as Exhibit&nbsp;10(aq) to the Company&#146;s
Form 10-K filed with the Commission on January&nbsp;14, 2008. Please see the Loan and Security
Agreement for a more detailed description of the terms of the Credit Facility.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and B of A are currently in the process of negotiating a UK Loan Facility in an
amount anticipated to be up to $10.0&nbsp;million. The applicable interest rate and fees under the
UK Loan Facility are anticipated to be comparable to the applicable interest rate and fees
under the Credit Facility. As noted above, loans and letters of credit under the UK Loan
Facility are anticipated to reduce the borrowing base under the Credit Facility. The Company
believes that the UK Credit Facility will enhance the Company&#146;s ability to meet its current
and long-term operating needs in the UK. Although there can be no assurance that the UK Loan
Facility will be consummated on the above-referenced terms or at all, the Company anticipates
that the UK Credit Facility will be completed during the second quarter of fiscal 2008.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-44 <!-- /Folio -->
</DIV>

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

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Board of Directors and Stockholders<BR>
Ashworth, Inc.:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Under date of January&nbsp;14, 2008, we reported on the consolidated balance sheets of Ashworth, Inc. (a
Delaware corporation) and subsidiaries as of October&nbsp;31, 2007 and 2006, and the related
consolidated statements of operations, stockholders&#146; equity, and cash flows for the years ended
October&nbsp;31, 2007 and 2006. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on this consolidated financial statement schedule based on
our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, such consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">/s/ Moss Adams, LLP

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Irvine, California<BR>
January&nbsp;14, 2008

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-45 <!-- /Folio -->
</DIV>

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

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





<DIV align="center" style="font-size: 10pt; margin-top: 6pt">ASHWORTH, INC. AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">SCHEDULE II &#151; VALUATION AND QUALIFYING ACCOUNTS
</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="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Allowances for Doubtful</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accounts and Sales Returns,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Markdowns and Other</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Allowances</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,438,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,061,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,149,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,664,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,826,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,188,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,136,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,494,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,830,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-46 <!-- /Folio -->
</DIV>

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

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



<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="023"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) 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>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ASHWORTH, INC.<BR>
(Registrant)</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: January 14, 2008&nbsp;</TD>
    <TD align="left">BY:&nbsp;</TD>
<TD colspan="2" align="left"><div style="border-bottom: 1px solid #000000">
/s/ Allan H. Fletcher
&nbsp;</div></TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Allan H. Fletcher&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
</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="5%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD align="LEFT" nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Allan H. Fletcher
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Allan H. Fletcher</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="LEFT" nowrap valign="top">/s/ Greg W. Slack
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Greg W. Slack</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Chief Financial Officer,
Principal Accounting Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ David M. Meyer
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
David M. Meyer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Chairman
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ Stephen G. Carpenter
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Stephen G. Carpenter</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ John M. Hanson, Jr.
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
John M. Hanson, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ James B. Hayes
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
James B. Hayes</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ Detlef H. Adler
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Detlef H. Adler</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ James G. O&#146;Connor
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
James G. O&#146;Connor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ John W. Richardson
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
John W. Richardson</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ Eric S. Salus
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Eric S. Salus</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD align="left" nowrap valign="top">/s/ Michael S. Koeneke
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
Michael S. Koeneke</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January 14, 2008</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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

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



<!-- link1 "EXHIBIT INDEX" -->
<DIV align="left"><A NAME="024"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Description of Exhibit</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap colspan="3" align="center" valign="top">10(ap)
</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consulting
agreement between Fletcher Leisure Group Ltd. and the
Company, effective January&nbsp;11, 2008.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD nowrap colspan="3" align="center" valign="top">10(aq)
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Loan agreement, effective January&nbsp;11, 2008 by and between
the Company and Bank of America, N. A.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Subsidiaries of the Registrant.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Independent Registered Public Accounting Firm Consent.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">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 Allan H. Fletcher.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">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 Greg W. Slack.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">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 Allan H. Fletcher.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">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 Greg W. Slack.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AP)
<SEQUENCE>2
<FILENAME>a37077exv10wxapy.htm
<DESCRIPTION>EXHIBIT 10.(AP)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wxapy</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10 (ap)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Ashworth &#150; FLG NY</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Consulting Agreement</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS CONSULTING AGREEMENT (this &#147;<U>Agreement</U>&#148;) is made by and between Fletcher Leisure
Group, Ltd., a New York corporation (&#147;<U>FLG NY</U>&#148;), and Ashworth, Inc., a Delaware corporation
(the&nbsp;&#147;<U>Company</U>&#148;), effective as of January&nbsp;11, 2008. This Agreement sets forth the services
to be provided to the Company by FLG NY and the terms and conditions of the delivery of those
services.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">1. <U>Engagement</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Subject to the terms of this Agreement, the Company hereby engages FLG NY to
provide the Company with advisory and management consulting services that fulfill the
duties required of the Office of the Chief Executive Officer (&#147;<U>CEO</U>&#148;) of the
Company, through a management consultant designated by FLG NY (the &#147;<U>Management
Consultant</U>&#148;). The initial Management Consultant designated by FLG NY to fulfill
its contractual responsibilities under this Agreement will be Allan&nbsp;H. Fletcher. FLG
NY shall not designate a different Management Consultant to provide services under this
Agreement without the prior written consent of the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In order to maintain the safety and security of the physical premises of the
Company, FLG NY shall direct and cause the Management Consultant to perform contracted
management consulting services on working days and hours, prescribed by FLG NY, that
are to the maximum degree possible consistent with the Company&#146;s working days and hours
of work provided by the Company&#146;s executive employees.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">While remaining at all times solely as an employee of FLG NY, the Management
Consultant may nonetheless be permitted to use the Company&#146;s email system and
letterhead and carry business cards identifying his responsibility or title at the
Company, and be referenced in the organizational chart of the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY will at all times during the term of this Agreement maintain compliance
with all federal, state and local laws, regulations and ordinances, including, without
limitation, U.S. employment, tax and immigration laws.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY shall not, directly or indirectly, employ, use, request or otherwise
make available, the labor, talents or energy of any person not eligible for employment
by FLG NY under the terms and conditions of the Immigration Reform and Control Act of
1986 (the &#147;<U>Act</U>&#148;), as it shall now exist or hereafter be modified or amended, at
any time during the term of this Agreement. FLG NY shall supply all documents
requested by the Company that relate to the eligibility of any person employed by FLG
NY to provide services to the Company under this Agreement.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">2. <U>Duties</U>: FLG NY shall cause the Management Consultant to perform the customary duties
of a CEO, including, without limitation:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">overseeing the development and execution by Company personnel of strategies and
actions approved by the Company&#146;s Board of Directors;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">regularly reporting to the Company&#146;s Board of Directors on the development and
execution of the Company&#146;s business plan;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">overseeing the Company&#146;s disclosure and disclosure controls, and signing the
Company&#146;s filings with the Securities and Exchange Commission; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">such other duties as are reasonably requested by the Board of Directors or
Chairman of the Company.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">3. <U>Consulting Fees</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company will pay FLG NY a one-time fee of $75,000 upon execution of this
Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company will pay FLG NY a monthly consulting fee of $9,000, payable in
arrears.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY may receive a cash incentive fee, the amount of which, if any, will be
determined annually by the Company&#146;s Compensation and Human Resource Committee based on
achievement of the Company&#146;s objectives and FLG NY&#146;s accomplishment of the prescribed
objectives for the CEO. The objectives for the Company and the CEO will be set out in
the Company&#146;s annual business plan, to be developed by senior management of the Company
and approved by the Board of Directors. The target incentive fee for fiscal year 2008
will be $500,000, assuming full achievement of the Company&#146;s 2008 business plan
objectives. If the Company terminates this Agreement without cause during a fiscal
year, the Company shall promptly pay FLG NY as soon as practicable (but no later than
90&nbsp;days after the applicable fiscal year end) a pro-rata portion of any cash incentive
fee determined by the Compensation and Human Resources Committee to have been earned
for such fiscal year.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Concurrent with the execution and delivery hereof, the Company will grant FLG
NY 100,000 non-qualified options to purchase shares of the Company&#146;s common stock at an
exercise price of $5.48 per share. Options to purchase 50,000 shares of the Company&#146;s
common stock will vest on October&nbsp;24, 2008 and the remaining options will vest on
October&nbsp;24, 2009. The option vesting will be accelerated and the options will become
immediately exercisable upon the Company&#146;s termination of this Agreement either without
cause, as defined below, or as a result of a change in control. The foregoing options
will be exercisable for a period of time from the vesting date until the earlier of
(i)&nbsp;one year after termination of this Agreement, and (ii)&nbsp;ten years after the date of
grant.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">4. <U>Business Expenses</U>: FLG NY will be reimbursed by the Company for:
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">normal, ordinary and reasonable business expenses (including business class
airfare) incurred by FLG NY in connection with the performance of FLG NY&#146;s duties
hereunder, upon submission of receipts substantiating the expenses claimed in
accordance with Company policy; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">rental of reasonable residential or hotel accommodations in the Carlsbad,
California area for the Management Consultant while he is providing services to the
Company at its headquarters in the event the Company does not itself make such
accommodations available.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">5. <U>Confidentiality; Non-Competition; Solicitation of Employees; Return of Property</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY acknowledges that, in the course of FLG NY&#146;s engagement by the Company,
it will have access to confidential information concerning the organization and
functioning of the business of the Company and that such information is a valuable
trade secret and the sole property of the Company. Accordingly, except as required by
law, legal process, or in connection with any litigation between the parties hereto
with respect to matters arising out of this Agreement, FLG NY shall not, and shall
cause the Management Consultant and other of its employees to not, disclose or furnish
any confidential information of the Company to any person other than an employee or
director of the Company, at any time during the term of this Agreement or thereafter.
FLG NY shall not, and shall cause the Management Consultant and other of its employees
to not, use any confidential information of the Company for its or their own direct or
indirect benefit.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">For the purposes of this Agreement, information will not be considered
&#147;confidential information&#148; to the extent that such information:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">is in the public domain, or hereafter becomes generally known
or available through no action or omission by FLG NY;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">is furnished by the Company or an affiliate to any person
(other than a subsidiary or affiliate of the Company) without restriction on
disclosure, provided that information furnished by, or at the direction of, the
Management Consultant acting in his capacity as CEO under this Agreement will
be considered confidential information, notwithstanding the absence of any
restriction on disclosure;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">becomes known to FLG NY from a source other than the Company,
or an affiliate of the Company, without a breach of this Agreement or any other
agreement with the Company, or an affiliate of the Company, and without any
restriction on disclosure; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">is within the general knowledge or skill of any FLG NY employee
to the extent acquired prior to this engagement.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">During the term of this Agreement and for a period of one year after the
termination of this Agreement, FLG NY will not, and shall cause the Management
Consultant and</DIV></TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">other of its employees to not, directly or indirectly, provide services to any person or
entity that competes or is planning to compete with the Company; <U>provided</U>,
<U>however</U>, that neither (i)&nbsp;passive investment of up to 5% of the outstanding
voting securities or similar equity interest in a publicly held entity, nor (ii)
provision of services to affiliates of FLG NY, will constitute a breach of this
Agreement.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Excluding general employment solicitations directed at the public, during the
term of this Agreement and for a period of two years after the termination of this
Agreement, FLG NY will not, and shall cause the Management Consultant and other of its
employees to not, directly or indirectly:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">solicit, induce or attempt to influence any person or business
that is an account, customer or client of the Company or any subsidiary to
restrict or cancel the business of any such account, customer or client with
the Company or any subsidiary; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">solicit any employee or sales representative of the Company or
any subsidiary or affiliate to leave his or her employment with or sales
representation of the Company or any subsidiary or affiliate.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">If this Agreement is terminated, FLG NY shall return to an officer of the
Company any and all confidential information of the Company then in its or its
employees&#146; possession and shall provide passwords for computer files stored on the
Company&#146;s computers used by the Management Consultant.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">6. <U>Independent Contractor</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Nothing in this Agreement shall be construed as creating an employer-employee
relationship, a partnership, a co-employment relationship or a joint venture between
the Company and FLG NY or between the Company and the Management Consultant. FLG NY
shall exercise sole and exclusive control over its employees, consultants or
independent contractors who provide services to the Company on behalf of FLG NY,
including the Management Consultant, and over the labor and employee relations policies
and policies relating to wages, hours, working conditions or other conditions of its
employees, consultants or independent contractors.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Notwithstanding any other term of this Agreement, the Management Consultant
will be supervised and directed in the performance and fulfillment of FLG NY&#146;s
responsibilities under this Agreement solely by the Chief Executive Officer of FLG NY
(&#147;<U>FLG NY&#146;s CEO</U>&#148;) and report regularly to FLG NY&#146;s CEO concerning developments,
progress and challenges relating to or arising from the services of the Management
Consultant under this Agreement. FLG NY&#146;s CEO shall not be the same person as the
Management Consultant. Accordingly, should the Company desire any changes in the
performance of the Management Consultant&#146;s services provided on behalf of FLG NY to the
Company under this Agreement, the Company through its designated representative shall
communicate such desired changes to FLG NY&#146;s CEO so that FLG NY&#146;s CEO may instruct the
Management Consultant in any change in the rendition of management consulting services
to the Company.</DIV></TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">7. <U>Inventions and Intellectual Property</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company shall own, and FLG NY hereby disclaims, any right, title or
interest whatsoever to, and in, all ideas, inventions, trade secrets, publications,
works of authorship, copyrights, copyright applications, moral rights, know-how,
drawings, sketches, configurations, models, prototypes, materials, machines, designs,
concepts, schematics, layouts, processes, patents, patent applications and improvements
(collectively, &#147;<U>Inventions and Intellectual Property</U>&#148;) that relate to:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the performance of this Agreement; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the Company&#146;s actual or anticipated business or products at the
time the Inventions and Intellectual Property are conceived or reduced to
practice.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY shall promptly and fully disclose any Inventions and Intellectual
Property to the Company.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY hereby assigns to the Company all right, title, and interest to and in
any Inventions and Intellectual Property in the United States and elsewhere. FLG NY
shall execute or cause to be executed all such documents and take all such further
action as is necessary to confirm or fully vest all Inventions and Intellectual
Property in the Company, including by providing assistance in securing patents,
copyrights or other proprietary rights.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">8. <U>Benefits and Taxes</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Neither FLG NY nor the Management Consultant will be entitled to any benefits
paid by the Company to its employees.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company will regularly report amounts paid to FLG NY by filing Form
1099-MISC with the Internal Revenue Service, as required by law. FLG NY and the
Management Consultant will be solely responsible for any tax consequences applicable to
FLG NY or the Management Consultant by reason of this Agreement. The Company will not
be responsible for the payment of any federal, state or local taxes or contributions
imposed under any employment insurance, social security, income tax or other tax law or
regulation with respect to FLG NY&#146;s performance of this Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY shall pay, as and when they become due, all taxes owed as a result of
reimbursement of expenses, payment of consulting fees or the exercise of stock options,
or that otherwise become payable in the United States or any other city, state, country
or jurisdiction as a result of the performance of this Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY hereby agrees to indemnify the Company from and against any and all
claims, losses, costs, fines, assessments, fees, liabilities, damages or injuries
(collectively, &#147;<U>Damages</U>&#148;) suffered by the Company as a result of any breach by
FLG NY of this Section&nbsp;8. FLG NY further agrees to indemnify the Company for any
Damages suffered by the Company as a result of any legal determination that FLG</DIV></TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV style="margin-top: 6pt"><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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">NY or the Management Consultant is not an independent contractor. FLG NY acknowledges
and affirms that it has not received any tax or other legal advice from the Company in
connection with this Agreement.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">9. <U>Representations and Warranties</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company represents and warrants to FLG NY that:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">it is a corporation duly authorized and validly existing under
the laws of the state of Delaware; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">this Agreement has been duly authorized by all necessary
corporate action and constitutes a binding agreement of the Company,
enforceable against the Company in accordance with its terms.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY represents and warrants to the Company that:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">it is a corporation duly authorized and validly existing under
the laws of the state of New York;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">this Agreement has been duly authorized by all necessary
corporate action and constitutes a binding agreement of FLG NY, enforceable
against FLG NY in accordance with its terms; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the initial Management Consultant is not obligated to assign
Inventions and Intellectual Property to any entity other than FLG NY.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">10. <U>Term and Termination</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement will remain effective until terminated by either party.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement may be terminated by:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">either party, without cause, by providing written notice of
termination to the other party;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the Company, for cause, effective immediately, by providing
written notice to FLG NY specifying in reasonable detail the cause for
termination; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">FLG NY, for material breach of this Agreement by the Company,
if the Company has not cured such breach within 7&nbsp;days of receiving written
notice thereof from FLG NY, by providing a written notice to the Company of
termination.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any termination of this Agreement by FLG NY as a result of a reduction in the
scope of the duties to be performed by FLG NY (including the Management Consultant)
under this Agreement will be deemed a termination without cause by the Company for
purposes of the vesting of the stock options granted to FLG NY under this Agreement.</DIV></TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In the event of any termination of this Agreement, whether voluntary or
involuntary, or with or without cause, no additional payments or benefits will be
provided, other than the acceleration of the stock options granted pursuant to
Section&nbsp;3(d) hereof under the specific circumstances described in Section&nbsp;3(d) hereof
and the possibility of a pro rata share of the cash incentive fee as provided in
Section&nbsp;3(c).</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">For purposes of this Agreement, &#147;cause&#148; shall mean:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">material breach of this Agreement by FLG NY;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any act or acts of personal dishonesty by FLG NY or the
Management Consultant;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the conviction of FLG NY or the Management Consultant of a
felony;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">violation of the Company&#146;s policies or code of conduct by FLG
NY or the Management Consultant;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">violation by FLG NY or the Management Consultant of any
confidentiality or non-competition agreement with the Company or any affiliate
of the Company; or</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the willful engaging by FLG NY or the Management Consultant in
misconduct that is injurious to the Company.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The provisions of Section&nbsp;5 will survive termination of this Agreement.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">If this Agreement is terminated in the middle of any month, the Company shall
promptly pay a prorated amount of the monthly consulting fee payable under Section
3(b).</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">11. <U>Miscellaneous</U>:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All notices under this Agreement must be in writing and will be duly given
under this Agreement: (i)&nbsp;upon delivery, if delivered by overnight courier with
confirmation of delivery; or (ii)&nbsp;on the third business day after the postmark date, if
mailed by certified or registered mail to the address listed below with postage
prepaid. Addresses to either party are as provided below, or as subsequently modified
by written notice to the other party.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If to the Company:
</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="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">Attention: Chairman of the Board <BR>
Ashworth, Inc.<BR>
2765 Loker Avenue West<BR>
Carlsbad, CA 90210<BR>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If to FLG NY:
</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="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">Attention: Chief Executive Officer<BR>
Fletcher Leisure Group Ltd.<BR>
2002 Ridge Road<BR>
Champlain, NY 12919<BR>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement will be interpreted and enforced in accordance with the internal
laws of the State of Delaware. FLG NY hereby submits to the jurisdiction of, and
consents to the enforcement of this Agreement in, the federal and state courts located
in the State of Delaware.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement may not be modified, amended or rescinded except by a written
agreement signed by both FLG NY and the Company&#146;s Chairman of the Board. No waiver of
any of the provisions of this Agreement will be deemed or will constitute a waiver of
any other provisions hereof (whether or not similar); nor will such waiver constitute a
continuing waiver.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement sets forth the entire agreement between the parties, and there
are no prior or contemporaneous representations, promises or conditions, whether oral
or written, to the contrary.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">This Agreement may be executed in counterparts, each of which will be deemed an
original, and both of which together will constitute the same document.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement has been executed by the parties as of January&nbsp;11, 2008.
</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="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ASHWORTH, INC.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-bottom: 1px solid #000000">/s/ David
M. Meyer</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">David M. Meyer</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 6pt">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FLETCHER LEISURE GROUP, LTD.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<tr STYLE="FONT-SIZE:10PT">
<td>&nbsp;</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">By:
</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" style="border-bottom: 1px solid #000000">/s/ Mark
Fletcher</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mark Fletcher</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><I>&#091;SIGNATURE PAGE TO CONSULTING AGREEMENT&#093;</I>
</DIV>



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




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AQ)
<SEQUENCE>3
<FILENAME>a37077exv10wxaqy.htm
<DESCRIPTION>EXHIBIT 10.(AQ)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wxaqy</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><b>Exhibit&nbsp;10
(aq)</b>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC.,</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">together with any of its Subsidiaries now or in the future party hereto,

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">as Borrowers

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>LOAN AND SECURITY AGREEMENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Dated as of January&nbsp;11, 2008

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">$55,000,000

</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BANK OF AMERICA, N.A.,</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">as Lender

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</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="88%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 1 DEFINITIONS; RULES OF CONSTRUCTION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.1 Definitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2 Accounting Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3 Uniform Commercial Code</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.4 Certain Matters of Construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 2 CREDIT FACILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.1 Revolver Commitment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.2 &#091;Intentionally Deleted&#093;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.3 Letter of Credit Facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 3 INTEREST, FEES AND CHARGES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1 Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2 Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3 Computation of Interest, Fees, Yield Protection</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.4 Reimbursement Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.5 Illegality</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.6 Inability to Determine Rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.7 Increased Costs; Capital Adequacy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.8 Mitigation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.9 Funding Losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.10 Maximum Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 4 LOAN ADMINISTRATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1 Manner of Borrowing and Funding Revolver Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2 Number and Amount of LIBOR Loans; Determination of Rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3 Borrower Agent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4 One Obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5 Effect of Termination</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 5 PAYMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1 General Payment Provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2 Repayment of Revolver Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.3 &#091;Intentionally Deleted&#093;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.4 Payment of Other Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.5 Marshaling; Payments Set Aside</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.6 Application of Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.7 Loan Account; Account Stated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.8 Taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.9 Nature and Extent of Each Borrower&#146;s Liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 6 CONDITIONS PRECEDENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1 Conditions Precedent to Initial Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2 Conditions Precedent to All Credit Extensions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.3 Limited Waiver of Conditions Precedent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="88%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 7 COLLATERAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1 Grant of Security Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2 Lien on Deposit Accounts; Cash Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3 &#091;Intentionally Deleted&#093;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4 Other Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.5 No Assumption of Liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.6 Further Assurances; Extent of Liens</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.7 Foreign Subsidiary Stock. Excluded Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 8 COLLATERAL ADMINISTRATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.1 Borrowing Base Certificates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.2 Administration of Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.3 Administration of Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.4 Administration of Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.5 Administration of Deposit Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.6 General Provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.7 Power of Attorney</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 9 REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.1 General Representations and Warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.2 Complete Disclosure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 10 COVENANTS AND CONTINUING AGREEMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.1 Affirmative Covenants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.2 Negative Covenants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 11 EVENTS OF DEFAULT; REMEDIES ON DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.1 Events of Default</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.2 Remedies upon Default</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.3 License</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.4 Setoff</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.5 Remedies Cumulative; No Waiver</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SECTION 12 MISCELLANEOUS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.1 Consents, Amendments and Waivers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.2 Indemnity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.3 Notices and Communications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.4 Performance of Borrowers&#146; Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.5 Credit Inquiries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.6 Severability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.7 Cumulative Effect; Conflict of Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.8 Counterparts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.9 Entire Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.10 No Control; No Advisory or Fiduciary Responsibility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.11 Confidentiality</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.12 &#091;Intentionally Omitted&#093;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.13 GOVERNING LAW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.14 Consent to Forum; Arbitration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.15 Waivers by Borrowers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><b>(ii)</b><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="88%">&nbsp;</TD>
    <TD width="5%">&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 nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.16 Patriot Act Notice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">12.17 Judgment Currency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">LIST OF SCHEDULES
</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="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;E
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Existing Letters of Credit</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;G-1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiary Guarantors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;P-1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Permitted Asset Disposition</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;P-2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Permitted Capital Leases</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;P-3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Permitted Investments</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;6.1(h)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Foreign Qualifications</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;8.2.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Canadian Accounts</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;8.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deposit Accounts</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;8.6.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business Locations</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Names and Capital Structure</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Former Names and Companies</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Surety Obligations</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Patents, Trademarks, Copyrights and Licenses</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Matters</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pension Plans</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;9.1.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Labor Relations</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;10.1.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Post-Closing Covenants</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;10.2.1(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Borrowed Money</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;10.2.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Existing Liens</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;10.2.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Existing Affiliate Transactions</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><b>(iii)</b><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>LOAN AND SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS LOAN AND SECURITY AGREEMENT </B>is dated as of January&nbsp;11, 2008, among <B>ASHWORTH, INC.</B><I>, </I>a
Delaware corporation (&#147;<U>Parent</U>&#148;), those of Parent&#146;s Subsidiaries now or in the future
signatory hereto (each such Subsidiary and Parent, individually a &#147;Borrower&#148;, and collectively,
&#147;<U>Borrowers</U>&#148;), and <B>BANK OF AMERICA, N.A.</B>, a national banking association (&#147;<U>Lender</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>R E C I T A L S:</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowers have requested that Lender provide a credit facility to Borrowers to finance their
mutual and collective business enterprise. Lender is willing to provide the credit facility on the
terms and conditions set forth in this Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW, THEREFORE</B>, for valuable consideration hereby acknowledged, the parties agree as follows:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 1 DEFINITIONS; RULES OF CONSTRUCTION</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 </B><U><B>Definitions</B></U><B>. </B>As used herein, the following terms have the meanings set forth
below:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Account</U>: as defined in the UCC, including all rights to payment for goods sold or
leased, or for services rendered.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Account Debtor</U>: a Person who is obligated under an Account, Chattel Paper or General
Intangible.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Accounts Formula Amount</U>: 85% of the Value of Eligible Accounts; <U>provided</U>,
<U>however</U>, that such percentage shall be reduced by 1.0% for each whole percentage point
(after rounding any partial percentage point to the nearest whole percentage point) that the
Dilution Percent exceeds 5.0%.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Acquisition Consideration</U>: the purchase consideration for any Permitted Acquisition
(other than Equity Interests in Parent) and all other payments paid to or for the benefit of any
seller by any Borrower or any Subsidiary in exchange for, or as part of, or in connection with, any
Permitted Acquisition, whether paid in cash or properties or otherwise and whether payable at or
prior to the consummation of such Permitted Acquisition or deferred for payment at any future time,
whether or not any such future payment is subject to the occurrence of any contingency, and
includes any and all payments representing the purchase price and any assumptions of Debt,
&#147;earn-outs&#148; and other agreements to make any payment the amount of which is, or the terms of
payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow
or profits (or the like) of any person or business; provided that any such future payment that is
subject to a contingency shall be considered Acquisition Consideration only to the extent of the
reserve, if any, required under GAAP at the time of such sale to be established in respect thereof
by any Borrower or any Subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Affiliate</U>: 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. &#147;<U>Control</U>&#148; means the possession, directly or indirectly, of the power
to direct or
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. &#147;<U>Controlling</U>&#148; and &#147;<U>Controlled</U>&#148;
have correlative meanings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Allocable Amount</U>: as defined in <B>Section&nbsp;5.9.3</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Anti-Terrorism Laws</U>: any laws relating to terrorism or money laundering, including
the Patriot Act.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Applicable Inventory Advance Rate</U>: 70% during each Seasonal Advance Rate Period; and
65% at all other times.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Applicable Law</U>: all laws, rules, regulations and governmental guidelines applicable
to the Person, conduct, transaction, agreement or matter in question, including all applicable
statutory law, common law and equitable principles, and all provisions of constitutions, treaties,
statutes, rules, regulations, orders and decrees of Governmental Authorities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Applicable Margin</U>: with respect to any Type of Loan, the margin set forth below, as
determined by the Fixed Charge Coverage Ratio for the last Fiscal Quarter with respect to which
financial statements have been delivered pursuant to <B>Section&nbsp;10.1.2</B>:
</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="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&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">Base Rate</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">LIBOR</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Fixed Charge</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Revolver</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Revolver</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Level</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Coverage Ratio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Loans</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Loans</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">I
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#062; 1.40:1.00
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.00%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.25%</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">II
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#062; 1.20:1.00 <U>&#060;</U><br>1.40:1.00
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.00%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.50%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">III
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><U>&#060;</u> 1.20:1.00
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.00%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1.75%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Until May&nbsp;1, 2008, margins shall be determined as if Level I were applicable. Thereafter, the
margins shall be subject to increase or decrease upon receipt by Lender pursuant to <B>Section&nbsp;10.1.2</B>
of the financial statements and corresponding Compliance Certificate for the last Fiscal Quarter,
which change shall be effective on the first day of the calendar month following receipt. If, by
the first day of a month, any financial statements and Compliance Certificate due in the preceding
month have not been received, then the margins shall be determined as if Level III were applicable,
from such day until the first day of the calendar month following actual receipt.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Ashworth Store I:</U> Ashworth Store I, Inc., a Delaware corporation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Ashworth Store II:</U> Ashworth Store II, Inc., a Delaware corporation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Ashworth Store III:</U> Ashworth Store III, Inc., a Delaware corporation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Ashworth UK</U>: Ashworth U.K., Ltd.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Asset Disposition</U>: a sale, lease, license, consignment, transfer or other disposition
of Property of an Obligor, including a disposition of Property in connection with a sale-leaseback
transaction or synthetic lease.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Availability</U>: the Borrowing Base minus the principal balance of all Revolver Loans.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Availability Block</U>: $5,000,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Availability Reserve</U>: the sum (without duplication) of (a)&nbsp;the Inventory Reserve;
(b)&nbsp;the Rent and Charges Reserve; (c)&nbsp;the LC Reserve; (d)&nbsp;the Bank Product Reserve; (e)&nbsp;all accrued
Royalties, whether or not then due and payable by a Borrower; (f)&nbsp;the aggregate amount of
liabilities secured by Liens upon Collateral that are senior to Lender&#146;s Liens (but imposition of
any such reserve shall not waive an Event of Default arising therefrom); (g)&nbsp;the Availability
Block; and (h)&nbsp;such additional reserves, in such amounts and with respect to such matters, as
Lender in its Credit Judgment may elect to impose from time to time.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Back-Up LC</U>: the Letter of Credit issued hereunder for the benefit of Union Bank of
California, which Back-Up L/C shall (i)&nbsp;be in the initial face (but declining) amount of, and
(ii)&nbsp;only support drawings made under, the Existing Letters of Credit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Bank Product</U>: any of the following products, services or facilities extended to any
Borrower or Subsidiary by Lender or any of its Affiliates: (a)&nbsp;Cash Management Services;
(b)&nbsp;products under Hedging Agreements; (c)&nbsp;commercial credit card and merchant card services; and
(d)&nbsp;leases and other banking products or services as may be requested by any Borrower or
Subsidiary, other than Letters of Credit or the Real Estate Term Loan or the UK Loan Facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Bank Product Debt</U>: Debt and other obligations of an Obligor relating to Bank
Products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Bank Product Reserve</U>: the aggregate amount of reserves established by Lender from
time to time in its reasonable discretion in respect of Bank Product Debt.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Bankruptcy Code</U>: Title 11 of the United States Code.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Base Rate</U>: the rate of interest announced by Lender from time to time as its prime
rate. Such rate is a rate set by Lender based upon various factors including its costs and desired
return, general economic conditions and other factors, and is used as a reference point for pricing
some loans, which may be priced at, above or below such announced rate. Any change in such rate
announced by Lender shall take effect at the opening of business on the day specified in the public
announcement of such change.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Base Rate Loan</U>: any Loan that bears interest based on the Base Rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Base Rate Revolver Loan</U>: a Revolver Loan that bears interest based on the Base Rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Board of Governors</U>: the Board of Governors of the Federal Reserve System.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrowed Money</U>: with respect to any Obligor, without duplication, its (a)&nbsp;Debt that
(i)&nbsp;arises from the lending of money by any Person to such Obligor, (ii)&nbsp;is evidenced by notes,
drafts, bonds, debentures, credit documents or similar instruments, (iii)&nbsp;accrues interest or is a
type upon which interest charges are customarily paid (excluding trade payables or taxes owing in
the ordinary course of business), or (iv)&nbsp;was issued or assumed as full or partial payment for
Property; (b)&nbsp;Capital Leases; (c)&nbsp;reimbursement obligations with respect to letters of credit; and
(d)&nbsp;guaranties of any Debt of the foregoing types owing by another Person.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrower Agent</U>: as defined in <B>Section&nbsp;4.3</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrowing</U>: a group of Loans of one Type that are made on the same day or are
converted into Loans of one Type on the same day.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrowing Base</U>: on any date of determination, an amount equal to the lesser of
(a)&nbsp;the Revolver Commitment, <U>minus</U> the LC Reserve, or (b)&nbsp;the sum of the Accounts Formula
Amount, <U>plus</U> the Inventory Formula Amount, <U>minus</U> the Availability Reserve,
<U>minus</U> all outstanding obligations under the UK Loan Facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrowing Base Certificate</U>: a certificate, in substantially the form agreed to by
Lender and Borrower Agent prior to the date hereof or otherwise in form and substance reasonably
satisfactory to Lender, by which Borrowers certify calculation of the Borrowing Base.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Business Day</U>: any day other than a Saturday, Sunday or other day on which commercial
banks are authorized to close under the laws of, or are in fact closed in, North Carolina and
California, and if such day relates to a LIBOR Loan, any such day on which dealings in Dollar
deposits are conducted between banks in the London interbank Eurodollar market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capital Expenditures</U>: all liabilities incurred, expenditures made or payments due
(whether or not made) by a Borrower or Subsidiary for the acquisition of any fixed assets, or any
improvements, replacements, substitutions or additions thereto with a useful life of more than one
year, including the principal portion of Capital Leases, but excluding proceeds of Asset
Dispositions re-invested in the business of the Borrower or Subsidiary making such Asset
Disposition to the extent such re-investment is permitted hereunder. For purposes of this
definition, the purchase price of equipment or other fixed assets that are purchased simultaneously
with the trade-in of existing assets or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the net amount by which such purchase price exceeds the credit
granted by the seller of such assets for the assets being traded in at such time or the amount of
such insurance proceeds, as the case may be.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capital Lease</U>: any lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capital Lease Lien</U>: a Lien that secures a Capital Lease, encumbering only the assets
leased with such Capital Lease and accessions to, and products and proceeds (including insurance
condemnation proceeds) of, such leased assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Collateral</U>: cash, and any interest or other income earned thereon, that is
delivered to Lender to Cash Collateralize any Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Collateral Account</U>: a demand deposit, money market or other account maintained
with Lender and subject to Lender&#146;s Liens.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Collateralize</U>: the delivery of cash to Lender, as security for the payment of
Obligations, in an amount equal to (a)&nbsp;with respect to LC Obligations, 105% of the aggregate LC
Obligations, and (b)&nbsp;with respect to any other Obligations (including Obligations arising under
Bank Products) other than contingent Obligations, Lender&#146;s good faith estimate of the amount due or
to become due, including all fees and other amounts relating to such Obligations. &#147;<U>Cash
Collateralization</U>&#148; has a correlative meaning.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Equivalents</U>: (a)&nbsp;marketable obligations issued or unconditionally guaranteed by,
and backed by the full faith and credit of, the United States government, maturing within 12&nbsp;months
of the date of acquisition; (b)&nbsp;certificates of deposit, time deposits and bankers&#146; acceptances
maturing within 12&nbsp;months of the date of acquisition, and overnight bank deposits, in each case
which are issued by a commercial bank organized under the laws of the United States or any state or
district thereof, rated A-1 (or better) by S&#038;P or P-1 (or better) by Moody&#146;s at the time of
acquisition, and (unless issued by Lender) not subject to offset rights; (c)&nbsp;repurchase obligations
with a term of not more than 30&nbsp;days for underlying investments of the types described in clauses
(a)&nbsp;and (b)&nbsp;entered into with any bank meeting the qualifications specified in clause (b);
(d)&nbsp;commercial paper rated A-1 (or better) by S&#038;P or P-1 (or better) by Moody&#146;s, and maturing
within nine months of the date of acquisition; and (e)&nbsp;shares of any money market fund that has
substantially all of its assets invested continuously in the types of investments referred to
above, has net assets of at least $500,000,000 and has the highest rating obtainable from either
Moody&#146;s or S&#038;P.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Cash Management Services</U>: any services provided from time to time by Lender or any of
its Affiliates to any Borrower or Subsidiary in connection with operating, collections, payroll,
trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable,
electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>CERCLA</U>: the Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. &#167; 9601 <U>et</U> <U>seq</U>.).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Change in Law</U>: the occurrence, after the date hereof, of (a)&nbsp;the adoption or taking
effect of any law, rule, regulation or treaty; (b)&nbsp;any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any Governmental
Authority; or (c)&nbsp;the making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Change of Control</U>: (a)&nbsp;Parent ceases to own and control, beneficially and of record,
directly or indirectly, all Equity Interests in any Material Obligor (except in connection with a
merger or consolidation permitted under <U>Section&nbsp;10.2.9</U>); (b)&nbsp;a change in the majority of
directors of Parent, unless approved by the then majority of directors; or (c)&nbsp;all or substantially
all of the assets of a Subsidiary of the Parent or a Borrower are sold or transferred (except in
connection with a merger or consolidation permitted under <U>Section&nbsp;10.2.9)</U> without providing
Lender at least 30&nbsp;day&#146;s prior written notice of such sale and obtaining the written consent of
Lender which consent shall not be unreasonably withheld.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Claims</U>: all liabilities, obligations, losses, damages, penalties, judgments,
proceedings, interest, costs and expenses of any kind (including remedial response costs,
reasonable attorneys&#146; fees and Extraordinary Expenses) at any time (including after Full Payment of
the Obligations) incurred by or asserted against any Indemnitee in any way relating to (a)&nbsp;any
Loans, Letters of Credit, Loan Documents, or the use thereof or transactions relating thereto,
(b)&nbsp;any action taken or omitted to be taken by any Indemnitee in connection with any Loan
Documents, (c)&nbsp;the existence or perfection of any Liens, or realization upon any Collateral,
(d)&nbsp;exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e)&nbsp;failure
by any Obligor to perform or observe any terms of any Loan Document, in each case including all
costs and expenses relating to any investigation, litigation, arbitration or other proceeding
(including an
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a
party thereto.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Closing Date</U>: as defined in <B>Section&nbsp;6.1</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Code</U>: the Internal Revenue Code of 1986.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Collateral</U>: all Property described in <B>Section&nbsp;7.1</B>, all Property described in any
Security Documents as security for any Obligations, and all other Property that now or hereafter
secures (or is intended to secure) any Obligations; provided, however, that the term &#147;Collateral&#148;
shall not include, and no security interest hereunder or any other Loan Documents shall attach to,
any Excluded Assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Commitment Termination Date</U>: the earliest to occur of (a)&nbsp;the Revolver Termination
Date; (b)&nbsp;the date on which Borrowers terminate the Revolver Commitment pursuant to <B>Section&nbsp;2.1.3</B>;
or (c)&nbsp;the date on which the Revolver Commitment is terminated pursuant to <B>Section&nbsp;11.2</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Commitments</U>: the Revolver Commitment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compliance Certificate</U>: a certificate, in form and substance reasonably satisfactory
to Lender, by which Borrowers certify compliance with <B>Sections&nbsp;10.1.2 </B>and calculate the applicable
Level for the Applicable Margin.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Contingent Obligation</U>: any obligation of a Person arising from a guaranty, indemnity
or other assurance of payment or performance of any Debt, lease, dividend or other obligation
(&#147;<U>primary obligations</U>&#148;) of another obligor (&#147;<U>primary obligor</U>&#148;) in any manner,
whether directly or indirectly, including any obligation of such Person under any (a)&nbsp;guaranty,
endorsement, co-making or sale with recourse of an obligation of a primary obligor; (b)&nbsp;obligation
to make take-or-pay or similar payments regardless of nonperformance by any other party to an
agreement; and (c)&nbsp;arrangement (i)&nbsp;to purchase any primary obligation or security therefor, (ii)&nbsp;to
supply funds for the purchase or payment of any primary obligation, (iii)&nbsp;to maintain or assure
working capital, equity capital, net worth or solvency of the primary obligor, (iv)&nbsp;to purchase
Property or services for the purpose of assuring the ability of the primary obligor to perform a
primary obligation, or (v)&nbsp;otherwise to assure or hold harmless the holder of any primary
obligation against loss in respect thereof. The amount of any Contingent Obligation shall be
deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum
amount for which such Person may be liable under the instrument evidencing the Contingent
Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with
respect thereto. For the avoidance of doubt, (i)&nbsp;the Specified Payments are not Contingent
Obligations and (ii)&nbsp;each Borrower&#146;s obligation under <B>Section&nbsp;5.9.1 </B>are not Contingent Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Credit Judgment</U>: Lender&#146;s judgment exercised reasonably and in good faith, based upon
its consideration of any factor that it believes (a)&nbsp;could reasonably be expected to adversely
affect the quantity, quality, mix or value of Collateral, the enforceability or priority of
Lender&#146;s Liens, or the amount that Lender could reasonably be expected to receive in liquidation of
any Collateral (including any such Collateral consisting of Inventory subject to a License that
restricts Lender&#146;s right to dispose of such Inventory, unless Lender has received an appropriate
Lien Waiver); (b)&nbsp;demonstrates that any collateral report or financial information delivered by any
Obligor is incomplete, inaccurate or misleading in any material respect; (c)&nbsp;materially increases
the likelihood of any Insolvency Proceeding involving an Obligor; or (d)&nbsp;creates or
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">could reasonably be expected to result in a Default or Event of Default. In exercising such
judgment, Lender may consider any factors related to the Borrowers and the business of the
Borrowers that could reasonably be expected to increase the credit risk of lending to Borrowers on
the security of the Collateral.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>CWA</U>: the Clean Water Act (33 U.S.C. &#167;&#167; 1251 <U>et</U> <U>seq</U>.).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Debt</U>: as applied to any Person, without duplication, (a)&nbsp;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)&nbsp;all obligations of such person to pay the
deferred purchase price of property or services (other than deferred compensation and trade
accounts payable, in each case in the ordinary course of business); (c)&nbsp;Capital Leases; (d)&nbsp;all
Contingent Obligations; (e)&nbsp;all reimbursement obligations in connection with letters of credit
issued for the account of such Person; and (f)&nbsp;in the case of a Borrower, the Obligations. The
Debt of a Person shall include any recourse Debt of any partnership in which such Person is a
general partner or joint venturer. For the avoidance of doubt, the Specified Payments do not
constitute Debt.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Default</U>: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Default Rate</U>: for any Obligation (including, to the extent permitted by law, interest
not paid when due), 2% plus the interest rate otherwise applicable thereto.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Deposit Account Control Agreements</U>: the Deposit Account control agreements to be
executed by each institution maintaining a Deposit Account for a Borrower, in favor of Lender, as
security for the Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dilution Percent</U>: the percent, determined for Borrowers&#146; most recently completed 12
months, equal to (a)&nbsp;all non-cash reductions to Accounts, including, but not limited to, bad debt
write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive
items with respect to Accounts, <U>divided</U> <U>by</U> (b)&nbsp;gross collections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Distribution</U>: any declaration or payment of a distribution, interest or dividend on
any Equity Interest; any distribution, advance or repayment of Debt to a holder of Equity Interests
(in its capacity as such); or any purchase, redemption, or other acquisition or retirement for
value of any Equity Interest, in each case other than payment-in-kind and other than dividend
payments or other distributions payable solely in the common stock or other common equity interests
of the person making such dividend or other distribution. For the avoidance of doubt, Specified
Payments shall not constitute Distributions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dollars</U>: lawful money of the United States.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dominion Account</U>: a special account established by Borrowers at Lender or a bank
acceptable to Lender, over which Lender has exclusive control for withdrawal purposes.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>EBITDA</U>: determined on a consolidated basis for Borrowers and Subsidiaries, net
income, calculated before interest expense, provision for income taxes, depreciation and
amortization expense, gains or extraordinary charges or non-cash charges or losses arising from the
sale of capital assets, gains arising from the write-up of assets, and any extraordinary gains (in
each case, to the extent included or deducted, as applicable, in determining net income).
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>EDC</U>: Ashworth EDC, LLC, a Delaware limited liability company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Eligible Account</U>: an Account owing to a Borrower that arises in the ordinary course
of business from the sale of goods or rendition of services<B><I>, </I></B>is payable in Dollars or Canadian
Dollars and is not excluded by the criteria set forth in the next succeeding sentence. No Account
shall be an Eligible Account if (a)&nbsp;it is unpaid for more than 60&nbsp;days after the original due date,
or more than 120&nbsp;days after the original invoice date; (b)&nbsp;50% or more of the Accounts owing by the
Account Debtor are not Eligible Accounts under clause (a)&nbsp;of this definition; (c)&nbsp;when aggregated
with other Accounts owing by the Account Debtor, it exceeds 20% of the aggregate Eligible Accounts
(or such higher percentage as Lender may establish for the Account Debtor from time to time);
(d)&nbsp;it does not conform with a covenant or representation herein; (e)&nbsp;it is owing by a creditor or
supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction,
discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be
limited to the amount thereof); (f)&nbsp;an Insolvency Proceeding has been commenced by or against the
Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is
liquidating, dissolving or winding up its affairs, or is not Solvent; (g)&nbsp;the Account Debtor is
organized or has its principal offices or assets outside the United States or Canada; (h)&nbsp;it is
owing by the United States or any department, agency or instrumentality thereof, unless the Account
has been assigned to Lender in compliance with the Assignment of Claims Act; (i)&nbsp;it is not subject
to a duly perfected, first priority Lien in favor of Lender, or is subject to any other Lien (other
than customary chargeback rights, and Permitted Liens specified in Sections&nbsp;10.2.2(c), (d)&nbsp;and (g)
and subject, in the case of the first priority nature of Lender&#146;s Lien, to such specified Permitted
Liens having priority by operation of applicable law over the Lien of the Lender); (j)&nbsp;the goods
giving rise to it have not been delivered to and accepted by the Account Debtor, the services
giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent
a final sale; (k)&nbsp;it is evidenced by Chattel Paper or an Instrument of any kind, or has been
reduced to judgment; (l)&nbsp;its payment has been extended, the Account Debtor has made a partial
payment, or it arises from a sale on a cash-on-delivery basis; (m)&nbsp;it arises from a sale to an
Affiliate, or from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment, or other repurchase or return basis; (n)&nbsp;it represents a progress billing or
retainage; or (o)&nbsp;it includes a billing for interest, fees or late charges, but ineligibility shall
be limited to the extent thereof. In calculating delinquent portions of Accounts under clauses (a)
and (b), credit balances more than 60&nbsp;days past due or more than 120&nbsp;days from the invoice date for
such Account will be excluded.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Eligible In-Transit Inventory</U>: Inventory owned by a Borrower that would be Eligible
Inventory if it were not subject to a Document and in transit from a foreign location to a location
of the Borrower within the United States or Canada, and that is not excluded by the following
criteria. No Inventory shall be Eligible In-Transit Inventory unless it (a)&nbsp;is subject to a
negotiable Document showing Lender (or, with the consent of Lender, the applicable Borrower) as
consignee, which Document is in the possession of Lender or such other Person as Lender shall
approve; (b)&nbsp;is fully insured in a manner satisfactory to Lender; (c)&nbsp;has been identified to the
applicable sales contract and title has passed to the Borrower; (d)&nbsp;is not sold by a vendor that
has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of
title or otherwise assert Lien rights against the Inventory, or with respect to whom any Borrower
is in default of any obligations; (e)&nbsp;is subject to purchase orders and other sale documentation
satisfactory to Lender; (f)&nbsp;is shipped by a common carrier that is not affiliated with the vendor;
and (g)&nbsp;is being handled by a customs broker, freight-forwarder or other handler that has delivered
a Lien Waiver.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Eligible Inventory</U>: Inventory owned by a Borrower that is not excluded by the
following criteria. No Inventory shall be Eligible Inventory unless it (a)&nbsp;is finished goods, and
not raw materials or work-in-process, packaging or shipping materials, labels, samples, display
items, bags, replacement parts or manufacturing supplies; (b)&nbsp;is not held on consignment, nor
subject to any deposit or down payment; (c)&nbsp;is in new and saleable condition and is not damaged,
defective, shopworn or otherwise unfit for sale; (d)&nbsp;is not greater than 12&nbsp;months old), obsolete
or unmerchantable, and does not constitute returned or repossessed goods; (e)&nbsp;meets all standards
imposed by any Governmental Authority, and does not constitute hazardous materials under any
Environmental Law; (f)&nbsp;conforms with the covenants and representations herein; (g)&nbsp;is subject to
Lender&#146;s duly perfected, first priority Lien, and no other Lien (other than the Permitted Liens
specified in Section&nbsp;10.2.2(c), (d)&nbsp;and (g)&nbsp;and subject, in the case of the first priority nature
of Lender&#146;s Lien, to such specified Permitted Liens having priority by operation of applicable law
over the Lien of the Lender); (h)&nbsp;is within the continental United States or Canada, is not in
transit except between locations of Borrowers, and is not consigned to any Person; (i)&nbsp;is not
subject to any warehouse receipt or negotiable Document; (j)&nbsp;&#091;intentionally deleted&#093; (k)&nbsp;is not
located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic,
shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien
Waiver or an appropriate Rent and Charges Reserve has been established; and (l)&nbsp;is reflected in the
details of a current perpetual inventory report (<U>provided</U>, that Inventory that is
in-transit or that is &#147;pack and hold&#148; Inventory does not need to meet the conditions of this clause
(l)).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Eligible Slow Moving Inventory</U>: Inventory owned by a Borrower (a)&nbsp;that would be
Eligible Inventory if it were not greater than 12&nbsp;months old, (b)&nbsp;that is less than 24&nbsp;months old.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Enforcement Action</U>: any action to enforce any Obligations or Loan Documents or to
realize upon any Collateral (whether by judicial action, self-help, notification of Account
Debtors, exercise of setoff or recoupment, or otherwise).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Environmental Laws</U>: all Applicable Laws (including all programs, permits and guidance
promulgated by regulatory agencies), relating to public health (but excluding occupational safety
and health, to the extent regulated by OSHA) or the protection or pollution of the environment,
including CERCLA, RCRA and CWA.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Environmental Notice</U>: a written notice from any Governmental Authority or other
Person of any possible noncompliance with, investigation of a possible violation of, litigation
relating to, or potential fine or liability under any Environmental Law, or with respect to any
Environmental Release, environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation or otherwise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Environmental Release</U>: a release as defined in CERCLA or under any other
Environmental Law.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Equity Interest</U>: the ownership interest of any (a)&nbsp;shareholder in a corporation;
(b)&nbsp;partner in a partnership (whether general, limited, limited liability or joint venture);
(c)&nbsp;member in a limited liability company; or (d)&nbsp;other Person having any other form of equity
security or ownership interest.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ERISA</U>: the Employee Retirement Income Security Act of 1974.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ERISA Affiliate</U>: any trade or business (whether or not incorporated) under common
control with an Obligor within the meaning of Section 414(b) or (c)&nbsp;of the Code (and Sections
414(m) and (o)&nbsp;of the Code for purposes of provisions relating to Section&nbsp;412 of the Code).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ERISA Event</U>: (a)&nbsp;a Reportable Event with respect to a Pension Plan; (b)&nbsp;a withdrawal
by any Obligor or ERISA Affiliate from a Pension Plan subject to Section&nbsp;4063 of ERISA during a
plan year in which it was a substantial employer (as defined in Section&nbsp;4001(a)(2) of ERISA) or a
cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c)&nbsp;a
complete or partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d)&nbsp;the filing of a notice of intent
to terminate, the treatment of a Plan amendment as a termination under Section&nbsp;4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer
Plan; (e)&nbsp;the failure by any Obligor or ERISA Affiliate to meet any funding obligations with
respect to any Pension Plan or Multiemployer Plan; (f)&nbsp;an event or condition which constitutes
grounds under Section&nbsp;4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (g)&nbsp;the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section&nbsp;4007 of ERISA,
upon any Obligor or ERISA Affiliate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Event of Default</U>: as defined in <B>Section&nbsp;11</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Excluded
Assets</U>: (a)&nbsp;real property and any fixtures attached or appurtenant thereto,
(b)&nbsp;any rights or property acquired by an Obligor under, or subject to, a lease, contract, or
license, if and for so long as the grant of a Lien under <B>Section&nbsp;7.1 </B>would constitute or result in
(x)&nbsp;the abandonment, invalidation or unenforceability of any right, title or interest of such
Obligor therein or (y)&nbsp;a breach or termination pursuant to the terms of, or a default under, any
such lease, contract, or license (other than to the extent that any restriction on such assignment
would be rendered ineffective pursuant to Sections&nbsp;9-406, 9-407, 9-408 or 9-409 of the UCC (or any
successor provision or provisions) of any relevant jurisdiction or any other Applicable Law or
principles of equity), (c)&nbsp;any insurance or condemnation proceeds from any of the foregoing to the
extent required to be maintained for the benefit of, and paid over to, a Person other than Parent,
Borrowers or their Affiliates, (d)&nbsp;any insurance or condemnation proceeds covering any real
property leased by an Obligor or fixtures attached or appurtenant thereto to the extent required to
be maintained for the benefit of, and paid over to, the applicable landlord; any insurance or
condemnation proceeds from any of the foregoing, (e)&nbsp;any insurance or condemnation proceeds
covering any real property leased by an Obligor or fixtures attached or appurtenant thereto to the
extent required to be maintained for the benefit of, and paid over to, the applicable landlord;
provided, however, that at such time as the condition causing such abandonment, invalidation or
unenforceability shall be no longer in effect with respect to any property, such property shall no
longer constitute Excluded Assets, (f)&nbsp;so long as the Real Estate Term Loan or any other Debt
outstanding under the Real Estate Term Loan documents are
outstanding, the Equity Interests in EDC, and (g) the Union Bank Cash
Collateral Account described on Schedule P-3.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Excluded Tax</U>: with respect to Lender or any other recipient of a payment to be made
by or on account of any Obligation, taxes imposed on or measured by its overall net income (however
denominated), 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 such recipient is
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">organized or in which its principal office is located or, in the case of Lender, in which its
applicable lending office is located.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Existing Credit Agreement</U>: the Revolving/Term Loan Credit Agreement dated as of
July&nbsp;6, 2004 among Parent, as Borrower thereunder, Union Bank of California, N.A., as
Administrative Agent, and the other lenders party thereto, as amended.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Existing Letters of Credit</U>: the letters of credit issued under the Existing Credit
Agreement and identified on <B>Schedule&nbsp;E</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Extraordinary Expenses</U>: all costs, expenses or advances that Lender may incur with
respect to the Obligations during a Default or Event of Default, or during the pendency of an
Insolvency Proceeding of an Obligor, including those relating to (a)&nbsp;any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for
sale, sale, collection, or other preservation of or realization upon any Collateral; (b)&nbsp;any
action, arbitration or other proceeding (whether instituted by or against Lender, any Obligor, any
representative of creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of Lender&#146;s Liens with
respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender
liability or other Claims; (c)&nbsp;the exercise, protection or enforcement of any rights or remedies of
Lender in, or the monitoring of, any Insolvency Proceeding; (d)&nbsp;settlement or satisfaction of any
taxes, charges or Liens with respect to any Collateral; (e)&nbsp;any Enforcement Action; and
(f)&nbsp;negotiation and documentation of any modification, waiver, workout, restructuring or
forbearance with respect to any Loan Documents or Obligations. Such costs, expenses and advances
include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation
and standby fees, legal fees, appraisal fees, brokers&#146; fees and commissions, auctioneers&#146; fees and
commissions, accountants&#146; fees, environmental study fees, wages and salaries paid to employees of
any Obligor or independent contractors in liquidating any Collateral, and travel expenses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Fiscal Quarter</U>: each period of three months, commencing on the first day of a Fiscal
Year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Fiscal Year</U>: the fiscal year of Borrowers and Subsidiaries for accounting and tax
purposes, ending on October&nbsp;31 of each year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Fixed Charge Coverage Ratio</U>: the ratio, determined on a consolidated basis for
Borrowers and Subsidiaries, of (a)&nbsp;EBITDA <U>minus</U> Capital Expenditures (except those financed
with Borrowed Money other than Revolver Loans) and cash taxes paid, to (b)&nbsp;Fixed Charges. Such
ratio shall be measured on a Fiscal Year to date basis for measurement dates prior to the end of
Fiscal Year 2008, and on a most recent four Fiscal Quarter basis for measurement dates thereafter.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Fixed Charges</U>: the sum of interest expense (other than payment-in-kind), principal
payments made by any Obligor on Borrowed Money (other than the Obligations and the obligations
under the UK Loan Facility), and Distributions made by Parent.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>FLSA</U>: the Fair Labor Standards Act of 1938.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-11-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Foreign Plan</U>: any employee benefit plan or arrangement (a)&nbsp;maintained or contributed
to by any Obligor or Subsidiary that is not subject to the laws of the United States; or
(b)&nbsp;mandated by a government other than the United States for employees of any Obligor or
Subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Foreign Subsidiary</U>: a Subsidiary that is a &#147;controlled foreign corporation&#148; under
Section&nbsp;957 of the Code.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Full Payment</U>: with respect to any Obligations, (a)&nbsp;if such Obligations are
Obligations other than (i)&nbsp;LC Obligations, (ii)&nbsp;Obligations arising under Bank Products, or (iii)
contingent indemnity Obligations, the full cash payment thereof, including any interest, fees and
other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding);
and (b)&nbsp;if such Obligations are LC Obligations or Obligations arising under Bank Products, Cash
Collateralization thereof (or delivery of a standby letter of credit acceptable to Lender in its
discretion, in the amount of required Cash Collateral). The Revolver Loans shall not be deemed to
have been paid in full until the Revolver Commitment has expired or been terminated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>GAAP</U>: generally accepted accounting principles in effect in the United States from
time to time, including any changes permitted under such principles as set forth in <B>Section&nbsp;1.2</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Gekko</U>: Gekko Brands, LLC, an Alabama limited liability company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Governmental Approvals</U>: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all Governmental
Authorities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Governmental Authority</U>: any federal, state, municipal, foreign or other governmental
department, agency, commission, board, bureau, court, tribunal, instrumentality, political
subdivision, or other entity or officer exercising executive, legislative, judicial, regulatory or
administrative functions for or pertaining to any government or court, in each case whether
associated with the United States, a state, district or territory thereof, or a foreign entity or
government.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Guarantor Payment</U>: as defined in <B>Section&nbsp;5.9.3</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Guarantors</U>: Each of Parent&#146;s Subsidiaries set forth on <B>Schedule&nbsp;G-1 </B>and each other
Person who guarantees payment or performance of any Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Guaranty</U>: each guaranty agreement executed by a Guarantor in favor of Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Hedging Agreement</U>: an agreement relating to any swap, cap, floor, collar, option,
forward, cross right or obligation, or combination thereof or similar transaction, with respect to
interest rate, foreign exchange, currency, commodity, credit or equity risk.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Immaterial Tax</U>: a state or local Tax obligation of an Obligor, with respect to which
the amount of all such Taxes is less than $500,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Indemnified Taxes</U>: Taxes other than Excluded Taxes.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Indemnitees</U>: Lender and its officers, directors, employees, Affiliates, agents and
attorneys.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-12-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Insolvency Proceeding</U>: any case or proceeding commenced by or against a Person under
any state, federal or foreign law for, or any agreement of such Person to, (a)&nbsp;the entry of an
order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt
adjustment law; (b)&nbsp;the appointment of a receiver, trustee, liquidator, administrator, conservator
or other custodian for such Person or any part of its Property; or (c)&nbsp;an assignment or trust
mortgage for the benefit of creditors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Insurance Assignment</U>: each collateral assignment of insurance pursuant to which an
Obligor assigns to Lender such Obligor&#146;s rights under business interruption or other insurance
policies as Lender reasonably deems appropriate, as security for the Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Intellectual Property</U>: all intellectual Property of a Person, including inventions,
designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential
or proprietary information, customer lists, know-how, software and databases; all embodiments or
fixations thereof and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records relating to the
foregoing.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Intellectual Property Claim</U>: any claim or assertion (whether in writing, by suit or
otherwise) that a Borrower&#146;s or Subsidiary&#146;s ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other Property violates another Person&#146;s
Intellectual Property.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Intercompany Subordination Agreement</U>: the Intercompany Subordination Agreement
executed by Parent, Borrowers and each of their Subsidiaries in form and substance satisfactory to
Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Interest Period</U>: as defined in <B>Section&nbsp;3.1.3</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Inventory</U>: as defined in the UCC, including all goods intended for sale, lease,
display or demonstration; all work in process; and all raw materials, and other materials and
supplies of any kind that are or could be used in connection with the manufacture, printing,
packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or
consumed in a Borrower&#146;s business (but excluding Equipment).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Inventory Formula Amount</U>: the least of (i)&nbsp;$45,000,000; (ii)&nbsp;the sum of (x)&nbsp;the
Applicable Inventory Advance Rate times the Value of Eligible Inventory; plus (y)&nbsp;the Applicable
Inventory Advance Rate times the Value of Eligible In-Transit Inventory plus (z)&nbsp;the Slow Moving
Inventory Advance Rate times the Value of Eligible Slow Moving Inventory, or (iii)&nbsp;85% of the
product of (y)&nbsp;NOLV Percentage multiplied by (z)&nbsp;the sum of (1)&nbsp;the Value of Eligible Inventory
plus (2)&nbsp;the Value of Eligible In-Transit Inventory plus (3)&nbsp;the Value of Eligible Slow Moving
Inventory.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Inventory Reserve</U>: reserves established by Lender to reflect factors that may
negatively impact the Value of Inventory, including change in salability, obsolescence,
seasonality, theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor
chargebacks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Inverse Inventory Advance Rate</U>: for LC Obligations relating to documentary Letters of
Credit issued to support Borrowers&#146; purchase of Inventory, a percentage equal to 100% <U>minus</U>
the Applicable Inventory Advance Rate.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-13-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Investment</U>: any acquisition of all or substantially all assets of a Person; any
acquisition of record or beneficial ownership of any Equity Interests of a Person; or any advance
or capital contribution to or other investment in a Person.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>IRS</U>: the United States Internal Revenue Service.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Application</U>: an application by Borrower Agent to Lender for issuance of a Letter
of Credit, in form and substance reasonably satisfactory to Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Conditions</U>: the following conditions necessary for issuance of a Letter of Credit:
(a)&nbsp;each of the conditions set forth in <B>Section&nbsp;6</B>; (b)&nbsp;after giving effect to such issuance, total
LC Obligations do not exceed the Letter of Credit Subline, no Overadvance exists and, if no
Revolver Loans are outstanding, the LC Obligations do not exceed the Borrowing Base (without giving
effect to the LC Reserve for purposes of this calculation); (c)&nbsp;the expiration date of such Letter
of Credit is (i)&nbsp;no more than 365&nbsp;days from issuance, in the case of standby Letters of Credit,
(ii)&nbsp;no more than 120&nbsp;days from issuance, in the case of documentary Letters of Credit, and
(iii)&nbsp;at least 20 Business Days prior to the Revolver Termination Date; (d)&nbsp;the Letter of Credit
and payments thereunder are denominated in Dollars; and (e)&nbsp;the purpose and form of the proposed
Letter of Credit is satisfactory to Lender in its reasonable discretion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Documents</U>: all documents, instruments and agreements (including LC Requests and LC
Applications) delivered by Borrowers or any other Person to Lender in connection with issuance,
amendment or renewal of, or payment under, any Letter of Credit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Obligations</U>: the sum (without duplication) of (a)&nbsp;all amounts owing by Borrowers
for any drawings under Letters of Credit; (b)&nbsp;the stated amount of all outstanding Letters of
Credit; and (c)&nbsp;all fees and other amounts owing with respect to Letters of Credit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Request</U>: a request for issuance of a Letter of Credit, to be provided by Borrower
Agent, in form reasonably satisfactory to Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LC Reserve</U>: the aggregate of all LC Obligations, other than (a)&nbsp;those that have been
Cash Collateralized and (b)&nbsp;if no Default or Event of Default exists, those constituting charges
owing to Lender. For purposes of this definition, (x)&nbsp;in the case of documentary Letters of Credit
issued to support Borrowers&#146; purchase of Eligible In-Transit Inventory (and so long as such Letters
of Credit have not become bankers acceptances), the reserve shall be limited to (i)&nbsp;the Inverse
Inventory Advance Rate <U>times</U> (ii)&nbsp;the amount of LC Obligations attributable to such
documentary Letters of Credit and (y)&nbsp;in the case of all other Letters of Credit (including the
Back-Up LC) and bankers acceptances, the reserve shall equal 100% of the face amount of all
outstanding Letters of Credit and bankers acceptances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Lender Professionals</U>: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround consultants, and other
professionals and experts retained by Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Letter of Credit</U>: any standby or documentary letter of credit (including the Back-Up
LC) issued by Lender for the account of a Borrower, or any indemnity, guarantee, exposure
transmittal memorandum or similar form of credit support issued by Lender for the benefit of a
Borrower.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-14-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Letter of Credit Subline</U>: $15,000,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LIBOR</U>: for any Interest Period with respect to a LIBOR Loan, the per annum rate of
interest (rounded upward, if necessary, to the nearest 1/100th of 1%), determined by Lender at
approximately 11:00&nbsp;a.m. (London time) two Business Days prior to commencement of such Interest
Period, for a term comparable to such Interest Period, equal to (a)&nbsp;the British Bankers Association
LIBOR Rate (&#147;<U>BBA LIBOR</U>&#148;), as published by Reuters (or other commercially available source
designated by Lender); or (b)&nbsp;if BBA LIBOR is not available for any reason, the interest rate at
which Dollar deposits in the approximate amount of the LIBOR Loan would be offered by Lender&#146;s
London branch to major banks in the London interbank Eurodollar market. If the Board of Governors
imposes a Reserve Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing
rate, divided by 1 minus the Reserve Percentage.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LIBOR Loan</U>: each set of LIBOR Revolver Loans having a common length and commencement
of Interest Period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LIBOR Revolver Loan</U>: a Revolver Loan that bears interest based on LIBOR.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>License</U>: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing, distribution or disposition of
Collateral, any use of Property or any other conduct of its business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Licensor</U>: any Person from whom an Obligor obtains the right to use any Intellectual
Property.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Lien</U>: any Person&#146;s interest in Property securing an obligation owed to, or a claim
by, such Person, whether such interest is based on common law, statute or contract, including
liens, security interests, pledges, hypothecations, statutory trusts, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Lien Waiver</U>: an agreement, in form and substance reasonably satisfactory to Lender,
by which (a)&nbsp;for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral to the Lien of Lender, and agrees to permit
Lender to enter upon the premises and remove the Collateral or to use the premises to store or
dispose of the Collateral; (b)&nbsp;for any Collateral held by a warehouseman, processor, shipper,
customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the
Collateral to the Lien of Lender, agrees to hold any Documents in its possession relating to the
Collateral as agent for Lender, and agrees to deliver the Collateral to Lender upon request;
(c)&nbsp;for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Lender&#146;s
Lien, waives or subordinates any Lien it may have on the Collateral to the Lien of Lender, and
agrees to deliver the Collateral to Lender upon request; and (d)&nbsp;for any Collateral subject to a
Licensor&#146;s Intellectual Property rights, the Licensor grants to Lender the right, vis-&#224;-vis such
Licensor, to enforce Lender&#146;s Liens with respect to the Collateral, including the right to dispose
of it with the benefit of the Intellectual Property, whether or not a default exists under any
applicable License.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan</U>: a Revolver Loan.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-15-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan Account</U>: the loan account established by Lender on its books pursuant to
<B>Section&nbsp;5.7</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan Documents</U>: this Agreement, Other Agreements and Security Documents.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan Year</U>: each calendar year commencing on the Closing Date and on each anniversary
of the Closing Date.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Margin Stock</U>: as defined in Regulation&nbsp;U of the Board of Governors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Material Adverse Effect</U>: the effect of any event or circumstance that, taken alone or
in conjunction with other events or circumstances, (a)&nbsp;has or could be reasonably expected to have
a material adverse effect on the business, operations, Properties, prospects or condition
(financial or otherwise) of the Obligors taken as a whole, on the value of any material Collateral,
on the enforceability of any Loan Documents, or on the validity or priority of Lender&#146;s Liens on
any Collateral; (b)&nbsp;impairs the ability of the Obligors taken as a whole, to perform any material
obligations under the Loan Documents, including repayment of any Obligations; or (c)&nbsp;otherwise
impairs the ability of Lender to enforce or collect any Obligations or to realize upon any
Collateral.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Material Contract</U>: any agreement or arrangement to which a Borrower or Subsidiary is
party (other than the Loan Documents) (a)&nbsp;for which breach, termination, nonperformance or failure
to renew could reasonably be expected to have a Material Adverse Effect; or (b)&nbsp;that relates to
Subordinated Debt, or Debt in an aggregate amount of $100,000 or more.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Material Obligor</U>: any Obligor other than Ashworth Store III and Ashworth Store II.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Moody&#146;s</U>: Moody&#146;s Investors Service, Inc., and its successors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Multiemployer Plan</U>: any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been obligated to make
contributions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Net Proceeds</U>: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or Subsidiary in cash from such
disposition, net of (a)&nbsp;reasonable and customary costs and expenses actually incurred in connection
therewith, including legal fees and sales commissions; (b)&nbsp;amounts applied to repayment of Debt
secured by a Permitted Lien senior to Lender&#146;s Liens on Collateral sold; (c)&nbsp;transfer or similar
taxes; and (d)&nbsp;reserves for indemnities, until such reserves are no longer needed; provided, that
&#147;Net Proceeds&#148; shall not include proceeds of or constituting Excluded Assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>NOLV Percentage</U>: the net orderly liquidation value of Inventory, expressed as a
percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period
of time, net of all liquidation expenses, as determined from the most recent appraisal of
Borrowers&#146; Inventory performed by an appraiser and on terms reasonably satisfactory to Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notice of Borrowing</U>: a Notice of Borrowing to be provided by Borrower Agent to
request a Borrowing of Revolver Loans, in form satisfactory to Lender.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-16-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notice of Conversion/Continuation</U>: a Notice of Conversion/Continuation to be provided
by Borrower Agent to request a conversion or continuation of any Loans as LIBOR Loans, in form
satisfactory to Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Obligations</U>: all (a)&nbsp;principal of and premium, if any, on the Loans, (b)&nbsp;LC
Obligations and other obligations of Obligors with respect to Letters of Credit, (c)&nbsp;interest,
expenses, fees and other sums payable by Obligors under Loan Documents, (d)&nbsp;obligations of Obligors
under any indemnity for Claims, (e)&nbsp;Extraordinary Expenses, (f)&nbsp;Bank Product Debt, and (g)&nbsp;other
Debts, obligations and liabilities of any kind owing by any Obligor to Lender pursuant to the Loan
Documents, whether now existing or hereafter arising, whether evidenced by a note or other writing,
whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance
of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct
or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or
several; provided, however, that the Obligations shall not include any obligations under the UK
Loan Facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Obligor</U>: each Borrower, Guarantor, or other Person that is liable for payment of any
Obligations or that has granted a Lien in favor of Lender on its assets to secure any Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Operating Cash</U>: cash on hand at Borrowers&#146; retail locations and held in local cash
accounts for such retail locations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Organic Documents</U>: with respect to any Person, its charter, certificate or articles
of incorporation, bylaws, articles of organization, limited liability agreement, operating
agreement, members agreement, shareholders agreement, partnership agreement, certificate of
partnership, certificate of formation, voting trust agreement, or similar agreement or instrument
governing the formation or operation of such Person.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>OSHA</U>: the Occupational Safety and Hazard Act of 1970.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other Agreement</U>: each LC Document; Lien Waiver; Borrowing Base Certificate,
Compliance Certificate, the Intercompany Subordination Agreement, financial statement or report
delivered hereunder; or other document, instrument or agreement (other than this Agreement or a
Security Document) now or hereafter delivered by an Obligor or other Person to Lender in connection
with any transactions relating hereto.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other Taxes</U>: all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made under any Loan Document or
from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Overadvance</U>: as defined in <B>Section&nbsp;2.1.4</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Patriot Act</U>: the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No.&nbsp;107-56, 115 Stat. 272 (2001).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Payment Item</U>: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-17-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>PBGC</U>: the Pension Benefit Guaranty Corporation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Pension Plan</U>: 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 and is
sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or 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
preceding five plan years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Acquisition</U>: any transaction for the (a)&nbsp;acquisition of all or
substantially all of the property of any Person, or of any business or division of any Person; or
(b)&nbsp;acquisition (including by merger or consolidation) of all or substantially all of the Equity
Interests of any Person that becomes a Subsidiary after giving effect to such transaction; provided
that each of the following conditions shall be met:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) no Default or Event of Default then exists or would result therefrom;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) after giving effect to such transaction, Availability is at least $5,000,000;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) no Borrower or Subsidiary shall, in connection with any such transaction, assume
or remain liable with respect to any Debt of the related seller, except to the extent
permitted under <B>Section&nbsp;10.2.1</B>;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Person or business to be acquired shall be, or shall be engaged in, a business
of the type that Borrowers and the Subsidiaries are permitted to be engaged in under <B>Section
10.2.16 </B>and the property acquired in connection with any such transaction shall be made
subject to the Lien of the Security Documents and shall be free and clear of any Liens,
other than Permitted Liens;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the Board of Directors of the Person to be acquired shall not have indicated
publicly its opposition to the consummation of such acquisition (which opposition has not
been publicly withdrawn);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) all transactions in connection therewith shall be consummated in all material
respects in accordance with all Applicable Law;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) with respect to any transaction, unless Lender shall otherwise agree, Borrowers
shall have provided Lender with (A)&nbsp;historical financial statements for the last three
fiscal years (or, if less, the number of years since formation) of the Person or business to
be acquired (audited if available without undue cost or delay) and unaudited financial
statements thereof for the most recent interim period which are available, (B)&nbsp;reasonably
detailed projections for the succeeding five years pertaining to the Person or business to
be acquired and updated projections for Parent and the Subsidiaries after giving effect to
such transaction, (C)&nbsp;a reasonably detailed description of all material information relating
thereto and copies of all material documentation pertaining to such transaction, and (D)&nbsp;all
such other information and data relating to such transaction or the person or business to be
acquired as may be reasonably requested by Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) at least 10 Business Days prior to the proposed date of consummation of the
transaction, Borrowers shall have delivered to Lender a certificate of a Senior Officer
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-18-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">certifying that (A)&nbsp;such transaction complies with this definition, and (B)&nbsp;such
transaction could not reasonably be expected to result in a Material Adverse Effect;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) the Acquisition Consideration for such acquisition shall not exceed $5,000,000,
and the aggregate amount of the Acquisition Consideration for all Permitted Acquisitions
since the Closing Date shall not exceed $25,000,000;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) prior to the date of consummation of the transaction, Lender shall have received
and approved all acquisition documents, UCC and lien searches, opinions and other documents
as requested by Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) For proposed Permitted Acquisitions other than those permitted under subsection
(xiii), the Fixed Charge Coverage Ratio immediately prior to and after giving effect to such
Permitted Acquisition shall be no less than 1.10:1.00;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) No more than two Permitted Acquisitions shall be entered into or consummated
during any Fiscal Year after the first Loan Year;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii) No more than one Permitted Acquisitions shall be entered into or consummated
during the first Loan Year, and in no event shall such Permitted Acquisition in the First
Loan Year have a cash portion of any Acquisition Consideration for such acquisition exceed
$250,000;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv) Borrowers have provided Lender with forecasted balance sheets, profit and loss
statements, and cash flow statements of the Person or related to the assets to be acquired,
all prepared on a basis consistent with such Person&#146;s or assets&#146; historical financial
statements, together with appropriate supporting details and a statement of underlying
assumptions for the 3&nbsp;year period following the date of the proposed acquisition (on a year
by year basis, and for the 1&nbsp;year period following the date of the proposed acquisition, on
a month by month basis), in form and substance (including as to scope and underlying
assumptions) reasonably satisfactory to Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv) the assets being acquired (other than a de minimis amount of assets in relation to
the assets being acquired) are located within the United States or Canada or the Person
whose Equity Interest is being acquired is organized in a jurisdiction located within the
United States or Canada;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi) For proposed acquisitions other than those permitted under subsection (xiii),
Borrower Agent has provided Lender with written notice of the proposed acquisition at least
30 Business Days prior to the anticipated closing date of the proposed acquisition and, not
later than 5 Business Days prior to the anticipated closing date of the proposed
acquisition, copies of the acquisition agreement and other material documents relative to
the proposed acquisition, which agreement and documents must be reasonably acceptable to
Lender; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvii) the subject assets or Equity Interests, as applicable, are being acquired
directly by an Obligor, and (i)&nbsp;in the case of an asset acquisition, such Obligor shall have
executed and delivered or authorized, as applicable, any and all documentation reasonably
requested by the Lender in order to include the newly acquired assets within the collateral
hypothecated under the Loan Documents, and (ii)&nbsp;in the case of an
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-19-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">acquisition of Equity Interests, such Obligor shall have complied with <B>Section&nbsp;10.1.9</B>
of the Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing, the Accounts and Inventory of the Person being acquired or
comprising the assets being acquired shall not be considered for inclusion in the Borrowing Base
until a field audit or appraisal of such Person or such assets has been completed to the
satisfaction of Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Asset Disposition</U>: as long as no Default or Event of Default exists and all
Net Proceeds are remitted to Lender (if and to the extent required by <B>Section&nbsp;5.2</B>), an Asset
Disposition that is (a)&nbsp;sale of Inventory in the ordinary course of business; (b)&nbsp;a disposition of
Inventory or other Property that is obsolete, unmerchantable or otherwise not used or useful in the
ordinary course of business; (c)&nbsp;termination of a lease of real or personal Property that is not
necessary for the ordinary course of business, could not reasonably be expected to have a Material
Adverse Effect; (d)&nbsp;leases of real or personal property in the ordinary course of business;
(e)&nbsp;mergers and consolidations in compliance with <B>Section&nbsp;10.2.9</B>; (f)&nbsp;the unwinding of any Hedging
Agreement; (g)&nbsp;any Asset Disposition from any Subsidiary to any Borrower; (h)&nbsp;Investments in
compliance with <B>Section&nbsp;10.2.5</B>; (i)&nbsp;dispositions of Property identified on <B>Schedule&nbsp;P-1</B>; (j)
Distributions in compliance with <B>Section&nbsp;10.2.4</B>; (k)&nbsp;the creation of any Permitted Lien; (l)
dispositions of Accounts in connection with the compromise, settlement or collection thereof in the
ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or
similar arrangements; (m)&nbsp;licenses of Intellectual Property granted by Borrowers or any Subsidiary
in the ordinary course of business; (n)&nbsp;Investments in compliance with <B>Section&nbsp;10.2.5</B>; (n)&nbsp;other
dispositions that, in the aggregate during any 12&nbsp;month period, have a fair market or book value
(whichever is more) of $750,000 or less; (o)&nbsp;the sale of Inventory by Parent to Ashworth UK in the
ordinary course of business and consistent with past practices; or (p)&nbsp;approved in writing by
Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Capital Leases</U>: (i)&nbsp;Capital Leases of Borrowers and Subsidiaries set forth
on <B>Schedule&nbsp;P-2</B>, and (ii)&nbsp;other Capital Leases of Borrowers and Subsidiaries so long as the
aggregate amount of such other Capital Leases does not exceed $1,000,000 at any time outstanding.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Contingent Obligations</U>: Contingent Obligations (a)&nbsp;arising from
endorsements of Payment Items for collection or deposit in the ordinary course of business;
(b)&nbsp;arising from Hedging Agreements permitted hereunder; (c)&nbsp;existing on the Closing Date, and any
extension or renewal thereof that does not increase the amount of such Contingent Obligation when
extended or renewed; (d)&nbsp;incurred in the ordinary course of business with respect to surety, appeal
or performance bonds, or other similar obligations; (e)&nbsp;arising from customary indemnification
obligations in favor of purchasers in connection with dispositions of Equipment permitted
hereunder; (f)&nbsp;arising under the Loan Documents; (g)&nbsp;in respect of a guaranty of Debt or other
obligations permitted hereunder; (h)&nbsp;product warranties in the ordinary course of business; or
(i)&nbsp;in addition to the foregoing, in an aggregate amount of $100,000 or less at any time.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Distributions</U>: (a)&nbsp;any Borrower or Subsidiary may make Distributions to an
officer or employee for salary, travel expenses, commissions and similar items in the ordinary
course of business; (b)&nbsp;any Borrower or 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
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-20-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">of its common stock or other common equity interests; (c)&nbsp;any Borrower or Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or other of its 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 of its common equity
interests; (d)&nbsp;Parent may (i)&nbsp;repurchase, redeem, or otherwise acquire for value Equity Interests
of Parent held by present or former officers, directors or employees (or their transferees, estates
or beneficiaries under their estates) upon their death, disability, retirement, severance or
termination of employment or service or pursuant to any management equity plan or stock option plan
or any other management or employee benefit plan, agreement or arrangement; <U>provided</U> that
the aggregate cash consideration paid for all such repurchases, redemptions and acquisitions shall
not exceed, without duplication, in any calendar year, $500,000, (ii)&nbsp;make repurchases of Equity
Interests deemed to occur upon the exercise of stock options if the Equity Interests represent a
portion of the exercise price thereof, (iii)&nbsp;make cash payments in lieu of the issuance of
fractional shares in connection with the exercise of warrants, options or other securities
convertible into or exchangeable for Equity Interests of Parent; and (e)&nbsp;any Borrower or Subsidiary
may declare and make other Distributions so long as no Default or Event of Default exists before
and immediately after declaring and making such Distribution, and after giving effect thereto
Availability is at least $8,000,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Investments</U>: (a)&nbsp;Investments existing on the Closing Date
and set forth on <B>Schedule&nbsp;P-3</B>; (b)&nbsp;Cash Equivalents that, in the case of an Obligor, are subject to
Lender&#146;s Lien and control, pursuant to documentation in form and substance reasonably satisfactory
to Lender; (c)&nbsp;loans and advances permitted under <B>Section&nbsp;10.2.7</B>; (d)&nbsp;Investments by any Borrower
in any other Borrower and Investments by any Subsidiary in any Borrower; (e)&nbsp;Investments received
in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and
disputes with, customers and suppliers; (f)&nbsp;endorsement of negotiable instruments held for
collection in the ordinary course of business; (g)&nbsp;lease, utility and other similar deposits in the
ordinary course of business; (h)&nbsp;Investments in Hedging Agreements, (i)&nbsp;Investments made by any
Borrower or any Subsidiary as a result of consideration received in connection with a Permitted
Asset Disposition made in compliance with <B>Section&nbsp;10.2.6, </B>(j)&nbsp;Permitted Contingent Obligations; (k)
Permitted Acquisitions (and any deposits required in connection therewith); (l)&nbsp;at any time after
the First Loan Year, additional Investments which do not exceed $10,000,000.00 in the aggregate at
any time provided that at the time of such Investment under this clause (l)&nbsp;no Event of Default
exists or would exist after giving effect to such Investment, after giving effect thereto
Availability is at least $8,000,000; and (m)&nbsp;deposit accounts that, in the case of an Obligor, are,
except as otherwise permitted hereunder, subject to Lender&#146;s Lien and control, pursuant to
documentation in form and substance reasonably satisfactory to Lender. The amount of any Investment
outstanding at any time pursuant to clause (l)&nbsp;hereunder (x)&nbsp;shall not include any appreciation in
the value of any such Investment occurring after the acquisition or making of such Investment and
(y)&nbsp;shall be deemed to be reduced upon the disposition or repayment of or return on any such
Investment, by an amount equal to the return of capital or principal with respect to such
Investment to the applicable Person, less the reasonable cost of the disposition of such Investment
and net of taxes.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Lien</U>: as defined in <B>Section&nbsp;10.2.2</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Permitted Purchase Money Debt</U>: Purchase Money Debt of Borrowers and Subsidiaries that
is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not
exceed $1,000,000 at any time and its incurrence does not violate <B>Section&nbsp;10.2.3</B>.
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Person</U>: any individual, corporation, limited liability company, partnership, joint
venture, joint stock company, land trust, business trust, unincorporated organization, Governmental
Authority or other entity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Plan</U>: any employee benefit plan (as such term is defined in Section&nbsp;3(3) of ERISA)
established by an Obligor or, with respect to any such plan that is subject to Section&nbsp;412 of the
Code or Title IV of ERISA, an ERISA Affiliate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Properly Contested</U>: with respect to any obligation of an Obligor, (a)&nbsp;the obligation
is subject to a bona fide dispute regarding amount or the Obligor&#146;s liability to pay; (b)&nbsp;the
obligation is being properly contested in good faith by appropriate proceedings promptly instituted
and diligently pursued; (c)&nbsp;appropriate reserves have been established in accordance with GAAP;
(d)&nbsp;non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any
assets of the Obligor; (e)&nbsp;no Lien is imposed on assets of the Obligor, unless bonded and stayed to
the reasonable satisfaction of Lender; and (f)&nbsp;if the obligation results from entry of a judgment
or other order, such judgment or order is stayed pending appeal or other judicial review.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Property</U>: any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Purchase Money Debt</U>: (a)&nbsp;Debt (other than the Obligations) for payment of any of the
purchase price of fixed assets; (b)&nbsp;Debt (other than the Obligations) incurred within 180&nbsp;days
before or after acquisition of any fixed assets, for the purpose of financing any of the purchase
price thereof; and (c)&nbsp;any renewals, extensions or refinancings (but not increases) thereof.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Purchase Money Lien</U>: a Lien that secures Purchase Money Debt, encumbering only the
fixed assets acquired with such Debt and accessions to, and products and proceeds (including
insurance condemnation proceeds) of, such acquired assets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>RCRA</U>: the Resource Conservation and Recovery Act (42 U.S.C. &#167;&#167; 6991-6991i).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Real Estate</U>: all right, title and interest (whether as owner, lessor or lessee) in
any real Property or any buildings, structures, parking areas or other improvements thereon.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Real Estate Term Loan</U>: the &#147;Loan&#148; as defined in that certain Loan Agreement, dated as
of April&nbsp;2, 2004 (as amended, restated, replaced, supplemented or otherwise modified from time to
time,), between Bank of America, N.A., a national banking association, having an address at 214
North Tryon Street, Charlotte, North Carolina 28255 and Ashworth EDC, LLC, a Delaware limited
liability company having an address at 2765 Loker Avenue West, Carlsbad, California 92008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Refinancing Conditions</U>: the following conditions for Refinancing Debt: (a)&nbsp;it is in
an aggregate principal amount that does not exceed the principal amount of the Debt being extended,
renewed or refinanced (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, extension or
renewal and by an amount equal to any existing commitments unutilized thereunder); (b)&nbsp;it has a
final maturity no sooner than the Debt being extended, renewed or refinanced; (c)&nbsp;if applicable, it
is subordinated to the Obligations at least to the same
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">extent as the Debt being extended, renewed or refinanced; (d)&nbsp;the representations, covenants
and defaults applicable to it are, taken as a whole, no less favorable to Borrowers than those
applicable to the Debt being extended, renewed or refinanced as determined in good faith by
Parent&#146;s board of directors; (e)&nbsp;no additional Property or, if applicable, class of Property is
subjected to a Lien to secure it; (f)&nbsp;no additional Person or, if applicable, category of Person is
obligated on such Debt (except for Permitted Contingent Obligations arising from the guaranty of
such Debt); and (g)&nbsp;upon giving effect to it, no Default or Event of Default exists.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Refinancing Debt</U>: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under <B>Section&nbsp;10.2.1(b)</B>, <B>(d) </B>,<B>(f), or (h) </B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reimbursement Date</U>: as defined in <B>Section&nbsp;2.3.2</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Rent and Charges Reserve</U>: the aggregate of (a)&nbsp;all past due rent and other amounts
owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight
forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any
Collateral; and (b)&nbsp;a reserve at least equal to three months rent and other charges that could be
payable to any such Person, unless it has executed a Lien Waiver; <U>provided</U>,
<U>however</U>, that for the first 60&nbsp;days after the Closing Date, the amount of any Rent and
Charges Reserve for any leased location with respect to which the Borrower is still diligently
pursuing a Lien Waiver shall be $0.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reportable Event</U>: any of the events set forth in Section 4043(c) of ERISA, other than
events for which the 30&nbsp;day notice period has been waived.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reserve Percentage</U>: the reserve percentage (expressed as a decimal, rounded upward to
the nearest 1/100th of 1%) applicable to member banks under regulations issued from time to time by
the Board of Governors for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as &#147;Eurocurrency liabilities&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restricted Investment</U>: any Investment by a Borrower or Subsidiary that is not a
Permitted Investment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Revolver Commitment</U>: Lender&#146;s obligation to make Revolver Loans and to issue Letters
of Credit in an amount up to $55,000,000.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Revolver Loan</U>: a loan made pursuant to <B>Section&nbsp;2.1</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Revolver Termination Date</U>: January&nbsp;11, 2012.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Royalties</U>: all royalties, fees, expense reimbursement and other amounts payable by a
Borrower under a License.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>S&#038;P</U>: Standard &#038; Poor&#146;s Ratings Services, a division of The McGraw-Hill Companies,
Inc., and its successors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Seasonal Advance Rate Period</U>: the period (but no more than one period) during any
Fiscal Year (a)&nbsp;commencing upon notice from Borrowers to Agent, which notice may only be given on
(x)&nbsp;or after January 1 and before May&nbsp;15 of such Fiscal Year and (y)&nbsp;so long as no
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Default or Event of Default then exists, and (b)&nbsp;continuing until the earliest of (x)&nbsp;4&nbsp;months
from the giving of such notice, (y)&nbsp;a Default or Event of Default shall occur, or (z)&nbsp;June 1 of
such Fiscal Year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Secured Parties</U>: Lender and providers of Bank Products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Security Documents</U>: the Guaranties, the Deed of Hypothec, the UK Charge over Shares,
Deposit Account Control Agreements, and all other documents, instruments and agreements now or
hereafter securing (or given with the intent to secure) any Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Senior Officer</U>: the president, chief executive officer, chief financial officer,
treasurer or assistant treasurer of a Borrower or, if the context requires, an Obligor.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Slow Moving Inventory Advance Rate</U>: 65% during the first Loan Year; 43% during the
second Loan Year; 22% during the third Loan Year; and 0% thereafter.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Solvent</U>: as to any Person, such Person (a)&nbsp;owns Property whose fair salable value is
greater than the amount required to pay all of its debts (including contingent, subordinated,
unmatured and unliquidated liabilities); (b)&nbsp;owns Property whose present fair salable value (as
defined below) is greater than the probable total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c)&nbsp;is
able to pay all of its debts as they mature; (d)&nbsp;has capital that is not unreasonably small for its
business and is sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage; (e)&nbsp;is not &#147;insolvent&#148; within the meaning of Section
101(32) of the Bankruptcy Code; and (f)&nbsp;has not incurred (by way of assumption or otherwise) any
obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any
conveyance in connection therewith, with actual intent to hinder, delay or defraud either present
or future creditors of such Person or any of its Affiliates. &#147;<U>Fair salable value</U>&#148; means
the amount that could be obtained for assets within a reasonable time, either through collection or
through sale under ordinary selling conditions by a capable and diligent seller to an interested
buyer who is willing (but under no compulsion) to purchase.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Specified Payments</U>: (i)&nbsp;guaranteed earn-out payments to executives of Gekko pursuant
to Executive Employment Agreements by and between Gekko as in effect on the date hereof and as
previously disclosed to Lender, the total amount of which payments shall not exceed in the
aggregate, $3,500,000, and (ii)&nbsp;payments to executives (other than those specified in subsection
(i)&nbsp;above) of Gekko pursuant to such Executive Employment Agreements which are based on the
performance of such executives.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Subordinated Debt</U>: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity,
interest, fees, repayment, covenants and subordination) satisfactory to Lender.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Subsidiary</U>: any entity more than 50% of whose voting securities or Equity Interests
is owned by a Borrower or any combination of Borrowers (including indirect ownership by a Borrower
through other entities in which such Borrower directly or indirectly owns more than 50% of the
voting securities or Equity Interests).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-24-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Taxes</U>: all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Trademark Security Agreement</U>: each trademark security agreement pursuant to which an
Obligor grants a Lien to Lender on such Obligor&#146;s interests in trademarks, as security for the
Obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Type</U>: any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same
interest option and, in the case of LIBOR Loans, the same Interest Period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>UCC</U>: the Uniform Commercial Code as in effect in the State of California or, when the
laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform
Commercial Code or any other applicable law (including the Civil Code of Quebec) of such
jurisdiction.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>UK Loan Document</U>: any document, agreement, or instrument evidencing the loans under
the UK Loan Facility, or any guaranty or security therefor.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>UK Loan Facility</U>: the loan facility now or in the future provided by Lender to
Ashworth UK, including, without limitation, any present or future guarantees thereof provided by
any Borrower or Subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Unfunded Pension Liability</U>: the excess of a Pension Plan&#146;s benefit liabilities under
Section&nbsp;4001(a)(16) of ERISA, over the current value of that Pension Plan&#146;s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to Section&nbsp;412 of the
Code for the applicable plan year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Upstream Payment</U>: a Distribution by a Subsidiary to any Obligor or any Obligor to
another Obligor (and, in the case of a Distribution by a non-wholly-owned Subsidiary, to any
Obligor 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).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Value</U>: (a)&nbsp;for Inventory, its value determined on the basis of the lower of cost or
market, calculated on a first-in, first-out basis, and excluding any portion of cost attributable
to intercompany profit among Borrowers and their Affiliates; and (b)&nbsp;for an Account, its face
amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits,
allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by
the Account Debtor or any other Person.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 </B><U><B>Accounting Terms</B></U>. Under the Loan Documents (except as otherwise specified
herein), all accounting terms shall be interpreted, all accounting determinations shall be made,
and all financial statements shall be prepared, in accordance with GAAP applied on a basis
consistent with the most recent audited financial statements of Borrowers delivered to Lender
before the Closing Date and using the same inventory valuation method as used in such financial
statements, except for any change required or permitted by GAAP if Borrowers&#146; certified public
accountants concur in such change, and the change is disclosed to Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.3 </B><U><B>Uniform Commercial Code</B></U>. As used herein, the following terms are defined in
accordance with the UCC in effect in the State of California from time to time: &#147;Chattel
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">Paper,&#148; &#147;Commercial Tort Claim,&#148; &#147;Deposit Account,&#148; &#147;Document,&#148; &#147;Equipment,&#148; &#147;General
Intangibles,&#148; &#147;Goods,&#148; &#147;Instrument,&#148; &#147;Investment Property,&#148; &#147;Letter-of-Credit Right&#148; and
&#147;Supporting Obligation.&#148;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.4 </B><U><B>Certain Matters of Construction</B></U>. The terms &#147;herein,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and
other words of similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the
computation of periods of time from a specified date to a later specified date, &#147;from&#148; means &#147;from
and including,&#148; and &#147;to&#148; and &#147;until&#148; each mean &#147;to but excluding.&#148; The terms &#147;including&#148; and
&#147;include&#148; shall mean &#147;including, without limitation&#148; and, for purposes of each Loan Document, the
parties agree that the rule of <I>ejusdem generis </I>shall not be applicable to limit any provision.
Section titles appear as a matter of convenience only and shall not affect the interpretation of
any Loan Document. All references to (a)&nbsp;laws or statutes include all related rules, regulations,
interpretations, amendments and successor provisions; (b)&nbsp;any document, instrument or agreement
include any amendments, waivers and other modifications, extensions or renewals (to the extent
permitted by the Loan Documents); (c)&nbsp;any section mean, unless the context otherwise requires, a
section of this Agreement; (d)&nbsp;any exhibits or schedules mean, unless the context otherwise
requires, exhibits and schedules attached hereto, which are hereby incorporated by reference;
(e)&nbsp;any Person include successors and assigns; (f)&nbsp;time of day mean time of day at Lender&#146;s notice
address under <B>Section&nbsp;12.3.1</B>; or (g)&nbsp;discretion of Lender mean its reasonable discretion. All
calculations of Value, fundings of Loans, issuances of Letters of Credit and payments of
Obligations shall be in Dollars and, unless the context otherwise requires, all determinations
(including calculations of Borrowing Base and financial covenants) made from time to time under
the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing
Base calculations shall be consistent with historical methods of valuation and calculation, and
otherwise reasonably satisfactory to Lender (and not necessarily calculated in accordance with
GAAP). No provision of any Loan Documents shall be construed against any party by reason of such
party having, or being deemed to have, drafted the provision. Whenever the phrase &#147;to the best of
Borrowers&#146; knowledge&#148; or words of similar import are used in any Loan Documents, it means actual
knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she
had engaged in good faith and diligent performance of his or her duties, including reasonably
specific inquiries of employees or agents and a good faith attempt to ascertain the matter to
which such phrase relates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of any Collateral located in the Province of Quebec or charged by any deed of
hypothec (or any other Loan Document) and for all other purposes pursuant to which the
interpretation or construction of a Loan Document may be subject to the laws of the Province of
Quebec or a court or tribunal exercising jurisdiction in the Province of Quebec, (i)&nbsp;&#148;personal
property&#148; shall be deemed to include &#147;movable property&#148;, (ii)&nbsp;&#148;real property&#148; shall be deemed to
include &#147;immovable property&#148; and an &#147;easement&#148; shall be deemed to include a &#147;servitude&#148;,
(iii)&nbsp;&#148;tangible property&#148; shall be deemed to include &#147;corporeal property&#148;, (iv)&nbsp;&#148;intangible
property&#148; shall be deemed to include &#147;incorporeal property&#148;, (v)&nbsp;&#148;security interest&#148; and &#147;mortgage&#148;
shall be deemed to include a &#147;hypothec&#148;, (vi)&nbsp;all references to filing, registering or recording
under the UCC shall be deemed to include publication under the Civil Code of Quebec, and all
references to releasing any Lien shall be deemed to include a release, discharge and mainlevee of a
hypothec, (vii)&nbsp;all references to &#147;perfection&#148; of or &#147;perfected&#148; Liens shall be deemed to include a
reference to the &#147;opposability&#148; of such Liens to third parties, (viii)&nbsp;any &#147;right of offset&#148;,
&#147;right of setoff&#148; or similar expression shall be deemed to include a &#147;right of
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">compensation&#148;, (ix)&nbsp;&#148;goods&#148; shall be deemed to include &#147;corporeal movable property&#148; other than
chattel paper, documents of title, instruments, money and securities, and (x)&nbsp;an &#147;agent&#148; shall be
deemed to include a &#147;mandatary&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 2 CREDIT FACILITIES</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B><U>Revolver Commitment</U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.1 <U>Revolver Loans</U>. Lender agrees, on the terms set forth herein, to make Revolver
Loans to Borrowers in an aggregate amount up to the Revolver Commitment, from time to time through
the Commitment Termination Date. The Revolver Loans may be repaid and reborrowed as provided
herein. In no event shall Lender have any obligation to honor a request for a Revolver Loan if the
unpaid balance of Revolver Loans outstanding at such time (including the requested Loan) would
exceed the Borrowing Base.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.2 <U>Use of Proceeds</U>. The proceeds of Revolver Loans shall be used by Borrowers
solely (a)&nbsp;to satisfy existing Debt; (b)&nbsp;to pay fees and transaction expenses associated with the
closing of this credit facility; (c)&nbsp;to pay Obligations in accordance with this Agreement; and
(d)&nbsp;for working capital and other lawful general corporate purposes of Borrowers, including
Permitted Acquisitions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.3 Voluntary Reduction or Termination of Revolver Commitment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Revolver Commitment shall terminate on the Revolver Termination Date, unless sooner
terminated in accordance with this Agreement. Upon at least 15&nbsp;days prior written notice to
Lender, Borrowers may, at their option, terminate the Revolver Commitment and this credit facility.
Any notice of termination given by Borrowers shall be irrevocable; provided that a notice of
termination delivered by Borrowers may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by Borrowers (by notice to
Lender on or prior to the specified effective date) if such condition is not satisfied. On the
termination date, Borrowers shall make Full Payment of all Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#091;Intentionally Deleted&#093;.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Concurrently with any reduction or termination of the Revolver Commitment occurring during
the first Loan Year or second Loan Year, for whatever reason (including an Event of Default),
Borrowers shall pay to Lender, as liquidated damages for loss of bargain (and not as a penalty), an
amount equal to (i)&nbsp;1% of the Revolver Commitment being reduced or terminated. No termination
charge shall be payable if termination occurs on or after the first day of the third Loan Year, or
the termination is in connection with the repayment in full of the Obligations with the proceeds of
a credit facility provided in full by the commercial banking division of Lender, or with respect to
which such division is the sole administrative agent.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.4 <U>Overadvances</U>. If the aggregate Revolver Loans exceed the Borrowing Base
(&#147;<U>Overadvance</U>&#148;) or the Revolver Commitment at any time, the excess amount shall be payable
by Borrowers <B>on demand </B>by Lender, but all such Revolver Loans shall nevertheless constitute
Obligations secured by the Collateral and entitled to all benefits of the Loan
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Documents. Any funding or sufferance of an Overadvance shall not constitute a waiver of the
Event of Default caused thereby.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B>&#091;Intentionally Deleted&#093;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B>Letter of Credit Facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.1 <U>Issuance of Letters of Credit</U>. Lender agrees to issue or extend Letters of
Credit (including the Back-Up LC which shall be issued on the Closing Date) from time to time until
20 Business Days prior to the Revolver Termination Date (or until the Commitment Termination Date,
if earlier), on the terms set forth herein, including the following:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Each Borrower acknowledges that Lender&#146;s willingness to issue any Letter of Credit is
conditioned upon its receipt of a LC Application with respect to the requested Letter of Credit, as
well as such other instruments and agreements as Lender may customarily require for issuance of a
letter of credit of similar type and amount. Lender shall have no obligation to issue any Letter
of Credit unless (i)&nbsp;it receives a LC Request and LC Application at least three Business Days prior
to the requested date of issuance; and (ii)&nbsp;each LC Condition is satisfied.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Letters of Credit may be requested by a Borrower only (i)&nbsp;to support obligations of such
Borrower incurred in the ordinary course of business; or (ii)&nbsp;for other purposes as Lender may
approve from time to time in writing. The renewal or extension of any Letter of Credit shall be
treated as the issuance of a new Letter of Credit, except that delivery of a new LC Application
shall be required at the reasonable discretion of Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Borrowers assume all risks of the acts, omissions or misuses of any Letter of Credit by
the beneficiary. In connection with issuance of any Letter of Credit, Lender shall not be
responsible for the existence, character, quality, quantity, condition, packing, value or delivery
of any goods purported to be represented by any Documents; any differences or variation in the
character, quality, quantity, condition, packing, value or delivery of any goods from that
expressed in any Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect
of any Documents or of any endorsements thereon; the time, place, manner or order in which shipment
of goods is made; partial or incomplete shipment of, or failure to ship, any goods referred to in a
Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by any
shipper or other Person in connection with any goods, shipment or delivery; any breach of contract
between a shipper or vendor and a Borrower; errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail,
telephone or otherwise; errors in interpretation of technical terms; the misapplication by a
beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from
causes beyond the control of Lender, including any act or omission of a Governmental Authority.
Lender shall be fully subrogated to the rights and remedies of each beneficiary whose claims
against Borrowers are discharged with proceeds of any Letter of Credit.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;In connection with its administration of and enforcement of rights or remedies under any
Letters of Credit or LC Documents, Lender shall be entitled to act, and shall be fully protected in
acting, upon any certification, documentation or communication in whatever form believed by Lender,
in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person.
Lender may consult with and employ legal counsel, accountants
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">and other experts to advise it concerning its obligations, rights and remedies, and shall be
entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon,
any advice given by such experts. Lender may employ agents and attorneys-in-fact in connection
with any matter relating to Letters of Credit or LC Documents, and shall not be liable for the
negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;If the Borrower Agent so requests in any applicable LC Application, the Lender may, in its
sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension
provisions (each, an &#147;<U>Auto-Extension Letter of Credit</U>&#148;); <U>provided</U> that any such
Auto-Extension Letter of Credit must permit the Lender to prevent any such extension 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 &#147;<U>Non-Extension Notice
Date</U>&#148;) in each such twelve-month period to be agreed upon at the time such Letter of Credit is
issued. Unless otherwise directed by the Lender, the Borrowers shall be required to make request
to the Lender for any such extension within 5 Business Days prior to the termination date of such
Letter of Credit; <U>provided</U>, <U>however</U>, that the Lender shall not permit any such
extension if (A)&nbsp;the Lender has determined that it would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the
terms hereof, or (B)&nbsp;one or more of the applicable conditions specified in Section&nbsp;6 is not then
satisfied.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Notwithstanding the provisions of this <B>Section&nbsp;2 </B>(including without limitation <B>Sections
2.3.1 </B>and <B>2.3.2</B>), Lender shall not be exonerated from any liability to any Borrower resulting from
its gross negligence or willful misconduct.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.2 <U>Reimbursement</U>. If Lender honors any request for payment under a Letter of
Credit, Borrowers shall pay to Lender, without duplication, on the same day (&#147;<U>Reimbursement
Date</U>&#148;), the amount paid under such Letter of Credit, together with interest at the interest
rate for Base Rate Revolver Loans from the Reimbursement Date until payment by Borrowers. The
obligation of Borrowers to reimburse Lender for any payment made under a Letter of Credit shall be
absolute, unconditional, irrevocable, and joint and several, and shall be paid without regard to
any lack of validity or enforceability of any Letter of Credit or the existence of any claim,
setoff, defense or other right that Borrowers may have at any time against the beneficiary.
Whether or not Borrower Agent submits a Notice of Borrowing, Borrowers shall be deemed to have
requested a Borrowing of Base Rate Revolver Loans in an amount necessary to pay all amounts due on
any Reimbursement Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.3 <U>Cash Collateral</U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;If any LC Obligations, whether or not then due or payable, shall for any reason be
outstanding at any time (a)&nbsp;that an Event of Default exists and is continuing, (b)&nbsp;that
Availability is less than zero, or (c)&nbsp;after the Commitment Termination Date, then Borrowers shall,
at Lender&#146;s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and
pay to Lender the amount of all other LC Obligations. If Borrowers fail to provide Cash Collateral
as required herein, Lender may advance, as Revolver Loans, the amount of the Cash Collateral
required.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;If Borrower Agent request that any Letter of Credit be renewed pursuant to
<B>Section&nbsp;2.2.</B><B>2(e)</B> which causes the expiration date of such Letter of Credit to
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">be after the Commitment Termination Date, before such renewal becomes effective, Borrower
shall Cash Collateralize the stated amount of such Letter of Credit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 3 INTEREST, FEES AND CHARGES</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 </B>Interest.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.1 Rates and Payment of Interest.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Obligations shall bear interest (i)&nbsp;if a Base Rate Loan, at the Base Rate in effect
from time to time, plus the Applicable Margin; (ii)&nbsp;if a LIBOR Loan, at LIBOR for the applicable
Interest Period, plus the Applicable Margin; and (iii)&nbsp;if any other Obligation (other than the LC
Obligations and Bank Product Debt) (including, to the extent permitted by law, interest not paid
when due), at the Base Rate in effect from time to time, plus the Applicable Margin for Base Rate
Revolver Loans. Interest shall accrue from the date the Loan is advanced or the Obligation is
incurred or payable, until paid by Borrowers. If a Loan is repaid on the same day made, one day&#146;s
interest shall accrue.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;During an Insolvency Proceeding with respect to any Borrower, or during any other Event of
Default if Lender in its discretion so elects, Obligations (other than the LC Obligations and Bank
Product Debt) shall bear interest at the Default Rate (whether before or after any judgment). Each
Borrower acknowledges that the cost and expense to Lender due to an Event of Default are difficult
to ascertain and that the Default Rate is a fair and reasonable estimate to compensate Lender for
this.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Interest accrued on the Loans shall be due and payable in arrears, (i)&nbsp;on the first day of
each month; (ii)&nbsp;on any date of prepayment, with respect to the principal amount of Loans being
prepaid; and (iii)&nbsp;on the Commitment Termination Date. Interest accrued on any other Obligations
shall be due and payable as provided in the Loan Documents and, if no payment date is specified,
shall be due and payable <B>on demand</B>. Notwithstanding the foregoing, interest accrued at the Default
Rate shall be due and payable <B>on demand</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.2 Application of LIBOR to Outstanding Loans.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Borrowers may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans to, or to continue any
LIBOR Loan at the end of its Interest Period as, a LIBOR Loan. During any Default or Event of
Default, Lender may declare that no Loan may be made, converted or continued as a LIBOR Loan.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Whenever Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent
shall give Lender a Notice of Conversion/Continuation, no later than 11:00&nbsp;a.m. at least three
Business Days before the requested conversion or continuation date. Each Notice of
Conversion/Continuation shall be irrevocable, and shall specify the amount of Loans to be converted
or continued, the conversion or continuation date (which shall be a Business Day), and the duration
of the Interest Period (which shall be deemed to be one month if not specified). If, upon the
expiration of any Interest Period in respect of any LIBOR Loans, Borrowers shall have failed to
deliver a Notice of Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.3 <U>Interest Periods</U>. In connection with the making, conversion or continuation of
any LIBOR Loans, Borrowers shall select an interest period (&#147;<U>Interest Period</U>&#148;) to apply,
which interest period shall be one, two, three or six months; <U>provided</U>, <U>however</U>,
that:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Interest Period shall commence on the date the Loan is made or continued as, or
converted into, a LIBOR Loan, and shall expire on the numerically corresponding day in the calendar
month at its end;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;if any Interest Period commences on a day for which there is no corresponding day in the
calendar month at its end or if such corresponding day falls after the last Business Day of such
month, then the Interest Period shall expire on the last Business Day of such month; and if any
Interest Period would expire on a day that is not a Business Day, the period shall expire on the
next Business Day; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;no Interest Period shall extend beyond the Revolver Termination Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.4 <U>Interest Rate Not Ascertainable</U>. If Lender shall determine that on any date for
determining LIBOR, due to any circumstance affecting the London interbank market, adequate and fair
means do not exist for ascertaining such rate on the basis provided herein, then Lender shall
immediately notify Borrowers of such determination. Until Lender notifies Borrowers that such
circumstance no longer exists, the obligation of Lender to make LIBOR Loans shall be suspended, and
no further Loans may be converted into or continued as LIBOR Loans.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 </B><U>Fees</U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.1 <U>Unused Line Fee</U>. Borrowers shall pay to Lender a fee equal to 0.25% per annum
times the amount by which the Revolver Commitment exceeds the sum of (i)&nbsp;the average actual daily
balance of Revolver Loans and stated amount of Letters of Credit during any month, plus (ii)&nbsp;the
Availability Block. Such fee shall be payable in arrears, on the first day of each month and on
the Commitment Termination Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.2 <U>LC Facility Fees</U>. Borrowers shall pay to Lender (a)&nbsp;a fee equal to the
Applicable Margin in effect for LIBOR Revolver Loans times the average actual daily stated amount
of Letters of Credit, which fee shall be payable monthly in arrears, on the first day of each
month; (b)&nbsp;a fronting fee equal to 0.125% per annum on the stated amount of each Letter of Credit,
which fee shall be payable monthly in arrears, on the first day of each month; and (c)&nbsp;all
customary charges associated with the issuance, amending, negotiating, payment, processing,
transfer and administration of Letters of Credit, which charges shall be paid as and when incurred.
During an Event of Default, the fee payable under clause (a)&nbsp;shall be increased by 2% per annum.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.3 <U>Closing Fee</U>. Borrowers shall pay to Lender a closing fee of $137,500, which
shall be paid concurrently with the funding of the initial Loans hereunder.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.3 </B><U><B>Computation of Interest, Fees, Yield Protection</B></U><B>. </B>All interest, as well as fees
and other charges calculated on a per annum basis, shall be computed for the actual days elapsed,
based on a year of 360&nbsp;days. Each determination by Lender of any interest, fees or interest rate
hereunder shall be final, conclusive and binding for all purposes, absent manifest error. All
fees shall be fully earned when due and shall not be subject to rebate, refund or
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">proration. All fees payable under <B>Section&nbsp;3.2 </B>are compensation for services and are not, and
shall not be deemed to be, interest or any other charge for the use, forbearance or detention of
money. A certificate as to amounts payable by Borrowers under <B>Section&nbsp;3.4, 3.6, 3.7, 3.9 </B>or <B>5.8</B>,
setting forth the calculation thereof in reasonable detail, submitted to Borrower Agent by Lender
shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers
shall pay such amounts to the appropriate party within 10 Business Days following receipt of the
certificate.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.4 </B><U><B>Reimbursement Obligations</B></U><B>. </B>Borrowers shall reimburse Lender for all
Extraordinary Expenses. Borrowers shall also reimburse Lender for all legal, accounting,
appraisal, consulting, and other fees, costs and expenses incurred by it in connection with
(a)&nbsp;negotiation and preparation of any Loan Documents, including any amendment or other
modification thereof; (b)&nbsp;administration of and actions relating to any Collateral, Loan Documents
and transactions contemplated thereby, including any actions taken to perfect or maintain priority
of Lender&#146;s Liens on any Collateral, to maintain any insurance required hereunder or to verify
Collateral; and (c)&nbsp;subject to the limits of <B>Section&nbsp;10.1.1(b)</B>, each inspection, audit or
appraisal with respect to any Obligor or Collateral, whether prepared by Lender&#146;s personnel or a
third party. If, for any reason (including inaccurate reporting on financial statements or a
Compliance Certificate), it is determined that a higher Applicable Margin should have applied to a
period than was actually applied, then the proper margin shall be applied retroactively and
Borrowers shall immediately pay to Lender an amount equal to the difference between the amount of
interest and fees that would have accrued using the proper margin and the amount actually paid.
If it is determined within 30&nbsp;days after an adjustment in the Applicable Margin that the
Applicable Margin should have been adjusted to a lower Applicable Margin, then the proper margin
shall be applied retroactively and Lender shall pay to Borrowers an amount equal to the difference
between the amount of interest that would have accrued using the proper margin, such adjustment
payment shall only be made by Lender if the reason for the application of the incorrect Applicable
Margin is a result of calculation mistakes made by Borrowers on a Compliance Certificate (and not
mistakes or inaccurate reporting on financial statements), and Borrower notifies Lender of such
mistake within 30&nbsp;days after such incorrect adjustment to the Applicable Margin. All amounts
payable by Borrowers under this Section shall be due <B>on demand</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.5 </B><U><B>Illegality</B></U><B>. </B>If Lender determines that any Applicable Law has made it unlawful,
or that any Governmental Authority has asserted that it is unlawful, for Lender to make, maintain
or fund LIBOR Loans, or to determine or charge interest rates based upon LIBOR, or any
Governmental Authority has imposed material restrictions on the authority of Lender to purchase or
sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by
Lender to Borrower Agent, any obligation of Lender to make or continue LIBOR Loans or to convert
Base Rate Loans to LIBOR Loans shall be suspended until Lender notifies Borrower Agent that the
circumstances giving rise to such determination no longer exist. Upon delivery of such notice,
Borrowers shall prepay or, if applicable, convert all LIBOR Loans to Base Rate Loans, either on
the last day of the Interest Period therefor, if Lender may lawfully continue to maintain LIBOR
Loans to such day, or immediately, if Lender may not lawfully continue to maintain LIBOR Loans.
Upon any such prepayment or conversion, Borrowers shall also pay accrued interest on the amount so
prepaid or converted.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.6 </B><U><B>Inability to Determine Rates</B></U><B>. </B>If Lender notifies Borrower Agent for any reason
in connection with a request for a Borrowing of, conversion to or continuation of, a
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">LIBOR Loan that (a)&nbsp;Dollar deposits are not being offered to banks in the London interbank
Eurodollar market for the applicable amount and Interest Period of such Loan, (b)&nbsp;adequate and
reasonable means do not exist for determining LIBOR for the requested Interest Period, or
(c)&nbsp;LIBOR for the requested Interest Period does not adequately and fairly reflect the cost to
Lender of funding such Loan, then the obligation of Lender to make or maintain LIBOR Loans shall
be suspended until it revokes the notice. Upon receipt of the notice, Borrower Agent may revoke
any pending request for a Borrowing of, conversion to or continuation of a LIBOR Loan or, failing
that, will be deemed to have submitted a request for a Base Rate Loan.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.7 </B><U><B>Increased Costs; Capital Adequacy</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7.1 <U>Change in Law</U>. If any Change in Law shall:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;impose modify or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the account of, or credit
extended or participated in by, Lender (except any reserve requirement reflected in LIBOR);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;subject Lender to any Tax with respect to any Loan, Loan Document or Letter of Credit, or
change the basis of taxation of payments to Lender in respect thereof (except for Indemnified Taxes
or Other Taxes covered by <B>Section&nbsp;5.8 </B>and the imposition of, or any change in the rate of, any
Excluded Tax payable by Lender); or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;impose on Lender or the London interbank market any other condition, cost or expense
affecting any Loan, Loan Document or Letter of Credit; and the result thereof shall be to increase
the cost to Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation to
make any such Loan), or to increase the cost to Lender of issuing or maintaining any Letter of
Credit (or of maintaining its obligation to issue any Letter of Credit), or to reduce the amount of
any sum received or receivable by Lender hereunder (whether of principal, interest or any other
amount) then, upon request by Lender pursuant to a certificate as set forth in <B>Section&nbsp;3.3</B>,
Borrowers will pay to Lender such additional amount or amounts as will compensate Lender for such
additional costs incurred or reduction suffered.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7.2 <U>Capital Adequacy</U>. If Lender determines that any Change in Law affecting Lender
or its holding company regarding capital requirements has or would have the effect of reducing the
rate of return on Lender&#146;s or such holding company&#146;s capital as a consequence of this Agreement,
Commitments, Loans or Letters of Credit to a level below that which Lender or such holding company
could have achieved but for such Change in Law (taking into consideration Lender&#146;s and such holding
company&#146;s policies with respect to capital adequacy), then from time to time upon request pursuant
to a certificate as set forth in <B>Section&nbsp;3.3 </B>Borrowers will pay to Lender such additional amount or
amounts as will compensate it or its holding company for any such reduction suffered.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7.3 <U>Compensation</U>. Failure or delay on the part of Lender to demand compensation
pursuant to this Section shall not constitute a waiver of its right to demand such compensation,
but Borrowers shall not be required to compensate Lender for any increased costs incurred or
reductions suffered more than nine months prior to the date that Lender notifies Borrower Agent of
the Change in Law giving rise to such increased costs or reductions and of Lender&#146;s intention to
claim compensation therefor (except that, if the Change in Law giving rise
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">to such increased costs or reductions is retroactive, then the nine-month period referred to
above shall be extended to include the period of retroactive effect thereof).
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.8 </B><U><B>Mitigation</B></U>. If Lender gives a notice under <B>Section&nbsp;3.5 </B>or requests compensation
under <B>Section&nbsp;3.7</B>, or if Borrowers are required to pay additional amounts under <B>Section&nbsp;5.8</B>, then
Lender shall use reasonable efforts to designate a different lending office or to assign its
rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the
judgment of Lender, such designation or assignment (a)&nbsp;would eliminate the need for such notice or
reduce amounts payable in the future, as applicable; and (b)&nbsp;would not subject Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to Lender. Borrowers
agree to pay all reasonable costs and expenses incurred by Lender in connection with any such
designation or assignment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.9 </B><U><B>Funding Losses</B></U><B>. </B>If for any reason (a)&nbsp;any Borrowing of, or conversion to or
continuation of, a LIBOR Loan does not occur on the date specified therefor in a Notice of
Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b)&nbsp;any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest Period, or
(c)&nbsp;Borrowers fail to repay a LIBOR Loan when required hereunder, then Borrowers shall pay to
Lender all losses and expenses that it sustains as a consequence thereof, including loss of
anticipated profits and any loss or expense arising from liquidation or redeployment of funds or
from fees payable to terminate deposits of matching funds. Lender shall not be required to
purchase Dollar deposits in the London interbank market or any other offshore Dollar market to
fund any LIBOR Loan, but the provisions hereof shall be deemed to apply as if Lender had purchased
such deposits to fund its LIBOR Loans.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.10 </B><U><B>Maximum Interest</B></U><B>. </B>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 (&#147;<U>maximum rate</U>&#148;).
If Lender shall receive interest in an amount that exceeds the maximum rate, the excess interest
shall be applied to the principal of the Obligations or, if it exceeds such unpaid principal,
refunded to Borrowers. In determining whether the interest contracted for, charged or received by
Lender exceeds the maximum rate, Lender may, to the extent permitted by Applicable Law,
(a)&nbsp;characterize any payment that is not principal as an expense, fee or premium rather than
interest; (b)&nbsp;exclude voluntary prepayments and the effects thereof; and (c)&nbsp;amortize, prorate,
allocate and spread in equal or unequal parts the total amount of interest throughout the
contemplated term of the Obligations hereunder.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 4 LOAN ADMINISTRATION</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 </B>Manner of Borrowing and Funding Revolver Loans.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.1 <U>Notice of Borrowing</U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Whenever Borrowers desire funding of a Borrowing of Revolver Loans, Borrower Agent shall
give Lender a Notice of Borrowing. Such notice must be received by Lender no later than 11:00&nbsp;a.m.
(i)&nbsp;on the Business Day of the requested funding date, in the case of Base Rate Loans, and (ii)&nbsp;at
least three Business Days prior to the requested funding date, in the case of LIBOR Loans. Notices
received after 11:00&nbsp;a.m. shall be deemed received on the next Business Day. Each Notice of
Borrowing shall be irrevocable and shall specify (A)&nbsp;the
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-34-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">amount of the Borrowing, (B)&nbsp;the requested funding date (which must be a Business Day),
(C)&nbsp;whether the Borrowing is to be made as Base Rate Loans or LIBOR Loans, and (D)&nbsp;in the case of
LIBOR Loans, the duration of the applicable Interest Period (which shall be deemed to be one month
if not specified).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Unless payment is otherwise timely made by Borrowers, the becoming due of any Obligations
(whether principal, interest, fees or other charges, including Extraordinary Expenses, LC
Obligations, Cash Collateral and Bank Product Debt) shall be deemed to be a request for Base Rate
Revolver Loans on the due date, in the amount of such Obligations. The proceeds of such Revolver
Loans shall be disbursed as direct payment of the relevant Obligation. In addition, Lender may, at
its option, charge such Obligations against any operating, investment or other account of a
Borrower maintained with Lender or any of its Affiliates.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If Borrowers establish a controlled disbursement account with Lender or any of its
Affiliates, then the presentation for payment of any check or other item of payment drawn on such
account at a time when there are insufficient funds to cover it shall be deemed to be a request for
Base Rate Revolver Loans on the date of such presentation, in the amount of the check and items
presented for payment. The proceeds of such Revolver Loans may be disbursed directly to the
controlled disbursement account or other appropriate account.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.2 <U>Fundings</U>. Lender shall fund each Borrowing on the applicable funding date and,
subject to the terms of this Agreement, shall disburse the proceeds as directed by Borrower Agent.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.3 <U>Notices</U>. Each Borrower authorizes Lender to extend, convert or continue Loans,
effect selections of interest rates, and transfer funds to or on behalf of Borrowers based on (and
Lender agrees to honor subject to any conditions set forth herein) telephonic or e-mailed
instructions. Borrowers shall confirm each such request by prompt delivery to Lender of a Notice
of Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs in any material
respect from the action taken by Lender, the records of Lender shall govern. Lender shall not have
any liability for any loss suffered by a Borrower as a result of Lender acting upon its
understanding of telephonic or e-mailed instructions from a person believed in good faith to be a
person authorized to give such instructions on a Borrower&#146;s behalf.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 </B><U>Number and Amount of LIBOR Loans; Determination of Rate</U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No more than six Borrowings of LIBOR Loans may be outstanding at any time, and each Borrowing
of LIBOR Loans when made shall be in a minimum amount of $500,000, or an increment of $250,000 in
excess thereof. Upon determining LIBOR for any Interest Period requested by Borrowers, Lender
shall promptly notify Borrowers thereof by telephone or electronically and, if requested by
Borrowers, shall confirm any telephonic notice in writing.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.3 </B><U><B>Borrower Agent</B></U><B>. </B>Each Borrower hereby designates Parent (&#147;<U>Borrower
Agent</U>&#148;) as its representative and agent for all purposes under the Loan Documents, including
requests for Loans and Letters of Credit, designation of interest rates, delivery or receipt of
communications, preparation and delivery of Borrowing Base and financial reports, receipt and
payment of Obligations, requests for waivers, amendments or other accommodations, actions under
the Loan Documents (including in respect of compliance with covenants), and all other
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-35-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">dealings with Lender. Borrower Agent hereby accepts such appointment. Lender shall be
entitled to rely upon, and shall be fully protected in relying upon, any notice or communication
(including any notice of borrowing) delivered by Borrower Agent on behalf of any Borrower. Lender
may give any notice or communication with a Borrower hereunder to Borrower Agent on behalf of such
Borrower. Lender shall have the right, in its discretion, to deal exclusively with Borrower Agent
for any or all purposes under the Loan Documents. Each Borrower agrees that any notice, election,
communication, representation, agreement or undertaking made on its behalf by Borrower Agent shall
be binding upon and enforceable against it.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.4 </B><U><B>One Obligation</B></U><B>. </B>The Loans, LC Obligations and other Obligations shall constitute
one general obligation of Borrowers and (unless otherwise expressly provided in any Loan Document)
shall be secured by Lender&#146;s Lien upon all Collateral; <U>provided</U>, <U>however</U>, that
Lender shall be deemed to be a creditor of, and the holder of a separate claim against, each
Borrower to the extent of any Obligations jointly or severally owed by such Borrower.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.5 </B><U><B>Effect of Termination</B></U><B>. </B>On the effective date of any termination of the Revolver
Commitment, all outstanding Obligations shall be immediately due and payable, and each Secured
Party may terminate its Bank Products. All undertakings of Borrowers contained in the Loan
Documents shall survive any termination until Full Payment of the Obligations, and Lender shall
retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents
until Full Payment of the Obligations. The provisions of <B>Sections&nbsp;2.3, 3.4, 3.6, 3.7, 3.9, 5.5,
5.8, 12.2 </B>and this Section, and the obligation of each Obligor with respect to each indemnity
given by it in any Loan Document, shall survive Full Payment of the Obligations and any release
relating to this credit facility.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 5 PAYMENTS</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.1 </B><U><B>General Payment Provisions</B></U><B>. </B>All payments of Obligations shall be made in
Dollars, without offset, counterclaim or defense of any kind, free of (and without deduction for)
any Indemnified Taxes or Other Taxes, and in immediately available funds, not later than 12:00
noon on the due date. Any payment after such time shall be deemed made on the next Business Day.
If any payment under the Loan Documents shall be stated to be due on a day other than a Business
Day, the due date shall be extended to the next Business Day and such extension of time shall be
included in any computation of interest and fees. Any payment of a LIBOR Loan prior to the end of
its Interest Period shall be accompanied by all amounts due under <B>Section&nbsp;3.9</B>. Any prepayment of
Loans shall be applied first to Base Rate Loans and then to LIBOR Loans; <U>provided</U>,
<U>however</U>, that as long as no Event of Default exists, prepayments of LIBOR Loans may, at
the option of Borrowers and Lender, be held by Lender as Cash Collateral and applied to such Loans
at the end of their Interest Periods.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.2 </B><U><B>Repayment of Revolver Loans</B></U><B>. </B>Revolver Loans shall be due and payable in full on
the Revolver Termination Date, unless payment is sooner required hereunder. Revolver Loans may be
prepaid from time to time, without penalty or premium. If any Asset Disposition includes the
disposition of Accounts or Inventory (other than sales of Inventory in the ordinary course of
business), then Net Proceeds equal to the greater of (a)&nbsp;the net book value of such Accounts and
Inventory, or (b)&nbsp;the reduction in the Borrowing Base upon giving effect to such disposition,
shall be applied to the Revolver Loans. Notwithstanding anything herein to the contrary, if an
Overadvance exists, Borrowers shall, on the sooner of Lender&#146;s demand or the first Business Day
after any Borrower has knowledge thereof, repay the outstanding Revolver
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-36-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">Loans in an amount sufficient to reduce the principal balance of Revolver Loans to the
Borrowing Base.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.3 </B>&#091;Intentionally Deleted&#093;.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.4 </B><U><B>Payment of Other Obligations</B></U><B>. </B>Obligations other than Loans, including LC
Obligations and Extraordinary Expenses, shall be paid by Borrowers as provided in the Loan
Documents or, if no payment date is specified, <B>on demand</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.5 </B><U><B>Marshaling; Payments Set Aside</B></U><B>. </B>Lender shall have no obligation to marshal any
assets in favor of any Obligor or against any Obligations. If any payment by or on behalf of
Borrowers is made to Lender, or Lender exercises a right of setoff, and such payment or the
proceeds of such setoff 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
Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then to the
extent of such recovery, the Obligation originally intended to be satisfied, and all Liens, rights
and remedies relating thereto, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.6 </B><U><B>Application of Payments</B></U>. At all times commencing on the Closing Date the ledger
balance in the main Dominion Account as of the end of a Business Day shall be applied to the
Obligations at the beginning of the next Business Day. If, as a result of such application, a
credit balance exists, the balance shall not accrue interest in favor of Borrowers and shall be
made available to Borrowers as long as no Default or Event of Default exists. Each Borrower
irrevocably waives the right to direct the application of any payments or Collateral proceeds, and
agrees that Lender shall have the continuing, exclusive right to apply and reapply same against
the Obligations, in such manner as Lender deems advisable, notwithstanding any entry by Lender in
its records.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.7 </B><U><B>Loan Account; Account Stated</B></U><B>.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7.1 <U>Loan Account</U>. Lender shall maintain in accordance with its usual and customary
practices an account or accounts (&#147;<U>Loan Account</U>&#148;) evidencing the Debt of Borrowers
resulting from each Loan or issuance of a Letter of Credit from time to time. Any failure of
Lender to record anything in the Loan Account, or any error in doing so, shall not limit or
otherwise affect the obligation of Borrowers to pay any amount owing hereunder. Lender may
maintain a single Loan Account in the name of Borrower Agent, and each Borrower confirms that such
arrangement shall have no effect on the joint and several character of its liability for the
Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7.2 <U>Entries Binding</U>. Entries made in the Loan Account shall constitute presumptive
evidence of the information contained therein. If any information contained in the Loan Account is
provided to or inspected by any Person, then such information shall be conclusive and binding on
such Person for all purposes absent manifest error, except to the extent such Person notifies
Lender in writing within 30&nbsp;days after receipt or inspection that specific information is subject
to dispute.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 1%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.8 </B><U>Taxes</U>.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-37-<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8.1 <U>Payments Free of Taxes</U>. Any and all payments by any Obligor on account of any
Obligations shall be made free and clear of and without reduction or withholding for any
Indemnified Taxes or Other Taxes, <U>provided</U> that if an Obligor shall be required by
Applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then
(a)&nbsp;the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section) Lender receives an
amount equal to the sum it would have received had no such deductions been made; (b)&nbsp;the Obligor
shall make such deductions; and (c)&nbsp;Borrowers shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law. Without limiting the foregoing,
Borrowers shall timely pay all Other Taxes to the relevant Governmental Authorities if and to the
extent required by Applicable Law.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8.2 <U>Payment</U>. Borrowers shall indemnify, hold harmless and reimburse Lender, within
10&nbsp;days after demand therefor, pursuant to a certificate complying with <B>Section&nbsp;3.3</B>, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed
or asserted on or attributable to amounts payable under this Section) paid by Lender with respect
to any Obligations, Letters of Credit or Loan Documents, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other
Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability setting forth the calculation thereof in
reasonable detail delivered to Borrower Agent by Lender shall be conclusive absent manifest error.
As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower,
Borrower Agent shall deliver to Lender a receipt issued by the Governmental Authority evidencing
such payment or other evidence of payment reasonably satisfactory to Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8.3 <U>Refunds</U>. If Lender receives a refund of any Indemnified Taxes or Other Taxes as
to which it has been indemnified by any Borrower or with respect to which any Borrower has paid
additional amounts hereunder, Lender shall pay to Borrower Agent an amount equal to such refund
(but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers
hereunder with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of
all out-of-pocket costs and expenses of Lender incurred in obtaining such refund, and without
interest (other than any interest paid by the relevant Governmental Authority with respect to such
refund).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.9 </B><U><B>Nature and Extent of Each Borrower&#146;s Liability</B></U><B>.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9.1 <U>Joint and Several Liability</U>. Each Borrower agrees that it is jointly and
severally liable for, and absolutely and unconditionally guarantees to Lender the prompt payment
and performance of, all Obligations and all agreements under the Loan Documents. Each Borrower
agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and
performance and not of collection, that such obligations shall not be discharged until Full Payment
of the Obligations, and that such obligations are absolute and unconditional, irrespective of
(a)&nbsp;the genuineness, validity, regularity, enforceability, subordination or any future modification
of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement
to which any Obligor is or may become a party or be bound; (b)&nbsp;the absence of any action to enforce
this Agreement (including this Section) or any other Loan Document, or any waiver, consent or
indulgence of any kind by Lender with respect thereto; (c)&nbsp;the existence, value or condition of, or
failure to perfect a Lien or to preserve rights against,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-38-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">any security or guaranty for the Obligations or any action, or the absence of any action, by
Lender in respect thereof (including the release of any security or guaranty); (d)&nbsp;the insolvency
of any Obligor; (e)&nbsp;any election by Lender in an Insolvency Proceeding for the application of
Section&nbsp;1111(b)(2) of the Bankruptcy Code; (f)&nbsp;any borrowing or grant of a Lien by any other
Borrower, as debtor-in-possession under Section&nbsp;364 of the Bankruptcy Code or otherwise; (g)&nbsp;the
disallowance of any claims of Lender against any Obligor for the repayment of any Obligations under
Section&nbsp;502 of the Bankruptcy Code or otherwise; or (h)&nbsp;any other action or circumstances that
might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9.2 <U>Waivers</U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Each Borrower expressly waives all rights that it may have now or in the future under any
statute, at common law, in equity or otherwise, to compel Lender to marshal assets or to proceed
against any Obligor, other Person or security for the payment or performance of any Obligations
before, or as a condition to, proceeding against such Borrower. Each Borrower waives all defenses
available to a surety, guarantor or accommodation co-obligor other than Full Payment of all
Obligations. It is agreed among each Borrower and Lender that the provisions of this <B>Section&nbsp;5.9</B>
are of the essence of the transaction contemplated by the Loan Documents and that, but for such
provisions, Lender would decline to make Loans and issue Letters of Credit. Each Borrower
acknowledges that its guaranty pursuant to this Section is necessary to the conduct and promotion
of its business, and can be expected to benefit such business.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Lender may, in its discretion, pursue such rights and remedies as it deems appropriate,
including realization upon Collateral or any Real Estate by judicial foreclosure or non-judicial
sale or enforcement, without affecting any rights and remedies under this <B>Section&nbsp;5.9</B>. If, in
taking any action in connection with the exercise of any rights or remedies, Lender shall forfeit
any other rights or remedies, including the right to enter a deficiency judgment against any
Borrower or other Person, whether because of any Applicable Laws pertaining to &#147;election of
remedies&#148; or otherwise, each Borrower consents to such action and waives any claim based upon it,
even if the action may result in loss of any rights of subrogation that any Borrower might
otherwise have had. Any election of remedies that results in denial or impairment of the right of
Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower&#146;s
obligation to pay the full amount of the Obligations. Each Borrower waives all rights and defenses
arising out of an election of remedies, such as nonjudicial foreclosure with respect to any
security for the Obligations, even though that election of remedies destroys such Borrower&#146;s rights
of subrogation against any other Person. Lender may bid all or a portion of the Obligations at any
foreclosure or trustee&#146;s sale or at any private sale, and the amount of such bid need not be paid
by Lender but shall be credited against the Obligations. The amount of the successful bid at any
such sale, whether Lender or any other Person is the successful bidder, shall be conclusively
deemed to be the fair market value of the Collateral, and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this <B>Section&nbsp;5.9</B>, notwithstanding that any present or future law or
court decision may have the effect of reducing the amount of any deficiency claim to which Lender
might otherwise be entitled but for such bidding at any such sale.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9.3 Extent of Liability; Contribution.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-39-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Notwithstanding anything herein to the contrary, each Borrower&#146;s liability under this
<B>Section&nbsp;5.9 </B>shall be limited to the greater of (i)&nbsp;all amounts for which such Borrower is primarily
liable, as described below, and (ii)&nbsp;such Borrower&#146;s Allocable Amount.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;If any Borrower makes a payment under this <B>Section&nbsp;5.9 </B>of any Obligations (other than
amounts for which such Borrower is primarily liable) (a &#147;<U>Guarantor Payment</U>&#148;) that, taking
into account all other Guarantor Payments previously or concurrently made by any other Borrower,
exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the
aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such
Borrower&#146;s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such
Borrower shall be entitled to receive contribution and indemnification payments from, and to be
reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately prior to such Guarantor Payment. The
&#147;<U>Allocable Amount</U>&#148; for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this <B>Section&nbsp;5.9 </B>without rendering such payment voidable under
Section&nbsp;548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance
act, or similar statute or common law.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Nothing contained in this <B>Section&nbsp;5.9 </B>shall limit the liability of any Borrower to pay
Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower
and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), LC
Obligations relating to Letters of Credit issued to support such Borrower&#146;s business, and all
accrued interest, fees, expenses and other related Obligations with respect thereto, for which such
Borrower shall be primarily liable for all purposes hereunder. Lender shall have the right, at any
time during the existence of a Default or Event of Default, in its discretion, to condition Loans
and Letters of Credit upon a separate calculation of borrowing availability for each Borrower and
to restrict the disbursement and use of such Loans and Letters of Credit to such Borrower.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9.4 <U>Joint Enterprise</U>. Each Borrower has requested that Lender make this credit
facility available to Borrowers on a combined basis, in order to finance Borrowers&#146; business most
efficiently and economically. Borrowers&#146; business is a mutual and collective enterprise, and
Borrowers believe that consolidation of their credit facility will enhance the borrowing power of
each Borrower and ease the administration of their relationship with Lender, all to the mutual
advantage of Borrowers. Borrowers acknowledge and agree that Lender&#146;s willingness to extend credit
to Borrowers and to administer the Collateral on a combined basis, as set forth herein, is done
solely as an accommodation to Borrowers and at Borrowers&#146; request.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9.5 <U>Subordination</U>. Each Borrower hereby subordinates any claims, including any
rights at law or in equity to payment, subrogation, reimbursement, exoneration, contribution,
indemnification or set off, that it may have at any time against any other Obligor, howsoever
arising, to the Full Payment of all Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 6 CONDITIONS PRECEDENT</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 </B><U><B>Conditions Precedent to Initial Loans</B></U><B>. </B>In addition to the conditions set forth
in <B>Section&nbsp;6.2</B>, Lender shall not be required to fund any requested Loan, issue any Letter of
Credit or otherwise extend credit to Borrowers hereunder, until the date (&#147;<U>Closing Date</U>&#148;)
that each of the following conditions has been satisfied or waived in writing by Lender:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-40-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Each other Loan Document shall have been duly executed and delivered to Lender by each of
the signatories thereto, and each Obligor shall be in compliance with all terms thereof.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Lender shall have received acknowledgments of all filings or recordations necessary to
perfect its Liens in the Collateral, as well as UCC and Lien searches and other evidence reasonably
satisfactory to Lender that such Liens are the only Liens upon the Collateral, except Permitted
Liens.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#091;intentionally deleted&#093;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Lender shall have received duly executed agreements establishing each Dominion Account,
controlled disbursement account and related lockbox, in form and substance, and with financial
institutions, reasonably satisfactory to Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Lender shall have received certificates, in form and substance reasonably satisfactory to
it, from a knowledgeable Senior Officer of Parent certifying that, after giving effect to the
initial Loans and transactions hereunder, (i)&nbsp;Parent together with its Subsidiaries, is Solvent;
(ii)&nbsp;no Default or Event of Default exists; (iii)&nbsp;the representations and warranties set forth in
<B>Section&nbsp;9 </B>are true and correct; and (iv)&nbsp;Parent and each other Borrower has complied with all
agreements and conditions to be satisfied by it under the Loan Documents.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Lender shall have received a certificate of a duly authorized officer of each Obligor,
certifying (i)&nbsp;that attached copies of such Obligor&#146;s Organic Documents are true and complete, and
in full force and effect, without amendment except as shown; (ii)&nbsp;that an attached copy of
resolutions authorizing execution and delivery of the Loan Documents is true and complete, and that
such resolutions are in full force and effect, were duly adopted, have not been amended, modified
or revoked, and constitute all resolutions adopted with respect to this credit facility; and
(iii)&nbsp;to the title, name and signature of each Person authorized to sign the Loan Documents.
Lender may conclusively rely on this certificate until it is otherwise notified by the applicable
Obligor in writing.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Lender shall have received a written opinion of Gibson, Dunn &#038; Crutcher LLP, as well as
Canadian, and any other local counsel to Borrowers or Lender, in form and substance reasonably
satisfactory to Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Lender shall have received copies of the charter documents of each Obligor, certified by
the Secretary of State or other appropriate official of such Obligor&#146;s jurisdiction of
organization. Lender shall have received good standing certificates for each Obligor, issued by
the Secretary of State or other appropriate official of such Obligor&#146;s jurisdiction of organization
and each jurisdiction identified on <B>Schedule&nbsp;6.1(h)</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Lender shall have received copies of policies or certificates of insurance for the
insurance policies carried by Borrowers, all in compliance with the Loan Documents.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Lender shall have completed its business, financial and legal due diligence of Obligors,
including a roll-forward of its previous field examination, with results reasonably satisfactory to
Lender. No material adverse change in the financial condition of any Obligor or in the quality,
quantity or value of any Collateral shall have occurred since October&nbsp;31, 2006.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-41-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;Borrowers shall have paid all fees and expenses to be paid to Lender on the Closing Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;Lender shall have received a Borrowing Base Certificate prepared as of November&nbsp;30, 2007.
Upon giving effect to the initial funding of Loans and issuance of Letters of Credit, and the
payment by Borrowers of all fees and expenses incurred in connection herewith as well as any
payables stretched beyond their customary payment practices, Availability shall be at least
$5,300,000<B>.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 </B><U><B>Conditions Precedent to All Credit Extensions</B></U>. Lender shall not be required to
fund any Loans, issue any Letters of Credit, or grant any other accommodation to or for the
benefit of Borrowers, unless the following conditions are satisfied:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;No Default or Event of Default shall exist at the time of, or result from, such funding,
issuance or grant;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The representations and warranties of each Obligor in the Loan Documents shall be true and
correct on the date of, and upon giving effect to, such funding, issuance or grant (except for
representations and warranties that expressly relate to an earlier date);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;All conditions precedent in any other Loan Document shall be satisfied;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;No event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;With respect to issuance of a Letter of Credit, the LC Conditions shall be satisfied.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Each request (or deemed request) by Borrowers for funding of a Loan, issuance of a Letter of Credit
or grant of an accommodation shall constitute a representation by Borrowers that the foregoing
conditions are satisfied on the date of such request and on the date of such funding, issuance or
grant. As an additional condition to any funding, issuance or grant, Lender shall have received
such other information, documents, instruments and agreements as it reasonably deems appropriate in
connection therewith.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.3 </B><U><B>Limited Waiver of Conditions Precedent</B></U><B>. </B>If Lender funds any Loans, issues any
Letters of Credit or grants any other accommodation when any conditions precedent are not
satisfied (regardless of whether the lack of satisfaction was known or unknown at the time), it
shall not operate as a waiver of (a)&nbsp;the right of Lender to insist upon satisfaction of all
conditions precedent with respect to any subsequent funding, issuance or grant; nor (b)&nbsp;any
Default or Event of Default due to such failure of conditions or otherwise.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 7 COLLATERAL</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 </B><U><B>Grant of Security Interest</B></U><B>. </B>To secure the prompt payment and performance of all
Obligations, each Borrower hereby grants to Lender a continuing security interest in and Lien upon
all personal Property of such Borrower, including all of the following Property (subject to
<B>Section&nbsp;7.7</B>), whether now owned or hereafter acquired, and wherever located:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-42-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;all Accounts;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;all Chattel Paper, including electronic chattel paper;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;all Commercial Tort Claims;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all Deposit Accounts;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;all Documents;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;all General Intangibles, including Intellectual Property;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;all Goods, including Inventory, Equipment and fixtures;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;all Instruments;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;all Investment Property;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;all Letter-of-Credit Rights;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;all Supporting Obligations;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;all monies, whether or not in the possession or under the control of Lender, or a bailee
or Affiliate of Lender, including any Cash Collateral;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;all accessions to, substitutions for, and all replacements, products, and cash and
non-cash proceeds of the foregoing, including proceeds of and unearned premiums with respect to
insurance policies, and claims against any Person for loss, damage or destruction of any
Collateral; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;all books and records (including customer lists, files, correspondence, tapes, computer
programs, print-outs and computer records) pertaining to the foregoing;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 </B><U><B>Lien on Deposit Accounts; Cash Collateral</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.1 <U>Deposit Accounts</U>. To further secure the prompt payment and performance of all
Obligations, each Borrower hereby grants to Lender a continuing security interest in and Lien upon
all amounts (other than Excluded Assets) credited to any Deposit Account of such Borrower,
including any sums (other than Excluded Assets) in any blocked or lockbox accounts or in any
accounts into which such sums are swept. Each Borrower authorizes and directs each bank or other
depository to deliver to Lender, on a daily basis, all balances in each Deposit Account maintained
by such Borrower with such depository for application to the Obligations then outstanding. Each
Borrower irrevocably appoints Lender as such Borrower&#146;s attorney-in-fact to collect such balances
to the extent any such delivery is not so made.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.2 <U>Cash Collateral</U>. Any Cash Collateral may be invested, at Lender&#146;s discretion,
in Cash Equivalents, but Lender shall have no duty to do so, regardless of any agreement or course
of dealing with any Borrower, and shall have no responsibility for any investment or loss. Each
Borrower hereby grants to Lender a security interest in all Cash Collateral held from time to time
and all proceeds thereof, as security for the Obligations, whether such Cash Collateral is held in
a Cash Collateral Account or elsewhere. Lender may
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-43-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">apply Cash Collateral to the payment of any Obligations, in such order as Lender may elect, as
they become due and payable. Each Cash Collateral Account and all Cash Collateral shall be under
the sole dominion and control of Lender. No Borrower or other Person claiming through or on behalf
of any Borrower shall have any right to any Cash Collateral, until Full Payment of all Obligations
except that when the conditions giving rise to any requirement for Cash Collateral no longer exist,
such Cash Collateral shall be returned to the applicable Borrower.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 </B>&#091;Intentionally Deleted&#093;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 </B><U>Other Collateral</U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4.1 <U>Commercial Tort Claims</U>. Borrowers shall promptly notify Lender in writing if
any Borrower has a Commercial Tort Claim (other than, as long as no Default or Event of Default
exists, a Commercial Tort Claim for less than $250,000) and, upon Lender&#146;s request, shall promptly
take such actions as Lender deems appropriate to confer upon Lender a duly perfected, first
priority Lien upon such claim.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4.2 <U>Certain After-Acquired Collateral</U>. Borrowers shall promptly notify Lender in
writing if, after the Closing Date, any Borrower obtains any interest in any Collateral (which in
the aggregate exceeds $100,000) consisting of Deposit Accounts, Chattel Paper, Documents,
Instruments, Intellectual Property, Investment Property or Letter-of-Credit Rights and, upon
Lender&#146;s request, shall promptly take such actions as Lender deems appropriate to effect Lender&#146;s
duly perfected, first priority Lien upon such Collateral, including obtaining any appropriate
possession, control agreement or Lien Waiver. If any Collateral is in the possession of a third
party, at Lender&#146;s request, Borrowers shall obtain an acknowledgment that such third party holds
the Collateral for the benefit of Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.5 </B><U><B>No Assumption of Liability</B></U><B>. </B>The Lien on Collateral granted hereunder is given as
security only and shall not subject Lender to, or in any way modify, any obligation or liability
of Borrowers relating to any Collateral.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.6 </B><U><B>Further Assurances; Extent of Liens</B></U><B>. </B>Promptly upon request, Borrowers shall
deliver such instruments, assignments, title certificates, or other documents or agreements, and
shall take such actions, as Lender reasonably deems appropriate under Applicable Law to evidence
or perfect its Lien on any Collateral, or otherwise to give effect to the intent of this
Agreement. Each Borrower authorizes Lender to file any financing statement that indicates the
Collateral as &#147;all assets (other than Excluded Assets)&#148; or &#147;all personal property (other than
Excluded Assets)&#148; of such Borrower, or words to similar effect, and ratifies any action taken by
Lender before the Closing Date to effect or perfect its Lien on any Collateral. All of Lender&#146;s
Liens on Collateral (and all evidences of such Liens), whether effected hereunder or under any
other Loan Document, are granted to Lender as agent for the benefit of all Secured Parties.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.7 </B><U><B>Foreign Subsidiary Stock. Excluded Assets</B></U><B>. (i) </B>Notwithstanding <B>Section&nbsp;7.1</B>, the
Collateral shall include only 65% of the voting stock of any Foreign Subsidiary. No security
interest is granted with respect to, and no security interest hereunder or any other Loan Document
shall attach to, any Excluded Assets.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-44-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 8 COLLATERAL ADMINISTRATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 </B><U><B>Borrowing Base Certificates</B></U><B>. </B>By the 15th day of each month (or such later time
as Lender may approve (via e-mail or otherwise)), Borrowers shall deliver to Lender a Borrowing
Base Certificate prepared as of the close of business of the previous month, and at such other
times as Lender may request. All calculations of Availability in any Borrowing Base Certificate
shall originally be made by Borrowers and certified by a Senior Officer, provided that Lender may
from time to time review and adjust any such calculation (a)&nbsp;to reflect its reasonable estimate of
declines in value of any Collateral, due to collections received in the Dominion Account or
otherwise; (b)&nbsp;reflect changes in dilution in accordance with the Dilution Percentage and the
Accounts Formula Amount and (c)&nbsp;to the extent the calculation is not made in accordance with this
Agreement or does not accurately reflect the Availability Reserve.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 </B><U><B>Administration of Accounts</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.1 <U>Records and Schedules of Accounts</U>. Each Borrower shall keep accurate and
complete records of its Accounts, including all payments and collections thereon, and shall submit
to Lender sales, collection, reconciliation (including a reconciliation from the general ledger to
agings) and other reports in form reasonably satisfactory to Lender, on such periodic basis as
Lender may request. Each applicable Borrower shall also provide to Lender, on or before the 15th
day of each month, a detailed aged trial balance of all Accounts as of the end of the preceding
month, specifying each Account&#146;s Account Debtor name and address, amount, invoice date and due
date, showing any discount, allowance, credit, authorized return or dispute, and including such
proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment
histories, status reports and other information as Lender may reasonably request. If Accounts in
an aggregate face amount of $200,000 or more cease to be Eligible Accounts, Borrowers shall notify
Lender of such occurrence promptly (and in any event within two Business Days) after any Borrower
has knowledge thereof.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.2 <U>Taxes</U>. If an Account of any Borrower includes a charge for any Taxes, Lender is
authorized, in its discretion, to pay the amount thereof to the proper taxing authority for the
account of such Borrower and to charge Borrowers therefor; provided, however, that Lender shall not
be liable for any Taxes that may be due from Borrowers or with respect to any Collateral.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.3 <U>Account Verification</U>. Whether or not a Default or Event of Default exists,
Lender shall have the right at any time, in the name of Lender, any designee of Lender or any
Borrower, to verify the validity, amount or any other matter relating to any Accounts of Borrowers
by mail, telephone or otherwise. Borrowers shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.4 <U>Maintenance of Dominion Account</U>. Borrowers shall maintain Dominion Accounts
pursuant to lockbox or other arrangements acceptable to Lender. Borrowers shall obtain an
agreement (in form and substance reasonably satisfactory to Lender) from each lockbox servicer and
Dominion Account bank, establishing Lender&#146;s control over and Lien in the lockbox or Dominion
Account, requiring daily deposit of all remittances received in the lockbox to a Dominion Account,
and waiving offset rights of such servicer or bank, except for customary administrative charges.
If a Dominion Account is not maintained with Lender, Lender may require daily transfer of all funds
in such account to a Dominion Account maintained with
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-45-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Lender. Lender does not assume any responsibility to Borrowers for any lockbox arrangement or
Dominion Account, including any claim of accord and satisfaction or release with respect to any
Payment Items accepted by any bank.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.5 <U>Proceeds of Collateral</U>. Borrowers shall request in writing and otherwise take
all commercially reasonable steps to ensure that all payments on Accounts or otherwise relating to
Collateral are made directly to a Dominion Account (or a lockbox relating to a Dominion Account).
Except as otherwise set forth in <B>Section&nbsp;8.2.6, </B>if any Borrower or Subsidiary receives cash or
Payment Items with respect to any Collateral, it shall hold same in trust for Lender and promptly
(not later than the next Business Day) deposit same (other than Operating Cash consisting of cash
on hand held at a retail location) into a Dominion Account.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.6 <U>Excluded Bank Accounts; Operating Cash</U>. Notwithstanding any provision of this
<B>Section&nbsp;8.2 </B>or any other provision of any Loan Document to the contrary, (A)&nbsp;Borrowers and
Subsidiaries may maintain accounts used exclusively for workers compensation, payroll, 401(k) and
employee health insurance and trust accounts that are not a part of the cash management and control
systems described herein (and not subject to a Deposit Account Control Agreement) provided that no
Obligor shall accumulate or maintain cash in such accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts necessary to meet
minimum balance requirements (B)&nbsp;Obligors may maintain local cash accounts that are not a part of
the cash management and control systems described herein (and not subject to a Deposit Account
Control Agreement) which individually do not contain funds in excess of $25,000 and, together with
all other such local cash accounts, do not contain funds in excess of $500,000; and monies in any
such account in excess of such amounts shall be swept within 3 Business Days to a Dominion Account
(or a lockbox relating to a dominion account); (C)&nbsp;Obligors may maintain Operating Cash on hand
with respect to their retail locations in amounts not to exceed the amounts the Obligors have
maintained in the ordinary course of business; (D)&nbsp;Borrowers may maintain the deposit accounts set
forth on <B>Schedule&nbsp;8.2.6 </B>subject only to springing cash management and control systems as reasonably
requested by Lender, so long as the balance of any such account does not exceed $250,000 at any
time; (E)&nbsp;Ashworth UK may maintain bank accounts in the United Kingdom which shall not be
subject to the cash management and control systems described herein;
and (F)&nbsp;Borrowers may maintain the Union Bank Cash Collateral
Account referred to on Schedule&nbsp;P-3.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.3 </B><U><B>Administration of Inventory</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.1 <U>Records and Reports of Inventory</U>. Each Borrower shall keep accurate and
complete records of its Inventory, including costs and daily withdrawals and additions, and shall
submit to Lender inventory and reconciliation reports (including a reconciliation from the general
ledger to the perpetual inventory) in form reasonably satisfactory to Lender, on such periodic
basis as Lender may request. Each Borrower shall conduct periodic cycle counts consistent with
historical practices, and shall provide to Lender a report based on each such inventory and count
promptly upon completion thereof, together with such supporting information as Lender may request.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.2 <U>Returns of Inventory</U>. No Borrower shall return any Inventory to a supplier,
vendor or other Person, whether for cash, credit or otherwise, unless (a)&nbsp;such return is in the
ordinary course of business; (b)&nbsp;no Default, Event of Default or Overadvance exists or would result
therefrom; (c)&nbsp;Lender is promptly notified if the aggregate Value of all Inventory
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-46-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">returned in any month exceeds $200,000; and (d)&nbsp;any payment received by a Borrower for a
return is promptly remitted to Lender for application to the Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.3 <U>Acquisition, Sale and Maintenance</U>. No Borrower shall acquire or accept more
than $50,000 at any one time (valued at the applicable Borrower&#146;s cost) of any Inventory on
consignment or approval, unless the same is identified to Lender and excluded from the Borrowing
Base, and shall take all steps to assure that all Inventory is produced in accordance with
Applicable Law, including the FLSA. No Borrower shall sell any Inventory on consignment or
approval or any other basis (other than customary rights of return) under which the customer may
return or require a Borrower to repurchase such Inventory. Borrowers shall use, store and maintain
all Inventory with reasonable care and caution, in accordance with applicable standards of any
insurance and in conformity with all Applicable Law, and shall make current rent payments (within
applicable grace periods provided for in leases) at all locations where any Collateral is located.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.4 </B><U><B>Administration of Equipment</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4.1 <U>Records and Schedules of Equipment</U>. Each Borrower shall keep accurate and
complete records of its Equipment, including kind, quality, quantity, cost, acquisitions and
dispositions thereof, and at any time a Default or Event of Default exists shall submit to Lender,
on such periodic basis as Lender may request, a current schedule thereof, in form reasonably
satisfactory to Lender. Promptly upon request, Borrowers shall deliver to Lender evidence of their
ownership or interests in any Equipment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4.2 <U>Dispositions of Equipment</U>. No Borrower shall sell, lease or otherwise dispose
of any Equipment, without the prior written consent of Lender, other than (a)&nbsp;a Permitted Asset
Disposition; and (b)&nbsp;disposal, sale or replacement of Equipment that is worn, damaged or obsolete
with Equipment of like function and value, if the replacement Equipment is acquired substantially
contemporaneously with such disposition and is free of Liens.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4.3 <U>Condition of Equipment</U>. The Equipment is in good operating condition and
repair, and all necessary replacements and repairs have been made so that the value and operating
efficiency of the Equipment is preserved at all times, reasonable wear and tear excepted. Each
Borrower shall ensure that the Equipment is mechanically and structurally sound, and capable of
performing the functions for which it was designed, in accordance with manufacturer specifications.
No Borrower shall permit any Equipment to become affixed to real Property unless any landlord or
mortgagee delivers a Lien Waiver.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.5 </B><U><B>Administration of Deposit Accounts</B></U>. <B>Schedule&nbsp;8.5 </B>sets forth all Deposit Accounts
maintained by Borrowers, including all Dominion Accounts. Each Borrower shall take all actions
necessary to establish Lender&#146;s control of each such Deposit Account (except as permitted by
<B>Section&nbsp;8.2.6 </B>and with respect to any account containing not more than $25,000 at any time). Each
Borrower shall be the sole account holder of each Deposit Account and shall not allow any other
Person (other than Lender) to have control over a Deposit Account or any Property deposited
therein. Except as permitted by <B>Section&nbsp;8.2.6</B>, each Borrower shall promptly notify Lender of any opening or closing of a Deposit
Account and, with the consent of Lender, will amend <B>Schedule&nbsp;8.5 </B>to reflect same.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-47-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.6 </B><U><B>General Provisions</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.1 <U>Location of Collateral</U>. All tangible items of Collateral, other than Inventory
in transit, shall at all times be kept by Borrowers at the business locations set forth in <B>Schedule
8.6.1</B>, except that Borrowers may (a)&nbsp;make sales or other dispositions of Collateral in accordance
with <B>Section&nbsp;10.2.6</B>; and (b)&nbsp;move Collateral to another location in the United States or Canada
other than a location listed on <B>Schedule&nbsp;8.6.1</B>, so long as Borrowers give 30 Business Days prior
written notice to Lender and take all steps necessary pursuant to <B>Section&nbsp;7.6 </B>to perfect Lender&#146;s
security interest in such Collateral prior to it being moved to a new location.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.2 <U>Insurance of Collateral; Condemnation Proceeds</U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Each Borrower shall maintain insurance with respect to the Collateral, covering casualty,
hazard, public liability, theft, malicious mischief, flood (if necessary) and other risks, in
amounts, with endorsements and with insurers (with a Best Rating of at least A7, unless otherwise
approved by Lender) reasonably satisfactory to Lender. All proceeds under each such policy (other
than proceeds constituting Excluded Assets) shall be payable to Lender. From time to time upon
request, Borrowers shall deliver to Lender the originals or certified copies of its insurance
policies and updated flood plain searches. Unless Lender shall agree otherwise, each policy shall
include reasonably satisfactory endorsements (i)&nbsp;showing Lender as sole loss payee or additional
insured, as appropriate (except with respect to insurance proceeds constituting Excluded Assets);
(ii)&nbsp;requiring 30&nbsp;days prior written notice to Lender in the event of cancellation of the policy
for any reason whatsoever; and (iii)&nbsp;specifying that the interest of Lender shall not be impaired
or invalidated by any act or neglect of any Borrower or the owner of the Property, nor by the
occupation of the premises for purposes more hazardous than are permitted by the policy. If any
Borrower fails to provide and pay for any insurance required hereunder or under <B>Section&nbsp;10.1.7</B>,
Lender may, at its option, but shall not be required to, procure the insurance and charge Borrowers
therefor. Each Borrower agrees to deliver to Lender, promptly as rendered, copies of all reports
made to insurance companies. While no Event of Default exists, Borrowers may settle, adjust or
compromise any insurance claim, as long as the proceeds are delivered to Lender. If an Event of
Default exists, only Lender shall be authorized to settle, adjust and compromise such claims
(except claims in respect of Excluded Assets).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Any proceeds of insurance (other than proceeds from workers&#146; compensation or D&#038;O insurance
and other than proceeds constituting Excluded Assets) and any awards arising from condemnation of
any Collateral shall be paid to Lender. Any such proceeds or awards that relate to Inventory shall
be applied to payment of the Revolver Loans, and then to any other Obligations outstanding.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If requested by Borrowers in writing within 60&nbsp;days after Lender&#146;s receipt of any
insurance proceeds or condemnation awards relating to any loss or destruction of Collateral
consisting of Equipment or Real Estate which are to be payable to Lender pursuant to <B>clauses (a)
and (b)</B>, Borrowers may use such proceeds or awards to repair or replace such Equipment or Real
Estate (and until so used, the proceeds shall be held by Lender as Cash Collateral) as long as
(i)&nbsp;no Default or Event of Default exists; (ii)&nbsp;such repair or replacement is promptly undertaken
and concluded, in accordance with plans reasonably satisfactory to Lender; (iii)&nbsp;replacement
buildings are constructed on the sites of the original casualties and are of comparable size,
quality and utility to the destroyed buildings; (iv)&nbsp;the repaired or replaced
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-48-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Property is free of Liens, other than Permitted Liens; and (v)&nbsp;Borrowers comply with
disbursement procedures for such repair or replacement as Lender may reasonably require.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.3 <U>Protection of Collateral</U>. All expenses of protecting, storing, warehousing,
insuring, handling, maintaining and shipping any Collateral, all Taxes payable with respect to any
Collateral (including any sale thereof), and all other payments required to be made by Lender to
any Person to realize upon any Collateral, shall be borne and paid by Borrowers. Lender shall not
be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage
thereto (except for reasonable care in its custody while Collateral is in Lender&#146;s actual
possession), for any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at
Borrowers&#146; sole risk.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.4 <U>Defense of Title to Collateral</U>. Each Borrower shall at all times defend its
title to Collateral and Lender&#146;s Liens therein against all Persons, claims and demands whatsoever,
except Permitted Liens.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.7 </B><U><B>Power of Attorney</B></U>. Each Borrower hereby irrevocably constitutes and appoints
Lender (and all Persons designated by Lender) as such Borrower&#146;s true and lawful attorney (and
agent-in-fact) for the purposes provided in this Section. Lender, or Lender&#146;s designee, may,
without notice and in either its or a Borrower&#146;s name, but at the cost and expense of Borrowers:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Endorse a Borrower&#146;s name on any Payment Item or other proceeds of Collateral (including
proceeds of insurance) that come into Lender&#146;s possession or control; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;During an Event of Default, (i)&nbsp;notify any Account Debtors of the assignment of their
Accounts, demand and enforce payment of Accounts, by legal proceedings or otherwise, and generally
exercise any rights and remedies with respect to Accounts; (ii)&nbsp;settle, adjust, modify, compromise,
discharge or release any Accounts or other Collateral, or any legal proceedings brought to collect
Accounts or Collateral; (iii)&nbsp;sell or assign any Accounts and other Collateral upon such terms, for
such amounts and at such times as Lender deems advisable; (iv)&nbsp;take control, in any manner, of any
proceeds of Collateral; (v)&nbsp;prepare, file and sign a Borrower&#146;s name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction of Lien
or similar document; (vi)&nbsp;receive, open and dispose of mail addressed to a Borrower, and notify
postal authorities to change the address for delivery thereof to such address as Lender may
designate; (vii)&nbsp;endorse any Chattel Paper, Document, Instrument, invoice, freight bill, bill of
lading, or similar document or agreement relating to any Accounts, Inventory or other Collateral;
(viii)&nbsp;use a Borrower&#146;s stationery and sign its name to verifications of Accounts and notices to
Account Debtors; (ix)&nbsp;use the information recorded on or contained in any data processing equipment
and computer hardware and software relating to any Collateral; (x)&nbsp;make and adjust claims under
policies of insurance; (xi)&nbsp;take any action as may be necessary or appropriate to obtain payment
under any letter of credit or banker&#146;s acceptance for which a Borrower is a beneficiary; and
(xii)&nbsp;take all other actions as Lender deems appropriate to fulfill any Borrower&#146;s obligations
under the Loan Documents.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-49-<!-- /Folio -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 9 REPRESENTATIONS AND WARRANTIES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 </B><U><B>General Representations and Warranties</B></U><B>. </B>To induce Lender to enter into this
Agreement and to make available the Commitments, Loans and Letters of Credit, each Borrower
represents and warrants that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.1 <U>Organization and Qualification</U>. Each Borrower and Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization. Each
Borrower and Subsidiary is duly qualified, authorized to do business and in good standing as a
foreign corporation in each jurisdiction where failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.2 <U>Power and Authority</U>. Each Obligor is duly authorized to execute, deliver and
perform its Loan Documents. The execution, delivery and performance of the Loan Documents have
been duly authorized by all necessary action, and do not (a)&nbsp;require any consent or approval of any
holders of Equity Interests of any Obligor, other than those already obtained; (b)&nbsp;contravene the
Organic Documents of any Obligor; (c)&nbsp;violate in any material respect or cause a material default
under any Applicable Law or Material Contract; or (d)&nbsp;result in or require the imposition of any
Lien (other than Permitted Liens) on any Property of any Obligor.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.3 <U>Enforceability</U>. Each Loan Document is a legal, valid and binding obligation of
each Obligor party thereto, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors&#146; rights
generally.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.4 <U>Capital Structure</U>. <B>Schedule&nbsp;9.1.4 </B>shows, for each Borrower and Subsidiary, its
name, its jurisdiction of organization, its authorized and issued Equity Interests as of the date
hereof (except with respect to Parent), the holders of its Equity Interests as of the date hereof
(except with respect to Parent), and to the knowledge of Parent, all agreements as of the date
hereof binding on such holders with respect to their Equity Interests. Each Borrower has good
title to its Equity Interests in its Subsidiaries, subject only to Lender&#146;s Lien and Permitted
Liens, and all such Equity Interests are duly issued, fully paid and non-assessable. As of the
date hereof, except as set forth on <B>Schedule&nbsp;9.1.4</B>, there are no outstanding options to purchase,
warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights
or powers of attorney relating to any Equity Interests of any Borrower or Subsidiary.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.5 <U>Corporate Names; Locations</U>. During the five years preceding the Closing Date,
except as shown on <B>Schedule&nbsp;9.1.5</B>, no Borrower or Subsidiary has been known as or used any
corporate, fictitious or trade names, has been the surviving corporation of a merger or
combination, or has acquired any substantial part of the assets of any Person. The chief executive
offices and other places of business of Borrowers and Subsidiaries are shown on <B>Schedule&nbsp;8.6.1</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.6 <U>Title to Properties; Priority of Liens</U>. Each Borrower and Subsidiary has good
and marketable title to (or valid leasehold interests in) all of its Real Estate, and good title to
valid leasehold interests in, or valid license to use all of its personal Property, including all
Property reflected in any financial statements delivered to Lender, in each case free of Liens
except Permitted Liens. Each Borrower and Subsidiary has paid and discharged all lawful claims
that, if unpaid, could become a Lien on its Properties, other than Permitted Liens. All
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-50-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Liens of Lender in the Collateral are duly perfected, first priority Liens, subject only to
Permitted Liens that are expressly allowed to have priority over Lender&#146;s Liens under this
Agreement or that have priority by operation of Applicable Law.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.7 <U>Accounts</U>. Lender may rely, in determining which Accounts are Eligible Accounts,
on all statements and representations made by Borrowers with respect thereto. Borrowers warrant,
with respect to each Account at the time it is shown as an Eligible Account in a Borrowing Base
Certificate, that:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;it is genuine and in all respects what it purports to be, and is not evidenced by a
judgment;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;it arises out of a completed, <I>bona fide </I>sale and delivery of goods or rendition of
services in the ordinary course of business, and substantially in accordance with any purchase
order, contract or other document relating thereto;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;it is for a sum certain, maturing as stated in the invoice covering such sale or rendition
of services, a copy of which has been furnished or is available to Lender on request;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;it is not subject to any offset, Lien (other than Lender&#146;s Lien and Permitted Liens set
forth in <B>Section&nbsp;10.2.2 (c)</B>), deduction, defense, dispute, counterclaim or other adverse condition
except as arising in the ordinary course of business and disclosed to Lender; and it is absolutely
owing by the Account Debtor, without contingency in any respect;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;no purchase order, agreement, document or Applicable Law restricts assignment of the
Account to Lender (regardless of whether, under the UCC, the restriction is ineffective), and the
applicable Borrower is the sole payee or remittance party shown on the invoice;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;no extension, compromise, settlement, modification, credit, deduction or return has been
authorized with respect to the Account, except discounts or allowances granted in the ordinary
course of business for prompt payment that are reflected on the face of the invoice related thereto
and in the reports submitted to Lender hereunder; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;to the best of Borrowers&#146; knowledge, (i)&nbsp;there are no facts or circumstances that are
reasonably likely to impair the enforceability or collectibility of such Account; (ii)&nbsp;the Account
Debtor had the capacity to contract when the Account arose, continues to meet the applicable
Borrower&#146;s customary credit standards, is Solvent, is not contemplating or subject to an Insolvency
Proceeding, and has not failed, or suspended or ceased doing business; and (iii)&nbsp;there are no
proceedings or actions threatened or pending against any Account Debtor that could reasonably be
expected to have a material adverse effect on the Account Debtor&#146;s financial condition.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.8 <U>Financial Statements</U>. The consolidated balance sheets, and related statements
of operations, cash flow and stockholder&#146;s equity, of Borrowers and Subsidiaries that have been and
are hereafter delivered to Lender, are prepared in accordance with GAAP, and fairly present the
financial positions and results of operations of Borrowers and Subsidiaries at the dates and for
the periods indicated, subject, in the case of unaudited financial statements, to changes resulting
from audit and year-end adjustments and the absence of footnotes. All projections delivered from
time to time to Lender have been prepared in good faith, based on
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-51-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">assumptions believed by Borrowers to be reasonable at the time made in light of the
circumstances at such time. Since October&nbsp;31, 2006, there has been no change in the condition,
financial or otherwise, of any Borrower or Subsidiary that could reasonably be expected to have a
Material Adverse Effect. Material Obligors, taken as a whole, are Solvent.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.9 <U>Surety Obligations</U>. Except as set forth in <B>Schedule&nbsp;9.1.9</B>, no Borrower or
Subsidiary is obligated as surety or indemnitor under any bond or other contract that assures
payment or performance of any obligation of any Person, except as permitted hereunder.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.10 <U>Taxes</U>. Each Borrower and Subsidiary has filed all federal and all material
state and local tax returns and other reports that it is required by law to file, and has paid, or
made provision for the payment of, all Taxes upon it, its income and its Properties that are due
and payable, except to the extent being Properly Contested or to the extent constituting Immaterial
Tax obligations. The provision for Taxes on the books of each Borrower and Subsidiary is adequate
for all years not closed by applicable statutes, and for its current Fiscal Year.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.11 <U>Brokers</U>. There are no brokerage commissions, finder&#146;s fees or investment
banking fees payable in connection with any transactions contemplated by the Loan Documents.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.12 <U>Intellectual Property</U>. Each Borrower and Subsidiary owns or has the lawful
right to use all Intellectual Property necessary for the conduct of its business, without conflict
with any rights of others. Except as would not reasonably be expected to have a Material Adverse
Effect, there is no pending or, to any Borrower&#146;s knowledge, threatened Intellectual Property Claim
with respect to any Borrower, any Subsidiary or any of their Property (including any Intellectual
Property). Except as disclosed on <B>Schedule&nbsp;9.1.12 </B>or as otherwise disclosed to Lender in writing,
no Borrower or Subsidiary pays or owes any Royalty or other compensation to any Person with respect
to any Intellectual Property in excess of $100,000 per year with respect to each such Person. All
Intellectual Property owned, used or licensed by, or otherwise subject to any interests of, any
Borrower or Subsidiary is shown on <B>Schedule&nbsp;9.1.12</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.13 <U>Governmental Approvals</U>. Except as could not reasonably be expected to have a
Material Adverse Effect, each Borrower and Subsidiary has, is in compliance with, and is in good
standing with respect to, all Governmental Approvals necessary to conduct its business and to own,
lease and operate its Properties. All necessary import, export or other licenses, permits or
certificates for the import or handling of any goods or other Collateral have been procured and are
in effect, and Borrowers and Subsidiaries have complied with all foreign and domestic laws with
respect to the shipment and importation of any goods or Collateral, except where noncompliance
could not reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.14 <U>Compliance with Laws</U>. Each Borrower and Subsidiary has duly complied, and its
Properties and business operations are in compliance, in all material respects with all Applicable
Law, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.
Except as could not reasonably be expected to have a Material Adverse Effect, there have been no
citations, notices or orders of noncompliance issued to any Borrower or Subsidiary under any
Applicable Law. No Inventory has been produced in violation of the FLSA.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-52-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.15 <U>Compliance with Environmental Laws</U>. Except as disclosed on <B>Schedule&nbsp;9.1.15</B>, or
as would not reasonably be expected to have a Material Adverse Effect, no Borrower&#146;s or
Subsidiary&#146;s past or present operations, Real Estate or other Properties are subject to any
federal, state or local investigation to determine whether any remedial action is needed to address
any environmental pollution, hazardous material or environmental clean-up. Except as would not
reasonably be expected to have a Material Adverse Effect, no Borrower or Subsidiary has received
any Environmental Notice. Except as would not reasonably be expected to have a Material Adverse
Effect, no Borrower or Subsidiary has any contingent liability with respect to any Environmental
Release, environmental pollution or hazardous material on any Real Estate now or previously owned,
leased or operated by it.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.16 <U>Burdensome Contracts</U>. No Borrower or Subsidiary is a party or subject to any
contract, agreement or charter restriction that could reasonably be expected to have a Material
Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.17 <U>Litigation</U>. Except as shown on <B>Schedule&nbsp;9.1.17</B>, there are no proceedings or
investigations pending or, to any Borrower&#146;s knowledge, threatened against any Borrower or
Subsidiary, or any of their businesses, operations, Properties, prospects or conditions, that
(a)&nbsp;relate to any Loan Documents or transactions contemplated thereby; or (b)&nbsp;could reasonably be
expected to have a Material Adverse Effect. No Borrower or Subsidiary is in default with respect
to any order, injunction or judgment of any Governmental Authority.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.18 <U>No Defaults</U>. No event or circumstance has occurred or exists that constitutes
a Default or Event of Default.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.19 <U>ERISA</U>. Except as disclosed on <B>Schedule&nbsp;9.1.19</B>:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code, and other federal and state laws. 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 knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such
qualification. Each Obligor and ERISA Affiliate has made all required contributions to each Plan
subject to Section&nbsp;412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section&nbsp;412 of the Code has been made with respect to any Plan.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;There are no pending or, to the knowledge of Borrowers, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably
be expected 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 in or
could reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) (i)&nbsp;No ERISA Event has occurred or is reasonably expected to occur; (ii)&nbsp;no Pension Plan
has any Unfunded Pension Liability; (iii)&nbsp;no Obligor or 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&nbsp;4007 of ERISA); (iv)&nbsp;no Obligor or ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred
which, with the giving of notice under Section&nbsp;4219 of ERISA, would
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-53-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">result in such liability) under Section&nbsp;4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v)&nbsp;no Obligor or ERISA Affiliate has engaged in a transaction that could be subject to
Section&nbsp;4069 or 4212(c) of ERISA.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;With respect to any Foreign Plan, (i)&nbsp;all employer and employee contributions required by
law or by the terms of the Foreign Plan have been made, or, if applicable, accrued, in accordance
with normal accounting practices; (ii)&nbsp;the fair market value of the assets of each funded Foreign
Plan, the liability of each insurer for any Foreign Plan funded through insurance, or the book
reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations with respect to all current and former
participants in such Foreign Plan according to the actuarial assumptions and valuations most
recently used to account for such obligations in accordance with applicable generally accepted
accounting principles; and (iii)&nbsp;it has been registered as required and has been maintained in good
standing with applicable regulatory authorities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.20 <U>Trade Relations</U>. There exists no actual or threatened termination, limitation
or modification of any business relationship between any Borrower or Subsidiary and any customer or
supplier, or any group of customers or suppliers, who individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect. There exists no condition or
circumstance that could reasonably be expected to impair the ability of any Borrower or Subsidiary
to conduct its business at any time hereafter in substantially the same manner as conducted on the
Closing Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.21 <U>Labor Relations</U>. Except as set forth on <B>Schedule&nbsp;9.1.21</B>, no Borrower or
Subsidiary is party to or bound by any collective bargaining agreement, management agreement or
consulting agreement which Borrowers&#146; obligations thereunder exceeds $500,000. There are no
grievances, disputes or controversies with any union or other organization of any Borrower&#146;s or
Subsidiary&#146;s employees, or, to any Borrower&#146;s knowledge, any asserted or threatened strikes, work
stoppages or demands for collective bargaining that could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.22 <U>Payable Practices</U>. Except as would not reasonably be expected to have a
Material Adverse Effect, no Borrower or Subsidiary has made any material change in its historical
accounts payable practices from those in effect on the Closing Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.23 <U>Not a Regulated Entity</U>. No Obligor is (a)&nbsp;an &#147;investment company&#148; or a &#147;person
directly or indirectly controlled by or acting on behalf of an investment company&#148; within the
meaning of the Investment Company Act of 1940; or (b)&nbsp;subject to regulation under the Federal Power
Act, the Interstate Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.24 <U>Margin Stock</U>. No Borrower or Subsidiary is engaged, principally or as one of
its important activities, in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock. No Loan proceeds or Letters of Credit will be used by Borrowers to
purchase or carry, or to reduce or refinance any Debt incurred to purchase or carry, any Margin
Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-54-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 </B><U><B>Complete Disclosure</B></U><B>. </B>None of the representations or warranties made by any
Borrower in the Loan Documents as of the date such representations and warranties are made or
deemed made, considering each of the foregoing in the context in which it was made and together
with all other representations, warranties and written statements theretofore furnished by such
Obligor to the Lender in connection with the Loan Documents, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or necessary to make such
representation, warranty or written statement, in light of the circumstances under which it is
made, not misleading as of the time when made or delivered; provided that the Borrowers&#146;
representation and warranty as to any forecast, projection or other statement regarding future
performance, future financial results or other future development is limited to the fact that such
forecast, projection or statement was prepared in good faith on the basis of information and
assumptions that the Borrowers believed to be reasonable as of the date such material was prepared
(it being understood that the projections are subject to significant uncertainties and
contingencies, many of which are beyond the Borrowers&#146; control, and that no assurance can be given
that the projections will be realized).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 10 COVENANTS AND CONTINUING AGREEMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.1 </B><U><B>Affirmative Covenants</B></U><B>. </B>As long as any Commitment or Obligations are
outstanding, each Borrower shall, and shall cause each Subsidiary to:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.1 <U><B>Inspections; Appraisals</B></U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Permit Lender from time to time, subject (except when a Default or Event of Default
exists) to reasonable notice and normal business hours, to visit and inspect the Properties of any
Borrower or Subsidiary, inspect, audit and make extracts from any Borrower&#146;s or Subsidiary&#146;s books
and records, and discuss on a confidential basis with its officers, employees, agents, advisors and
independent accountants such Borrower&#146;s or Subsidiary&#146;s business, financial condition, assets,
prospects and results of operations. Lender shall not have any duty to any Borrower to make any
inspection, nor to share any results of any inspection, appraisal or report with any Borrower.
Borrowers acknowledge that all inspections, appraisals and reports are prepared by Lender for its
purposes, and Borrowers shall not be entitled to rely upon them.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Reimburse Lender for all its reasonable charges, costs and expenses in connection with
(i)&nbsp;examinations of any Obligor&#146;s books and records or any other financial or Collateral matters as
Lender reasonably deems appropriate, up to twice per Loan Year; and (ii)&nbsp;appraisals of Inventory up
to one time per Loan Year; provided, however, that if an examination or appraisal is initiated
during a Default or Event of Default, all charges, costs and expenses therefor shall be reimbursed
by Borrowers without regard to such limits. Subject to and without limiting the foregoing,
Borrowers specifically agree to pay Lender&#146;s then standard charges (such standard charges as of the
Closing Date are $850 per day per person plus out of pocket expenses) for each day that an employee
of Lender or its Affiliates is engaged in any examination activities, and shall pay the standard
charges of Lender&#146;s internal appraisal group. This Section shall not be construed to limit
Lender&#146;s right to conduct examinations or to obtain appraisals at any time in its reasonable
discretion, nor to use third parties for such purposes.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-55-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.2 <U>Financial and Other Information</U>. Keep adequate records and books of account
with respect to its business activities, in which proper entries are made in accordance with GAAP
reflecting all financial transactions; and furnish to Lender:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;as soon as available, and in any event within 120&nbsp;days after the close of each Fiscal
Year, consolidated balance sheets of Parent and its Subsidiaries as of the end of such Fiscal Year
and the related consolidated statements of operations, cash flow and stockholders&#146; equity for such
Fiscal Year, on a consolidated basis for Borrowers and Subsidiaries, which consolidated statements
shall be audited and certified (without qualification as to scope, &#147;going concern&#148; or similar
items) by a firm of independent certified public accountants of recognized standing selected by
Borrowers and reasonably acceptable to Lender, and shall set forth in comparative form
corresponding figures for the preceding Fiscal Year and other information acceptable to Lender (the
documents required to be delivered pursuant to this <B>clause (a) </B>shall be deemed to have been
delivered on the date on which such documents are posted on the Securities and Exchange
Commission&#146;s website at www.sec.gov;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;commencing with the 3rd month of each Fiscal Year, as soon as available, and in any event
within 30&nbsp;days after the end of each month (but within 45&nbsp;days after the last month in each fiscal
quarter and by February&nbsp;15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> with respect to November and December of the preceding
year), unaudited balance sheets as of the end of such month and the related statements of
operations and cash flow for such month and for the portion of the Fiscal Year then elapsed, on a
consolidated basis for Borrowers and Subsidiaries, setting forth in comparative form corresponding
figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower
Agent as prepared in accordance with GAAP and fairly presenting the financial position and results
of operations for such month and period, subject to normal year-end adjustments and the absence of
footnotes (the documents required to be delivered pursuant to this <B>clause (b) </B>shall be deemed to
have been delivered on the date on which such documents are posted on the Securities and Exchange
Commission&#146;s website at www.sec.gov;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;concurrently with delivery of financial statements under clauses (a)&nbsp;and (b)&nbsp;above, a
Compliance Certificate executed by a Senior Officer of Borrower Agent;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;concurrently with delivery of financial statements under clause (a)&nbsp;above, copies of all
management letters (if available) and other material reports submitted to Borrowers by their
accountants in connection with such financial statements;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;not later than 45&nbsp;days after the end of each Fiscal Year, projections of Borrowers&#146;
consolidated balance sheets, results of operations, cash flow and Availability for the next Fiscal
Year, month by month;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;concurrently with the delivery of Borrowing Base Certificates pursuant to <B>Section&nbsp;8.1</B>, a
listing of each Borrower&#146;s trade payables (excluding the trade payables with respect to the
Borrowers&#146; operations in Canada), specifying the trade creditor and balance due, and a detailed
trade payable aging, all in form satisfactory to Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;promptly after the sending or filing thereof, copies of any proxy statements, financial
statements or reports that any Borrower has sent to its stockholders; copies of any regular,
periodic and special reports or registration statements or prospectuses that any Borrower files
with the Securities and Exchange Commission or any other Governmental
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-56-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Authority, or any securities exchange; and copies of any press releases or other statements
made available by a Borrower to the public concerning material changes to or developments in the
business of such Borrower (the documents required to be delivered pursuant to this <B>clause (g) </B>shall
be deemed to have been delivered on the date on which such documents are posted on the Securities
and Exchange Commission&#146;s website at www.sec.gov;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;promptly after the sending or filing thereof, copies of any annual report to be filed in
connection with each Plan or Foreign Plan; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;such other reports and information (financial or otherwise) as Lender may reasonably
request from time to time in connection with any Collateral or any Borrower&#146;s, Subsidiary&#146;s or
other Obligor&#146;s financial condition or business.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.3 <U>Notices</U>. Notify Lender in writing, promptly after a Borrower&#146;s obtaining
knowledge thereof, of any of the following that affects an Obligor: (a)&nbsp;the threat or commencement
of any proceeding or investigation that would reasonably be expected to have a Material Adverse
Effect; (b)&nbsp;any pending or threatened labor dispute, strike or walkout, or the expiration of any
material labor contract that could reasonably be expected to have a Material Adverse Effect;
(c)&nbsp;any default under or termination of a Material Contract; (d)&nbsp;the existence of any Default or
Event of Default; (e)&nbsp;any judgment in an amount exceeding $200,000; (f)&nbsp;the assertion of any
Intellectual Property Claim, that could reasonably be expected to have a Material Adverse Effect;
(g)&nbsp;any violation or asserted violation by Parent or its Subsidiaries of any Applicable Law
(including ERISA, OSHA, FLSA, or any Environmental Laws), that could reasonably be expected to have
a Material Adverse Effect; (h)&nbsp;any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice that could reasonably be
expected to have a Material Adverse Effect; (i)&nbsp;the occurrence of any ERISA Event; (j)&nbsp;the
discharge of or any withdrawal or resignation by Borrowers&#146; independent accountants; or (k)&nbsp;any
opening of a new office or place of business where any Borrowers&#146; Accounts, Inventory or Borrower&#146;s
books and records are located, at least 30&nbsp;days after such opening.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.4 <U>Landlord and Storage Agreements</U>. Upon request, provide Lender with copies of
all existing material agreements, and promptly after execution thereof provide Lender with copies
of all future agreements, between an Obligor and any landlord, warehouseman, processor, shipper,
bailee or other Person that owns any premises at which any Collateral may be kept or that otherwise
may possess or handle any Collateral.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.5 <U>Compliance with Laws</U>. Comply with all Applicable Laws, including ERISA,
Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding collection and payment of
Taxes, and maintain all Governmental Approvals necessary to the ownership of its Properties or
conduct of its business, unless failure to comply (other than failure to comply with Anti-Terrorism
Laws) or maintain could not reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.6 <U>Taxes</U>. Pay and discharge all Taxes prior to the date on which they become
delinquent or penalties attach, unless such Taxes are being Properly Contested or constitute
Immaterial Taxes.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-57-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.7 <U>Insurance</U>. In addition to the insurance required hereunder with respect to
Collateral, maintain insurance with insurers (with a Best Rating of at least A7, unless otherwise
approved by Lender) reasonably satisfactory to Lender, (a)&nbsp;with respect to the Properties and
business of Borrowers and Subsidiaries of such type (including product liability, workers&#146;
compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such
amounts, and with such coverages and deductibles as are customary for companies similarly situated;
and (b)&nbsp;business interruption insurance in an amount not less than $50,000,000, with deductibles
and subject to an Insurance Assignment reasonably satisfactory to Lender.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.8 <U>Licenses</U>. Except as would not reasonably be expected to have a Material
Adverse Effect, keep each material License affecting any Collateral (including the manufacture,
distribution or disposition of Inventory) or any other material Property of Borrowers and
Subsidiaries in full force and effect; promptly notify Lender of any proposed material modification
to any such License, or entry into any new material License, in each case at least 30&nbsp;days prior to
its effective date; pay all Royalties when due unless being contested in good faith; and notify
Lender of any default or breach asserted by any Person to have occurred under any material License.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.9 <U>Future Subsidiaries</U>. Promptly notify Lender upon any Person becoming a
Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to guaranty the Obligations in
a manner satisfactory to Lender, and to execute and deliver such documents, instruments and
agreements and to take such other actions as Lender shall reasonably require to evidence and
perfect a Lien in favor of Lender on all assets of such Person, including delivery of such legal
opinions, in form and substance reasonably satisfactory to Lender, as it shall reasonably deem
appropriate.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.10 <U>Merger of Ashworth Store III</U>. Parent shall cause Ashworth Store III, formally
to be merged into Parent within 180&nbsp;days of the Closing Date. Prior to the date of such merger,
Ashworth Store III shall neither hold nor receive any material assets, debt or equity, nor engage
in any business other than winding up and merging into Parent (and any activity reasonably related
thereto).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.11 <U>Post-Closing Covenants</U>. Each Borrower shall satisfy each of the covenants set
forth in <B>Schedule&nbsp;10.1.12 </B>within the time periods specified therein.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.2 </B><U><B>Negative Covenants</B></U><B>. </B>As long as any Commitment or Obligations are outstanding,
each Borrower shall not, and shall cause each Subsidiary not to:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.1 <U>Permitted Debt</U>. Create, incur, guarantee or suffer to exist any Debt, except:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Obligations;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Subordinated Debt;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Permitted Purchase Money Debt and Permitted Capital Leases;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-58-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Borrowed Money as identified on <B>Schedule&nbsp;10.2.1(d) </B>(other than the Obligations,
Subordinated Debt and Permitted Purchase Money Debt), but only to the extent outstanding on the
Closing Date and not satisfied with proceeds of the initial Loans;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Bank Product Debt;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Debt that is in existence when a Person becomes a Subsidiary or that is secured by an
asset when acquired by a Borrower or Subsidiary, as long as such Debt was not incurred in
contemplation of such Person becoming a Subsidiary or such acquisition, and does not exceed
$1,000,000 in the aggregate at any time;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Permitted Contingent Obligations;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;the Real Estate Term Loan in the maximum outstanding amount of up to the principal amount
of $11,650,000 and the Debt outstanding under the UK Loan Facility;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Refinancing Debt as long as each Refinancing Condition is satisfied;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Investments that are not Restricted Investments;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;Hedging Agreements permitted under <B>Section&nbsp;10.2.15</B>;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;Debt in respect of (i)&nbsp;workers&#146; compensation claims or obligations in respect of health,
disability or other employee benefits or property, casualty or liability insurance or
self-insurance or completion, bid, performance, appeal or surety bonds issued for the account of
any Borrower or Subsidiary, bankers acceptances and other similar obligations not constituting
Borrowed Money that are incurred in the ordinary course of business, and (ii)&nbsp;guarantees of, or
obligations of any Borrower or any Subsidiary with respect to letters of credit supporting, any
obligations described in clause (m);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;Debt arising from the honoring by a bank or other financial institution of a check, draft
or similar instrument (except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; provided, however, that such Debt is extinguished within five
Business Days of incurrence;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;Debt arising in connection with endorsement of instruments for deposit in the ordinary
course of business;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;Debt with respect to the deferred purchase price due to the seller for any Permitted
Acquisition, provided that such Debt is subordinated to the Obligations on terms reasonably
acceptable to Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;Debt arising from agreements of any Borrower or any Subsidiary providing for
indemnification, adjustment of purchase price, earn-outs or similar obligations, in each case,
incurred or assumed in connection with the disposition or acquisition of any Subsidiary or any
other business or assets, other than guarantees of Debt incurred by any Person acquiring all or any
portion of such Subsidiary, business or assets for the purpose of financing such acquisition;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-59-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;Unsecured Debt assumed in connection with Permitted Acquisitions in an aggregate amount
not to exceed $1,000,000 at any time outstanding;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;Debt that is not included in any of the preceding clauses of this Section, is not secured
by a Lien and does not exceed $1,000,000 in the aggregate at any time.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.2 <U>Permitted Liens</U>. Create or suffer to exist any Lien upon any of its Property,
except the following (collectively, &#147;<U>Permitted Liens</U>&#148;):
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Liens granted pursuant to the Security Documents and other Liens in favor of Lender;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Purchase Money Liens securing Permitted Purchase Money Debt and Capital Lease Liens
securing Permitted Capital Leases;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Liens for Taxes not yet past due or being Properly Contested;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;statutory Liens, such as carriers&#146;, warehousemen&#146;s, materialmen&#146;s, workmen&#146;s, suppliers&#146;,
repairmen&#146;s and mechanics&#146; Liens and other similar Liens (other than Liens for Taxes or imposed
under ERISA and Landlord&#146;s and Lessors&#146; Liens) arising in the ordinary course of business, but only
if (i)&nbsp;payment of the obligations secured thereby is not yet due or is being Properly Contested,
and (ii)&nbsp;such Liens do not materially impair the value or use of the Property or materially impair
operation of the business of any Borrower or Subsidiary;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) (i)&nbsp;Liens incurred or deposits or pledges made in the ordinary course of business to
secure the performance of tenders, bids, leases, contracts (except those relating to Borrowed
Money), statutory obligations and other similar obligations, or arising as a result of progress
payments under government contracts, as long as such Liens are at all times junior to Lender&#146;s
Liens, and (ii)&nbsp;pledges and deposits made in the ordinary course of business in compliance with
workers&#146; compensation, unemployment insurance and other social security laws or regulations, other
than any Liens for Taxes or imposed by ERISA;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) (i)&nbsp;landlords&#146; and lessors&#146; Liens in respect of rent not in default and (ii)&nbsp;Liens arising
in the ordinary course of business that are subject to Lien Waivers;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Liens arising by virtue of a judgment or judicial order against any Borrower or
Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens are adequately
bonded and any appropriate legal proceedings which may have been duly initiated for the review of
such judgment have not been finally terminated or the period within which the proceedings may be
initiated has not expired;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;easements, rights-of-way, restrictions (including zoning restrictions), covenants,
licenses, encroachments, protrusions or other agreements of record, and other similar charges or
encumbrances on Real Estate, that do not secure any Debt and do not interfere with the ordinary
course of business;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;normal and customary rights of setoff upon deposits in favor of depository institutions,
and Liens of a collecting bank on Payment Items in the course of collection; and
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-60-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;existing Liens shown on <B>Schedule&nbsp;10.2.2 </B>and any Lien granted as a replacement or
substitute therefor; provided that any such replacement or substitute Lien (i)&nbsp;except as permitted
by <B>Section&nbsp;10.2.1</B>, does not secure an aggregate amount of Debt, if any, greater than that secured
on the Closing Date and (ii)&nbsp;is not expanded beyond the property or categories of property subject
thereto on the Closing Date;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;leases or subleases of the properties of any Borrower or Subsidiary granted by such Person
to third parties, in each case entered into in the ordinary course of business so long as such
leases or subleases do not, individually or in the aggregate, (i)&nbsp;interfere in any material respect
with the ordinary conduct of the business of any Borrower or Subsidiary or (ii)&nbsp;materially impair
the use (for its intended purposes) or the value of the property subject thereto;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;bankers&#146; Liens, rights of setoff and other similar Liens existing solely with respect to
cash and Cash Equivalents on deposit in one or more accounts maintained by any Borrower or
Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks
or security intermediary with which such accounts are maintained, securing amounts owing to such
bank or securities intermediary including with respect to cash management and operating account
arrangements, including those involving pooled accounts and netting arrangements; provided that,
unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens
secure (either directly or indirectly) the repayment of any Debt;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;Liens on fixed assets acquired in connection with a Permitted Acquisition so long as such
Liens were existing at the time of such Acquisition by a Borrower or Subsidiary and were not
incurred, extended or renewed in contemplation of such Acquisition; <U>provided</U> that (i)&nbsp;the
Debt secured by such Lien is permitted under <B>Section&nbsp;10.2.1</B>, (ii)&nbsp;the Lien shall attach solely to
the property acquired, and (iii)&nbsp;at the time of acquisition of such fixed assets, the aggregate
amount remaining unpaid on all Debt secured by Liens on such fixed assets whether or not assumed by
a Borrower or Subsidiary shall not exceed an amount equal to the fair market value at the time of
acquisition of such fixed assets;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;Liens securing Refinancing Debt permitted sunder <B>Section&nbsp;10.2.1</B>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;Liens on property of and Equity Interests in a Foreign Subsidiary securing Debt of such
Foreign Subsidiary permitted under Section&nbsp;10.2.1(h);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;Liens incidental to the conduct of the business or the ownership of the assets of any
Borrower or Subsidiary that (x)&nbsp;were not incurred in connection with Borrowed Money, (y)&nbsp;do not in
the aggregate materially detract from the value of the assets subject thereto or materially impair
the use thereof in the operation of such business and (z)&nbsp;do not secure obligations aggregating in
excess of $500,000.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.3 &#091;Intentionally deleted&#093;.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-61-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.4 <U>Distributions; Upstream Payments</U>. Declare or make any Distributions, except
the Borrowers and their Subsidiaries may declare and pay Upstream Payments and Permitted
Distributions.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.5 <U>Restricted Investments</U>. Make any Restricted Investment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.6 <U>Disposition of Assets</U>. Make any Asset Disposition, except a Permitted Asset
Disposition, a disposition of Equipment under <B>Section&nbsp;8.4.2</B>, or a transfer of Property by a
Subsidiary or Obligor to a Borrower.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.7 <U>Loans</U>. Make any loans or other advances of money to any Person, except
(a)&nbsp;advances to an officer or employee for salary, travel expenses, commissions and similar items
in the ordinary course of business; (b)&nbsp;prepaid expenses and extensions of trade credit made in the
ordinary course of business; (c)&nbsp;deposits with financial institutions permitted hereunder; (d)&nbsp;as
long as no Default or Event of Default exists, intercompany loans by a Subsidiary to a Borrower,
(e)&nbsp;Permitted Investments, and (f)&nbsp;a Loan by a Borrower to Ashworth UK, provided that not more than
$4,000,000 of such loans may be outstanding at any one time.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.8 <U>Restrictions on Payment of Certain Debt</U>. (a)&nbsp;Make any payments (whether
voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with
respect to any Subordinated Debt, except regularly scheduled payments of principal, interest and
fees, but only to the extent permitted under any subordination agreement relating to such Debt (and
a Senior Officer of Borrower Agent shall certify to Lender, not less than five Business Days prior
to the date of payment, that all conditions under such agreement have been satisfied); or (b)&nbsp;if an
Event of Default has occurred and is continuing or will result after giving effect thereto, make
any voluntary prepayment of Borrowed Money (other than the Obligations or the Debt outstanding
under the UK Loan Facility) prior to the due date for any payments under the agreements evidencing
such Debt as in effect on the Closing Date (or as amended thereafter with the consent of Lender).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.9 <U>Fundamental Changes</U>. Merge, combine or consolidate with any Person, or
liquidate, wind up its affairs or dissolve itself, in each case whether in a single transaction or
in a series of related transactions, except for mergers or consolidations of a wholly-owned
Subsidiary into a Borrower or the merger set forth in <B>Section&nbsp;10.1.11</B>; change its name or conduct
business under any fictitious name without giving Lender 30&nbsp;days advance written notice thereof;
change its tax, charter or other organizational identification number; or change its form or state
of organization without giving Lender 30&nbsp;days advance written notice thereof.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.10 <U>Subsidiaries</U>. Form or acquire any Subsidiary after the Closing Date, except
in accordance with <B>Sections&nbsp;10.1.9 </B>and <B>10.2.5</B>; or permit any existing Subsidiary to issue any
additional Equity Interests except director&#146;s qualifying shares.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.11 <U>Organic Documents</U>. Amend, modify or otherwise change any of its Organic
Documents except for any amendment, modification or other change that does not adversely affect
Lender or any duty to pay the Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.12 <U>Tax Consolidation</U>. File or consent to the filing of any consolidated income
tax return with any Person other than Borrowers and Subsidiaries.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-62-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.13 <U>Accounting Changes</U>. Make any material change in accounting treatment or
reporting practices, except as required by GAAP and in accordance with <B>Section&nbsp;1.2</B>; or change its
Fiscal Year.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.14 <U>&#091;Intentionally Omitted&#093;</U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.15 <U>Hedging Agreements</U>. Enter into any Hedging Agreement, except to hedge risks
arising in the ordinary course of business and not for speculative purposes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.16 <U>Conduct of Business</U>. Engage in any business, other than its business as
conducted on the Closing Date and any activities incidental thereto and business reasonably related
and/or complementary thereto.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.17 <U>Affiliate Transactions</U>. Enter into or be party to any transaction with an
Affiliate, except (a)&nbsp;transactions contemplated by the Loan Documents; (b)&nbsp;payment of reasonable
compensation to officers and employees for services actually rendered (including, without
limitation, Specified Payments), and loans and advances permitted by <B>Section&nbsp;10.2.7</B>; (c)&nbsp;payment of
customary directors&#146; fees and indemnities; (d)&nbsp;transactions solely among Borrowers and/or Borrowers
and Ashworth UK as set forth in <B>Section&nbsp;10.2.7</B>; (e)&nbsp;transactions with Affiliates that were
consummated prior to the Closing Date, as shown on <B>Schedule&nbsp;10.2.17</B>; (f)&nbsp;transactions with
Affiliates in the ordinary course of business, upon fair and reasonable terms fully disclosed to
Lender and no less favorable than would be obtained in a comparable arm&#146;s-length transaction with a
non-Affiliate; (g)&nbsp;Permitted Distributions; (h)&nbsp;Permitted Investments; (i)&nbsp;Permitted Asset
Dispositions, (j)&nbsp;payment of administrative or related expenses of Ashworth UK in the ordinary
course of business and consistent with past practices, and (k)&nbsp;real property lease payments to EDC
with respect to Borrower&#146;s facility located in Oceanside, California.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.18 <U>Plans</U>. Become party to any Multiemployer Plan or Foreign Plan, other than any
in existence on the Closing Date.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.19 <U>Amendments to Subordinated Debt</U>. Amend, supplement or otherwise modify any
document, instrument or agreement relating to any Subordinated Debt, if such modification
(a)&nbsp;increases the principal balance of such Debt, or increases any required cash payment payable
prior to the Full Payment of all Obligations; (b)&nbsp;accelerates the date on which any installment of
principal or any interest is due, or adds any additional redemption, put or prepayment provisions;
(c)&nbsp;shortens the final maturity date or otherwise accelerates amortization; (d)&nbsp;increases the
interest rate; (e)&nbsp;increases or adds any fees or charges; (f)&nbsp;modifies any covenant in a manner or
adds any representation, covenant or default that is more onerous or restrictive in any material
respect for any Borrower or Subsidiary, or that is otherwise materially adverse to any Borrower,
any Subsidiary or Lender; or (g)&nbsp;results in the Obligations not being fully benefited by the
subordination provisions thereof.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.20 <u><B>Financial Covenants</B></u>. &#091;Intentionally Deleted&#093;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 11 EVENTS OF DEFAULT; REMEDIES ON DEFAULT</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 </B><U><B>Events of Default</B></U><B>. </B>Each of the following shall be an &#147;<U>Event of Default</U>&#148;
hereunder, if the same shall occur for any reason whatsoever, whether voluntary or involuntary, by
operation of law or otherwise:
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-63-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;A Borrower fails to pay (i)&nbsp;when and as required to be paid hereunder, any amount of
principal or interest of any Loan or any reimbursement of any drawing under a Letter of Credit, or
(ii)&nbsp;within five Business Days after the same becomes due, any other amount payable hereunder or
under any other Loan Document;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Any representation, warranty or other written statement of an Obligor made in connection
with any Loan Documents or transactions contemplated thereby is incorrect or misleading in any
material respect when given;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;A Borrower breaches or fail to perform any covenant contained in Sections <B>2.1.4, 6.3, 7.4,
7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1(a), 10.1.2,</B> or <B>10.2;</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;An Obligor breaches or fails to perform any other covenant contained in any Loan
Documents, and such breach or failure is not cured within 30&nbsp;days after a Senior Officer of such
Obligor has knowledge thereof or receives notice thereof from Lender, whichever is sooner;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an Obligor denies or
contests the validity or enforceability of any Loan Documents or Obligations, or the perfection or
priority of any Lien granted to Lender; or any Loan Document ceases to be in full force or effect
for any reason (other than a waiver or release by Lender);
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Any &#147;Event of Default&#148; occurs under the Real Estate Term Loan, any UK Loan Document, or
any other document, instrument or agreement to which it is a party or by which it or any of its
Properties is bound, relating to any Debt (other than the Obligations) in excess of $500,000, if
the maturity of or any payment with respect to such Debt may be accelerated or demanded due to such
&#147;Event of Default&#148;;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Any judgment or order for the payment of money is entered against an Obligor in an amount
that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all
Obligors, $500,000 (net of any insurance coverage therefor not disputed by the insurer), and the
same shall remain undischarged, unvacated or unbonded for a period of 30 consecutive days
consecutive days during which execution shall not be effectively stayed, by reason of a pending
appeal or otherwise;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;A loss, theft, damage or destruction occurs with respect to any Collateral if the amount
not covered by insurance exceeds $500,000;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Any Material Obligor is enjoined, restrained or in any way prevented by any Governmental
Authority from conducting any material part of its business; any Material Obligor suffers the loss,
revocation or termination of any material license, permit, lease or agreement necessary to its
business; there is a cessation of any material part of any Material Obligor&#146;s business for a
material period of time; any material Collateral or Property of the Obligors (taken as a whole) is
taken or impaired through condemnation; any Material Obligor agrees to or commences any
liquidation, dissolution or winding up of its affairs; or Material Obligors, taken as a whole cease
to be Solvent;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;An Insolvency Proceeding is commenced by any Material Obligor; any Material Obligor makes
an offer of settlement, extension or composition to its unsecured creditors generally; a trustee is
appointed to take possession of any substantial Property of or to
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-64-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">operate any of the business of any Material Obligor; or an Insolvency Proceeding is commenced
against any Material Obligor and: the Obligor consents to institution of the proceeding, the
petition commencing the proceeding is not timely controverted by the Obligor, the petition is not
dismissed within 30&nbsp;days after filing, or an order for relief is entered in the proceeding;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has
resulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan,
Multiemployer Plan or PBGC, or that constitutes grounds for appointment of a trustee for or
termination by the PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate
fails to pay when due any installment payment with respect to its withdrawal liability under
Section&nbsp;4201 of ERISA under a Multiemployer Plan; or any event similar to the foregoing occurs or
exists with respect to a Foreign Plan;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;An Obligor or any of its Senior Officers is criminally indicted or convicted for (i)&nbsp;a
felony committed in the conduct of the Obligor&#146;s business, or (ii)&nbsp;violating any state or federal
law (including the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal
Exportation of War Materials Act) that could lead to forfeiture of any material Property or any
material Collateral; or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;A Change of Control occurs; or any event occurs or condition exists that has a Material
Adverse Effect.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.2 </B><U><B>Remedies upon Default</B></U><B>. </B>If an Event of Default described in <B>Section&nbsp;11.1(j)</B>
occurs with respect to any Borrower, then to the extent permitted by Applicable Law, all
Obligations shall become automatically due and payable and all Commitments shall terminate,
without any action by Lender or notice of any kind. In addition, or if any other Event of Default
exists, Lender may in its discretion do any one or more of the following from time to time:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;declare any Obligations immediately due and payable, whereupon they shall be due and
payable without diligence, presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrowers to the fullest extent permitted by law;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;terminate, reduce or condition any Commitment, or make any adjustment to the Borrowing
Base;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;require Obligors to Cash Collateralize the Obligations including the LC Obligations and
Obligations in respect of Bank Products but excluding other contingent Obligations such as rights
to indemnification as to which no claim has been made, and, if Obligors fail promptly to deposit
such Cash Collateral, Lender may advance the required Cash Collateral as Revolver Loans (whether or
not an Overadvance exists or is created thereby, or the conditions in <B>Section&nbsp;6 </B>are satisfied); and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;exercise any other rights or remedies afforded under any agreement, by law, at equity or
otherwise, including the rights and remedies of a secured party under the UCC. Such rights and
remedies include the rights to (i)&nbsp;take possession of any Collateral; (ii)&nbsp;require Borrowers to
assemble Collateral, at Borrowers&#146; expense, and make it available to Lender at a place designated
by Lender; (iii)&nbsp;enter any premises where Collateral is located and store Collateral on such
premises until sold (and if the premises are owned or leased by a Borrower, Borrowers agree not to
charge for such storage); and (iv)&nbsp;sell or otherwise dispose of any
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-65-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Collateral in its then condition, or after any further manufacturing or processing thereof, at
public or private sale, with such notice as may be required by Applicable Law, in lots or in bulk,
at such locations, all as Lender, in its discretion, deems advisable. Each Borrower agrees that 10
days notice of any proposed sale or other disposition of Collateral by Lender shall be reasonable.
Lender shall have the right to conduct such sales on any Obligor&#146;s premises, without charge, and
such sales may be adjourned from time to time in accordance with Applicable Law. Lender shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination
thereof, and Lender may purchase any Collateral at public or, if permitted by law, private sale
and, in lieu of actual payment of the purchase price, may set off the amount of such price against
the Obligations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.3 </B><U><B>License</B></U><B>. </B>Except (i)&nbsp;with respect to Intellectual Property constituting Excluded
Assets, or (ii)&nbsp;as prohibited by any agreement (including any License) with respect to any
Intellectual Property, Lender is hereby granted an irrevocable, non-exclusive license or other
right to use, license or sub-license (without payment of royalty or other compensation to any
Person), effective at any time that a Default or Event of Default has occurred and is continuing,
any or all Intellectual Property of Borrowers, computer hardware and software, trade secrets,
brochures, customer lists, promotional and advertising materials, labels, packaging materials and
other Property, in advertising for sale, marketing, selling, collecting, completing manufacture
of, or otherwise exercising any rights or remedies with respect to, any Collateral.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.4 </B><U><B>Setoff</B></U><B>. </B>At any time during an Event of Default, Lender and its Affiliates are
authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by Lender or such
Affiliate to or for the credit or the account of an Obligor against any Obligations, irrespective
of whether or not Lender or such Affiliate shall have made any demand under this Agreement or any
other Loan Document and although such Obligations may be contingent or unmatured or are owed to a
branch or office of Lender or such Affiliate different from the branch or office holding such
deposit or obligated on such indebtedness. The rights of Lender and each such Affiliate under
this Section are in addition to other rights and remedies (including other rights of setoff) that
such Person may have.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.5 </B><U><B>Remedies Cumulative; No Waiver</B></U>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5.1 <U>Cumulative Rights</U>. All covenants, conditions, provisions, warranties,
guaranties, indemnities and other undertakings of Borrowers contained in the Loan Documents are
cumulative and not in derogation or substitution of each other. In particular, the rights and
remedies of Lender are cumulative, may be exercised at any time and from time to time, concurrently
or in any order, and shall not be exclusive of any other rights or remedies that Lender may have,
whether under any agreement, by law, at equity or otherwise.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5.2 <U>Waivers</U>. The failure or delay of Lender to require strict performance by
Borrowers with any terms of the Loan Documents, or to exercise any rights or remedies with respect
to Collateral or otherwise, shall not operate as a waiver thereof nor as establishment of a course
of dealing. All rights and remedies shall continue in full force and effect until Full Payment of
all Obligations. No modification of any terms of any Loan Documents (including any waiver thereof)
shall be effective, unless such modification is specifically provided in a writing directed to
Borrowers and executed by Lender, and such modification shall be applicable
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-66-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">only to the matter specified. No waiver of any Default or Event of Default shall constitute a
waiver of any other Default or Event of Default that may exist at such time, unless expressly
stated. If Lender accepts performance by any Obligor under any Loan Documents in a manner other
than that specified therein, or during any Default or Event of Default, or if Lender shall delay or
exercise any right or remedy under any Loan Documents, such acceptance, delay or exercise shall not
operate to waive any Default or Event of Default nor to preclude exercise of any other right or
remedy.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>SECTION 12 MISCELLANEOUS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.1 </B>Consents, Amendments and Waivers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.1 <U>Successors and Assigns</U>. This Agreement shall be binding upon and inure to the
benefit of Borrowers, Lender, and their respective successors and assigns, except that (i)&nbsp;no
Borrower shall have the right to assign its rights or delegate its obligations under any Loan
Documents and (ii)&nbsp;no assignment by Lender (other than an assignment to Lender&#146;s Affiliates) of its
rights and obligations hereunder shall be effective without the prior written consent of Parent
which shall not be unreasonably withheld or delayed and shall be deemed given if no objection is
made within 15 Business Days after notice of the proposed assignment by Lender; <U>provided</U>
that if a Default or an Event of Default exists, Lender may assign any of its rights and
obligations without Parent&#146;s consent.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.2 <U>Amendments and Other Modifications</U>. No modification of any Loan Document,
including any extension or amendment of a Loan Document or any waiver of a Default or Event of
Default, shall be effective without the prior written agreement of Lender and each Obligor party to
such Loan Document. However, only the consent of the parties to a Bank Product shall be required
for any modification of such agreement, and no Affiliate of Lender that is party to a Bank Product
agreement shall have any other right to consent to or participate in any manner in modification of
any other Loan Document. The funding of any Loans or issuance of any Letters of Credit during a
Default or Event of Default shall not be deemed to constitute a waiver of such Default or Event of
Default, nor to establish a course of dealing. Any waiver or consent granted by Lender hereunder
shall be effective only if in writing, and then only in the specific instance and for the specific
purpose for which it is given.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.2 </B><U>Indemnity</U>. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES
AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS
ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have
any obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that
is determined in a final, non-appealable judgment by a court of competent jurisdiction to result
from the gross negligence or willful misconduct of such Indemnitee.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.3 </B><U><B>Notices and Communications</B></U>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.1 <U>Notice Address</U>. Subject to <B>Section&nbsp;4.1.3</B>, all notices and other communications
by or to a party hereto shall be in writing and shall be given to any Borrower, at Borrower Agent&#146;s
address shown on the signature pages hereof, and to any other Person at its address shown on the
signature pages hereof, or at such other address as a party may hereafter
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-67-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">specify by notice in accordance with this <B>Section&nbsp;12.3</B>. Each such notice or other
communication shall be effective only (a)&nbsp;if given by facsimile transmission, when transmitted to
the applicable facsimile number, if confirmation of receipt is received; (b)&nbsp;if given by mail,
three Business Days after deposit in the U.S. mail, with first-class postage pre-paid, addressed to
the applicable address; or (c)&nbsp;if given by personal delivery, when duly delivered to the notice
address with receipt acknowledged; or (d)&nbsp;if given by electronic communication in accordance with
<B>Section&nbsp;12.3.2</B>, as provided in such Section. Notwithstanding the foregoing, no notice to Lender
pursuant to <B>Section&nbsp;2.1.3, 2.3, 3.1.2, </B>or <B>4.1.1 </B>shall be effective until actually received by the
individual to whose attention at Lender such notice is required to be sent. Any written notice or
other communication that is not sent in conformity with the foregoing provisions shall nevertheless
be effective on the date actually received by the noticed party. Any notice received by Borrower
Agent shall be deemed received by all Borrowers.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.2 <U>Electronic Communications; Voice Mail</U>. Electronic mail and internet websites
may be used only for routine communications, such as financial statements, Borrowing Base
Certificates and other information required by <B>Section&nbsp;10.1.2</B>, administrative matters, distribution
of Loan Documents for execution, and matters permitted under <B>Section&nbsp;4.1.3</B>. Lender makes no
assurances as to the privacy and security of electronic communications. Voice mail may not be used
as effective notice under the Loan Documents. Unless Parent and Lender otherwise agree, (i)
notices and other communications sent to an e-mal address shall be deemed received upon the
sender&#146;s receipt of an acknowledgement from the intended recipient (such as by the &#147;return receipt
requested&#148; function, as available, return e-mail or other written acknowledgement); provided that
if such notice or other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at the opening of
business on the next business day for the recipient, and (ii)&nbsp;notices or communications posted to
an Internet or intranet website shall be deemed received upon the deemed receipt by the intended
recipient at its e-mail address as described in the foregoing clause (i)&nbsp;of notification that such
notice or communication is available and identifying the website address therefor.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3.3 <U>Non-Conforming Communications</U>. Lender may rely upon any notices purportedly
given by or on behalf of any Borrower even if such notices were not made in a manner specified
herein, were incomplete or were not confirmed, or if the terms thereof, as understood by the
recipient, varied from a later confirmation. Each Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any telephonic
communication purportedly given by or on behalf of a Borrower.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.4 </B><U><B>Performance of Borrowers&#146; Obligations</B></U><B>. </B>Lender may, in its reasonable discretion
at any time and from time to time, at Borrowers&#146; expense, pay any amount or do any act required of
a Borrower under any Loan Documents or otherwise lawfully requested by Lender (and, in any such
case, not paid or performed by an Obligor within 10&nbsp;days after written request therefor by Lender)
to (a)&nbsp;enforce any Loan Documents or collect any Obligations; (b)&nbsp;protect, insure, maintain or
realize upon any Collateral; or (c)&nbsp;defend or maintain the validity or priority of Lender&#146;s Liens
in any Collateral, including any payment of a judgment, insurance premium, warehouse charge,
finishing or processing charge, or landlord claim, or any discharge of a Lien. All payments,
costs and expenses (including Extraordinary Expenses) of Lender under this Section shall be
reimbursed by Borrowers, <B>on demand</B>, with interest from the date incurred to the date of payment
thereof at the Default Rate applicable to Base Rate Revolver Loans. Any payment made or action
taken by Lender under this Section shall be
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-68-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">without prejudice to any right to assert an Event of Default or to exercise any other rights
or remedies under the Loan Documents.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.5 </B><U><B>Credit Inquiries</B></U><B>. </B>Each Borrower hereby authorizes Lender (but it shall have no
obligation) to respond to usual and customary credit inquiries from third parties concerning any
Borrower or Subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.6 </B><U><B>Severability</B></U><B>. </B>Wherever possible, each provision of the Loan Documents shall be
interpreted in such manner as to be valid under Applicable Law. If any provision is found to be
invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and
the remaining provisions of the Loan Documents shall remain in full force and effect.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.7 </B><U><B>Cumulative Effect; Conflict of Terms</B></U><B>. </B>The provisions of the Loan Documents are
cumulative. The parties acknowledge that the Loan Documents may use several limitations, tests or
measurements to regulate similar matters, and they agree that these are cumulative and that each
must be performed as provided. Except as otherwise provided in another Loan Document (by specific
reference to the applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision herein shall govern and
control.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.8 </B><U><B>Counterparts</B></U><B>. </B>Any Loan Document may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement shall become effective when Lender has executed it and received
counterparts bearing the signatures of all other parties hereto. Delivery of a signature page of
any Loan Document by telecopy or electronic communication (e.g., pdf files delivered via email)
shall be effective as delivery of a manually executed counterpart of such agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.9 </B><U><B>Entire Agreement</B></U><B>. </B>Time is of the essence of the Loan Documents. The Loan
Documents constitute the entire contract among the parties relating to the subject matter hereof,
and supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.10 </B><U><B>No Control; No Advisory or Fiduciary Responsibility</B></U><B>. </B>Nothing in any Loan
Document and no action of Lender pursuant to any Loan Document shall be deemed to constitute
control of any Obligor by Lender. In connection with all aspects of each transaction contemplated
by any Loan Document, Borrowers acknowledge and agree that (a)(i) this credit facility and all
related services by Lender or its Affiliates are arm&#146;s-length commercial transactions between
Borrowers and such Person; (ii)&nbsp;Borrowers have consulted their own legal, accounting, regulatory
and tax advisors to the extent they have deemed appropriate; and (iii)&nbsp;Borrowers are capable of
evaluating and understanding, and do understand and accept, the terms, risks and conditions of the
transactions contemplated by the Loan Documents; (b)&nbsp;each of Lender and its Affiliates is and has
been acting solely as a principal in connection with this credit facility, is not the financial
advisor, agent or fiduciary for Borrowers, any of their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents except as expressly
set forth therein; and (c)&nbsp;Lender and its Affiliates may be engaged in a broad range of
transactions that involve interests that differ from Borrowers and their Affiliates, and have no
obligation to disclose any of such interests to Borrowers or their Affiliates. To the fullest
extent permitted by Applicable Law, each Borrower hereby waives and releases any claims that it
may have against Lender and its
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-69-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated by a Loan Document.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.11 </B><U><B>Confidentiality</B></U>. Lender agrees to maintain the confidentiality of all
Information (as defined below), except that Information may be disclosed (a)&nbsp;to its Affiliates and
to its and its Affiliates&#146; respective partners, directors, officers, employees, agents, advisors
and representatives (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)&nbsp;to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners); (c)&nbsp;to the extent required by Applicable Law or by any subpoena or
similar legal process; (d)&nbsp;to any other party hereto; (e)&nbsp;in connection with the exercise of any
remedies, the enforcement of any rights, or any action or proceeding relating to any Loan
Documents; (f)&nbsp;subject to an agreement containing provisions substantially the same as those of
this Section, to any potential or actual transferee of any interest in a Loan Document or any
actual or prospective party (or its advisors) to any Bank Product; (g)&nbsp;with the consent of the
Borrower; or (h)&nbsp;to the extent such Information (i)&nbsp;becomes publicly available other than as a
result of a breach of this Section or (ii)&nbsp;becomes available to Lender or any of its Affiliates on
a nonconfidential basis from a source other than Borrowers. Notwithstanding the foregoing, Lender
may issue and disseminate to the public general information describing this credit facility,
including the names and addresses of Borrowers and a general description of Borrowers&#146; businesses,
and may use Borrowers&#146; names in advertising and other promotional materials. For purposes of this
Section, &#147;<U>Information</U>&#148; means all information received from an Obligor or Subsidiary
relating to it or its business, other than any information that is available to Lender on a
nonconfidential basis prior to disclosure by the Obligor or Subsidiary. Lender acknowledges that
(i)&nbsp;Information may include material non-public information concerning an Obligor or Subsidiary;
(ii)&nbsp;it has developed compliance procedures regarding the use of material non-public information;
and (iii)&nbsp;it will handle such material non-public information in accordance with Applicable Law,
including federal and state securities laws.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.12 </B><U><B>&#091;Intentionally Omitted</B></U><B>&#093;</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.13 </B><U><B>GOVERNING LAW</B></U><B>. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE
SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.14 </B><U><B>Consent to Forum</B><B><I>; </I></B><B>Arbitration</B></U><B>.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.14.1 <U>Forum</U>. <B>EACH BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER LOS ANGELES, CALIFORNIA, IN ANY
PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH
PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY WAIVES ALL
CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT&#146;S PERSONAL OR SUBJECT MATTER
JURISDICTION, VENUE OR INCONVENIENT FORUM. EACH PARTY HERETO</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-70-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION
12.3.1</B>. Nothing herein shall limit the right of Lender to bring proceedings against any Obligor in
any other court, nor limit the right of any party to serve process in any other manner permitted by
Applicable Law. Nothing in this Agreement shall be deemed to preclude enforcement by Lender of any
judgment or order obtained in any forum or jurisdiction.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.14.2 <U><B>Arbitration</B></U>. Notwithstanding any other provision of this Agreement to the
contrary, any controversy or claim among the parties relating in any way to any Obligations or Loan
Documents, including any alleged tort, shall at the request of any party hereto be determined by
binding arbitration conducted in accordance with the United States Arbitration Act (Title 9 U.S.
Code). Arbitration proceedings will be determined in accordance with the Act, the then-current
rules and procedures for the arbitration of financial services disputes of the American Arbitration
Association (&#147;AAA&#148;), and the terms of this Section. In the event of any inconsistency, the terms
of this Section shall control. If AAA is unwilling or unable to serve as the provider of
arbitration or to enforce any provision of this Section, Lender may designate another arbitration
organization with similar procedures to serve as the provider of arbitration. The arbitration
proceedings shall be conducted in Los Angeles, California. The arbitration hearing shall commence
within 90&nbsp;days of the arbitration demand and close within 90&nbsp;days thereafter. The arbitration
award must be issued within 30&nbsp;days after close of the hearing (subject to extension by the
arbitrator for up to 60&nbsp;days upon a showing of good cause), and shall include a concise written
statement of reasons for the award. The arbitrator shall give effect to applicable statutes of
limitation in determining any controversy or claim, and for these purposes, service on AAA under
applicable AAA rules of a notice of claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this Section or whether a controversy or claim is arbitrable shall be determined
by the arbitrator. The arbitrator shall have the power to award legal fees to the extent provided
by this Agreement. Judgment upon an arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a
provisional or ancillary remedy shall not constitute a waiver of the right of any party, including
the plaintiff, to submit the controversy or claim to arbitration if any other party contests such
action for judicial relief. No controversy or claim shall be submitted to arbitration without the
consent of all parties if, at the time of the proposed submission, such controversy or claim
relates to an obligation secured by Real Estate, but if all parties do not consent to submission of
such a controversy or claim to arbitration, it shall be determined as provided in the next
sentence. At the request of any party, a controversy or claim that is not submitted to arbitration
as provided above shall be determined by judicial reference; and if such an election is made, the
parties shall designate to the court a referee or referees selected under the auspices of the AAA
in the same manner as arbitrators are selected in AAA sponsored proceedings and the presiding
referee of the panel (or the referee if there is a single referee) shall be an active attorney or
retired judge; and judgment upon the award rendered by such referee or referees shall be entered in
the court in which proceeding was commenced. None of the foregoing provisions of this Section
shall limit the right of Lender to exercise self-help remedies, such as setoff, foreclosure or sale
of any Collateral or to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after or during any arbitration proceeding. The exercise of a remedy does not
waive the right of any party to resort to arbitration or reference. At Lender&#146;s option,
foreclosure under a real estate mortgage may be accomplished either by exercise of power of sale
thereunder or by judicial foreclosure.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-71-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.15 </B><U><B>Waivers by Borrowers</B></U><B>. To the fullest extent permitted by Applicable Law, each
Borrower waives (a)&nbsp;the right to trial by jury (which Lender hereby also waives) in any proceeding
or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral;
(b)&nbsp;presentment, demand, protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts, documents,
instruments, chattel paper and guaranties at any time held by Lender on which a Borrower may in
any way be liable, and hereby ratifies anything Lender may do in this regard; (c)&nbsp;notice prior to
taking possession or control of any Collateral; (d)&nbsp;any bond or security that might be required by
a court prior to allowing Lender to exercise any rights or remedies; (e)&nbsp;the benefit of all
valuation, appraisement and exemption laws; (f)&nbsp;any claim against Lender, on any theory of
liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to
direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan
Documents or transactions relating thereto; and (g)&nbsp;notice of acceptance hereof</B>. Each Borrower
acknowledges that the foregoing waivers are a material inducement to Lender entering into this
Agreement and that Lender is relying upon the foregoing in its dealings with Borrowers. Each
Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly and
voluntarily waived its jury trial and other rights following consultation with legal counsel. In
the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.16 </B><U><B>Patriot Act Notice</B></U>. Lender hereby notifies Borrowers that pursuant to the
requirements of the Patriot Act, Lender is required to obtain, verify and record information that
identifies each Borrower, including its legal name, address, tax ID number and other information
that will allow Lender to identify it in accordance with the Patriot Act. Lender will also
require information regarding each personal guarantor, if any, and may require information
regarding Borrowers&#146; management and owners, such as legal name, address, social security number
and date of birth.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.17 </B><U><B>Judgment Currency</B></U>. 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 &#147;Original
Currency&#148;) into another currency (the &#147;Second Currency&#148;), the rate of exchange applied shall be
that at which, in accordance with normal banking procedures, Lender could purchase in the New York
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 Obligor agrees that its obligation
in respect of any Original Currency due from it hereunder or under any other Loan Document to
which it is party shall, notwithstanding any judgment or payment in such other currency, be
discharged only to the extent that, on the Business Day following the date Lender receives payment
of any sum so adjudged to be due hereunder in the Second Currency, Lender may, in accordance with
normal banking procedures, purchase, in the New York 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 Obligor agrees as a separate obligation and notwithstanding any such
payment or judgment to indemnify Lender and the Lenders against such loss. The term &#147;rate of
exchange&#148; in this <B>Section&nbsp;12.17 </B>means the spot rate at which 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.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-72-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement has been executed and delivered as of the date set forth
above.
</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="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>LENDER</B></U><B>:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>BANK OF AMERICA, N.A.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> /s/ John Tolle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John Tolle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bank of America, N.A.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">55 South Lake Avenue, Suite 900</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pasadena, CA 91101</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: John Tolle<BR>
Telecopy: (626)&nbsp;584-4601</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>BORROWERS</B></U><B>:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASHWORTH, INC.,</B><BR>
a Delaware corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" style="border-bottom: 1px solid #000000">/s/ Edward J. Fadel</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Edward J. Fadel</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASHWORTH STORE I, INC.,</B><BR>
a Delaware corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VP, Corporate Secretary and Compliance Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth Store I, Inc.,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASHWORTH STORE II, INC.,</B><BR>
a Delaware corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VP, Corporate Secretary and Compliance Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth Store II, Inc.,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASHWORTH ACQUISITION CORP.,</B><BR>
a Delaware corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VP, Corporate Secretary and Compliance Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth Acquisition Corp.,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>GEKKO BRANDS, L.L.C.,</B><BR>
an Alabama limited liability company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gekko Brands, L.L.C.,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>KUDZU, L.L.C.,</B><BR>
an Alabama limited liability company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kudzu, L.L.C.,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>THE GAME, LLC,</B><BR>
an Alabama limited liability company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Halina Balys</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Halina Balys</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Game, LLC,<br>
c/o Ashworth, Inc.<br>
2765 Loker Avenue West<br>
Carlsbad, CA 92010<br>
Attn: Halina Balys<br>
Telecopy: (760)&nbsp;476-8425
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>a37077exv21.htm
<DESCRIPTION>EXHIBIT 21
<TEXT>
<HTML>
<HEAD>
<TITLE>exv21</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 21
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ASHWORTH, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SUBSIDIARIES OF THE REGISTRANT.</B>

</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="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>State or other jurisdiction</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of subsidiary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>of incorporation or organization</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store I, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store II, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store III, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth EDC, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Acquisition Corp
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gekko Brands, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kudzu, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Game, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth U.K., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">England</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>5
<FILENAME>a37077exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 23.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSENT</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the registration statements (Nos. 333-147649,
33-92580, 333-51730, 33-35516, 33-41455, 33-47502, 33-54206 and 33-66040) on Form S-8 of our report
dated January&nbsp;14, 2008, relating to the consolidated balance sheet of Ashworth, Inc. and
subsidiaries as of October&nbsp;31, 2007, and the related consolidated statements of operations,
stockholders&#146; equity and cash flows for each of the three years
in the period ended October&nbsp;31,
2007, and the related consolidated financial statement schedule, management&#146;s assessment on the
effectiveness of internal control over financial reporting, and the effectiveness of internal
control over financial reporting, appearing in this Annual Report on Form 10-K of Ashworth, Inc.
and subsidiaries for the year ended October&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Moss Adams LLP<BR>
Irvine, California<BR>
January&nbsp;14, 2008

</DIV>


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




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>6
<FILENAME>a37077exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 31.1
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Allan H. Fletcher, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this report on Form 10-K of Ashworth, Inc.;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(a)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:<U> January&nbsp;14, 2008</U>
</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="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">/s/ Allan H. Fletcher
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allan H. Fletcher</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>7
<FILENAME>a37077exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 31.2
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Greg W. Slack, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this report on Form 10-K of Ashworth, Inc.;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(a)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:<U> January&nbsp;14, 2008</U>
</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="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">/s/ Greg W. Slack
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greg W. Slack</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer,</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Principal Accounting Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>a37077exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 32.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Allan H. Fletcher, in my capacity as Chief Executive Officer of Ashworth, Inc. (the
&#147;Registrant&#148;), 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:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;the Annual Report of the Registrant on Form 10-K for the year ended October&nbsp;31, 2007 (the
&#147;Report&#148;), 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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Registrant.
</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="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">January&nbsp;14, 2008
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Allan H. Fletcher
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allan H. Fletcher</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906 has been provided to the
Registrant and will be retained by the Registrant and furnished to the Securities and Exchange
Commission or its staff upon request.
</DIV>


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

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>9
<FILENAME>a37077exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 32.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Greg W. Slack, in my capacity as Chief Financial Officer of Ashworth, Inc. (the &#147;Registrant&#148;),
do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;the Annual Report of the Registrant on Form 10-K for the quarter ended October&nbsp;31, 2007
(the &#147;Report&#148;), 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
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Registrant.
</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="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">January&nbsp;14, 2008
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Greg W. Slack
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greg W. Slack</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer,</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Principal Accounting Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906 has been provided to the
Registrant and will be retained by the Registrant and furnished to the Securities and Exchange
Commission or its staff upon request.
</DIV>



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




</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>10
<FILENAME>a37077a3707701.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 a37077a3707701.gif
M1TE&.#EAL@$+`<00`$!`0,#`P````("`@.#@X/#P\!`0$*"@H-#0T&!@8"`@
M(%!04+"PL)"0D#`P,'!P</___P``````````````````````````````````
M`````````````````````````"'Y!`$``!``+`````"R`0L!``7_("2.9&F>
M:*JN;.N^<"S/=&W?>*[O?.__P*!P2"P:C\@DBC`8!0BB0``1+2BOV*QVR^UZ
MG0;#`^)P"*8"`0`"<!BLW[A\3J_;BX/'8X!8`P8'"@$0!`(%#@=WBHN,C8YR
M!`8*#"((`@0)D@D!`FQ-(@124(^DI::GJ"D(!0L&$`@&B5*<G)XC!P,#:ZF\
MO;Z_7`,+K61_`0E_"@6Q!E0EN\#1TM/4-@4)DP0`VP?7"U0,?R?0U>7FY^:#
M-.3H[>[O[^SP\_3UJ?+V^?K[<OC\_P`#$O$GL*#!@S,((ES(L*$(A0XC2N0'
M<:+%B^XJ8MS(,9K&CB!#EOHHLJ3).B1/_ZI<J24ERY<P!\:<2?.*RYHX<\:X
MJ;-GPT*C@/#T2=1@I@1"AA9=RB^2I:`^E#*=2H_`@B8)D`JERA5A@09FWA"Z
MM+6KV7\'%J1I]0E"UK)GX]9K(&!!MP)I\JJ!*[=O.0(-X!2`>D2JW\-U&*A5
M0%B)8<20N3!1(&!3E\>1,U]IH&``G,N:0]\YUO@+9M&H=7RE#$`=G=.I8\\(
ML'A`Z3BP9>MV,2`!)2-,G(PBX`Q"@,\D<N]>3D+Q[2$!PHPI<R9Z9S9ND#]D
MSCT'@0<&*A='DF=/'T\)'C!@;`B1">7=43,P@T@[DDB3*ETR=J:3N&?Q!1C#
M`0^,A\4JQ,"2"/]_M?P'00/;P"=@7U\!8-\6PA#C@#&Z/+#`,@<T\]Z$)(I0
M0%H"&)#`<UA<DTV$W23P#03AM)5<B1,.$)Y=%WKAF@P2XNA34`<TP&(O00I9
MTXENP).DDC`=DV*!3D(IFEH+_#;/DU:&A$`BH!QI#I==8H3``Y0Y`!"990;T
M7`%H"J``E6NVF9,!-@XV@@.6%<2FG?L$\@9@`-3ET)^`YC-G&"G:)29%B;X4
MP`!FR"F`EA$A&FE&EAIIRT2:;BH-`@T,,P(!!!P`370]'A2JJ+Q\U4JC8(Z@
MEEX"&,C0J[`^4L!QE2B0P`&ZEL1KKW=\F4"E/\YT++*OI?@'`X^:]"S_M"U.
MNH"PIU;+TK78(A%(&GPV4"Q1X(;;`P(,"%/HJ0,`&U>ZZNJ0EP-787H8O?6Z
M$``N`%!6ZQ2I\1LI`C:J\*N6:AD`P`,--*L2;0`D<&X.!G,Q2[NY=.SQQ[D<
M,(O$NY)U`A/(Y*45(:UJ@8MMOX08KXX7WY#Q#>%$N$VQH32@"P#A";#A-B`7
M[?$"$58JYS8)Y"**##Y[W,`OT3U@<;O(W*)`OC5[<4AGF>@[PJ]!Z5(K9:ZE
M,4(?T+#M!""G/E&#`:X)PQ<OO8W<=!2]A57Q``S([0,"4N3RP#;A.?Q'O"2/
M(,#'G:32LQM*XPNS*;K<X@H$:8WQT.,C.#U"_\2?20%O6TRTI:KG$`P`^N=M
MI>':SOJM&N3--N0R]K+T)4"Z9`&T>WBE`%P5L3.1.TY*\+6ZGF+3,OH"``.E
M%N_`(&G5*H<4I<N+EY;AW)V*TP^8H4!KC?R*"S*4[3A`Q(4L@@G0>4%CQ7]`
MG9(J%=,[#(@@O4"&%0B@`.WQ`'<S8)*<'C`(W4E.`.NCW_D`T;@B_*LW`3,9
M`IHF,OM88@^YX)8I%!`+SCD`#ISQ!2L<)@#61847*"(:"1R8BN2)X`SMVI;0
M?-<U&DC!9WV"P-*N$J^6D:``(!-;8A:P,JAD8@%NZ*$C0F'$X#@A"@0SSH40
MV(+O&,`!@6G=^2)T'?]>/,YC-HQ"J5A31!C\ZE^SR\OY%E!!<WRF5`8D`:D8
M8,1I1$<,(GA`)RRQES:(!4"D4)6*QO/&D?5Q$3X3Y!ZFE@(",*!\0E//V@+0
M`$IR#E<.8!WA]L&*7#6D/$U`6B<",8A"'"*/7#P!$A50P$<"PW4).\$LC'1)
MI:7!87$3W$%X]!-)4.)7G<B$L!J4RUB2P(OHF\<RHC.+7!0'5RER!A(9@`T#
M.&HA`0CE11"TN5K,HC^?>E"$%(&)RGA+!Z$(2N$\-ISWC:PXH1B9,`DWS\O!
MJ0W8/-_`3+<"P*@EE%*<!S?K>)`,E3.9R0"1B!!)!TRHZ)WO8X$4<!%'7,7_
M;HP1<@;;,K@7$3A/+VTIE!I".H**/2YXA\3!)4DX+%M.8S7O-(B+?G,>;X##
M03>:@T4]$X-"Q/05H],+-S8Y"YL*(7,BN,JZ(*0&3VV)J"%AJ`INULX$.'4$
M67E8`["1HK@EM`N2(./F?'`B96JR'`Q0(E,,AD1WTJ`0!_CEM+X:!W[.XJPU
M"`":O-D-:=`EEU/AEXX6D%,:E8^)2*E12`PJ-#Y(3C!\I4FZUA--%YSH5M,R
M&:M*4@!NTK2PCRA4'L]RK3X44`;1J:E)%;<-`7C2)*0JE`/BU0AB0>98U\#3
M(PGU)GW*BR6EC=,"S!6'X(J&5PWPIIB^4JD9Q255_]V\"D.1^#'`=O%Z]S&N
M14(53O"R0)!U02UBL&N&AU'+!`'H3,>`>M>WVF1HB--J0!`5W-O*T@GJ%4UI
M=1&&AXG,..2@80V@*-<8--*X%^LL&_1;IR)$]T,J4(S)`'(BP.DOAY52$>".
M@5B-^K<$^>RGN\B(S97J+$)!NQ?3A!4X*$BX(61R;05GN4B!$'"W"CAA+^;C
M,\2E(4)$-%K'$G!DG?F2M@_K6,3^:H-="LO(E?W=KH10UQ*;5$YA]-/*WL*+
M`"38-K-X&<B.\C'Q8D'"N\7@T@#76'0D*;X`.%+P$%*(,4PJKR;EK4F/.QKY
MYH*^*"#A:B\S92F8MQ+M`O^:__CX#PFM<+45TL=G\N",0ICR%4+CW!\B9[81
MH*VE`"C.@;O`!)5VAF3?$>4=?J:SYUCR<'(:5IU_`9\081C%.E)`F,\1BEH5
MJBW#D.=X'!2]%K1K..%QPL.R$*(]G.^9(YB/"ZO!R59XD[E5VH$V`%B"#<II
MT3&;MDGGM$F;PJ)I0-MU"2:U,M<M`,#>?4$AM/E:3V?V%Z3R]C?MO`,=/>!"
MR&CP\K(=Y%O`;0=?>=^_61`*+>45&H=S#?=HL)Y$M/<3OOU'P#5!Z6I@!@%E
M,%"^Z;!QXZ@-%((N!X%J)3O'G:$2VW!"25O7PM:1F"$(TZUEI6&8+I=@7/+.
M`L+_@I)-$ZV<&MV#0^K&ED41E/`5=(M(:;LI6^E5^7Q!X?'ECH#$I;J@75JB
M74Q@L2$(FHFJNWVZ:6C0W^9(8MADQU=<^80"P;)N&PJ/$J$QLG5:^F;B+9D!
M`[RI'4YF`4)C$U$X[BT"59VX7Z1`F!F6FW3'%#5@O\$$A;F<-5A49FH(&SWF
M?966+]))$2F)[L$1K`:YU^`[JRKK&QT0^-4#8Z8J"G`_7(!R\![`#!8KS/1,
M!-1"J".ZB/=]*4C57JOBA@5PPA,H+OJ#H#!9=6,_08@<0$O;2Q\5;96$?;D`
MD<6G.NPZ&*4(F$QY&@GS!54_?SX$ZX:!9X$@XS96*G(#_[_B29R0/*&@?RM!
M6:'T(]KP8MNV`_A05\4C-.BF`KD`!Y;@3`H(5YBT7(1S/2-S.R;`6>%Q8RJ0
M%L6Q#9W7@2>!76%00$&A$*I7"8ZV<:Y%"=:'`H=3*WM0@RY(%(%0*+O@#P3D
M=C32"01D`)3@.N2@4O7#9$*&;94'3'QC?D'H$V96"=MQ`GD0/3K2"59S?'A!
M0&F7"6I0/Q&C<VLE!5B8A4RQA4$%7PX#!5+@'_&"3LQV?')T'#4'`;\2?7!X
M%K#P8@2!<@H0!7A("WAH*VFH.(-H)7[U-"?0-(*DB&XQ+`X`%/GQ$'[`"1P8
MB3IQA)]0"TO8A#N''?/!9*$HBO\Z<8$H`(5KX8JTR`:U>(NM>(N1D8NZB!B\
MV(M^\8O`*!?".(RL98R#6(S(R!7*N(R)Y8Q!V(S06!32.(T^48W6J!/8F(TX
ML8W<J%G?*'W>&(XP,8[D^"WGB'GFF(XGL8[L:"SOJ"[N&(\@,8_TR!'V>(\8
MD8_Z.%[]V"O\^(^9(I`!4H,!29#OX#HGY&EKX(3C@)#<T4*`LQY34(:=.(<0
MJ1M`DPCH%3&-2%$9*1O7@`AQM7C,-#KK%)*R$0EZT!N^80"<*#8'J9+EX#J,
M@0"*QG/X,),T60VP."(]:24\&93[,)1$F0]&>93UD)1*N25-B2-,^909(94D
M$I54>0[_5GF5Y9"56DD-7-F51`>6W?&58LEK9<D<9'F6O)"6:HD*;-F6IO"6
M<$D*<CF7CE"7=LD(>)F7L,>7S^67H;&7@/D:@YD9@EF8UX>8OJB8B\F81*%5
MA^F80'"$B>"00!D-"-""<]![I?`K?B2(FTD#7_@AEW"1+34-,0<,\S@IJ`F$
MBS`4T9%G)PF2OY":9BD-K"D-MNEU-("(L]DZAAB<PCF<Q%F<QGF<R)F<RKF<
MS-F<SOF<T!F=TCF=U%F=UCF<$>@"EG@)I<F9DAD3I*B3W\D5/SF>YGF>Z)F>
MZKF>[(F>7P*(#0`F\21HN*"911`XA"!H3S`I4,`$Y=D%2%1Y_V'6#?$)8(WP
MGE\AGT\@:"'3")["GY7'.6&4H`>:"!1*"`LZ").2"^^$9VX1,)497TS&!/B2
MB)"D?<)"%GE6&8F(+U=W!]JP2N>#%/0&HH!HA8K@H>P3HBD:"FJ0G7(`)V=0
M"-CP$$.(%'SRHG:@HS8:+SVJ*F[P3L6S!G1C-ZGF'_$)4XMP#'&'I6P`>;F"
M`#CIG5J0'IV@7:X0+U5Z;YG0BE,*`6O*!I;PI9P1?G7@,V<`IH0C#&IJ">QB
MGTF!-'"J+7+JI1#P`/\Y0VMP!IG3&HUX"%[6#WGH"1NZJ!J:)8S`3`TB1)/2
M&IV1BYG#J)^(A\LBJ(P@JIP:+PPB-/^?I@BAVJD3UHCQ-0.O*@R3TB!3(TZ-
MP!]?.C.+2BJMEJF+Z`J6ZBZTI*1V4*MT-*D`T`"!4PNG"JNYX@=]^I&N6JS+
MBJMN`:0KD#D[REL]2A<YIY=-T*-K0*2)N`UEE*,R6C&LN:.$LRR`^E1K\*V#
MT*,#L#6Y.*0L:HM'"@&+XII*X*T@"JXC"K!D2@+_`I^)()^\I6:]U4H/RS=0
M<*'R`W*!(3<6N["9:J$%ZK#J4"2@B0=V:!L)**$#Y&$=R["<`W/J8*?M&;,R
M.[,T6[,V>[,XF[,ZN[,\V[,^^[-`&[1".[1$6[1&>[1(F[1*N[1,V[1.^[10
M&[52.[546[7_5GNU6)NU6KNU7-NU7ONU8!NV8CNV9%NV9GNV:)NV:KNV;-NV
M;ONV<!NW]T@7N`)8E%$:B.8"19).\Y9&C*`',>`Z&KH+A6"BAWJ"5)`7+\ID
M8))]M7=$#<.M539(*]-<H'56I509R%1Y:3(>X^(`-7-SXA<>8Q`B)823/8>Z
MW%H`A:(`5"!(KNL6<D(%T86L-:!@*)@"T2%56/00?``%F?D*P`N\ZE``8DH`
M?*(-OPM?G6"\)_L*@\=J:8!1UR:'PI!U3P$!IG)SG%"Q*K(+Y4,`+D("?`<+
MZI!%JR`WP((J8KI)<5.Q@[`L5$!%7E`Q!8!$1Z4"8'&_PE8+BT<%_UDC`O_[
MH:#@/7[82H1F`(&1*YO``&?J&<UP%<MP+IP!)Q]B(3VH#,*P;]%!?,:E3UDQ
M,F#TP?<$5L-BH@&#+VS`0H)U;^+$A"G,&-'Q.)*@2(72+.8D"=>&#5%Z!)-(
MB<8A!4A3/%2G3P820E*P"P7T%H70K*,@NF#$.>P!!4QH(I]F"<CQ8]<&-&Z0
MPJWS1=P2PSX*-(33"22$J`XS44(03YM$)#'5&8)!4("817DE6[6P`-F)QR6@
M(T##1T%F!O^2QBI'%BB'%#<W:H.0MR3`1`(<"YG#B#>D5:Q;G+2D,U]4G)0W
MP7!*"=Y$:=/V!["`O*X;"\J@O9N@HDWPR?\)8TZ&X,#9NX-#((MI$#O8-`H'
MJ%1[#`BML08=C,7&<2M-(+KBT*S:.P:BRZF82`+14P`%-&V74@OY.A9H8@5,
M%%W,!<U4&B^F,@2XU%*O(T3'_(<'J'/0P(=,^)O)82/[]B#"EHC.AR>T47]8
MYSFTH2:'++A\:P*9,`K']P!]9@8`.PS'G#LVDKOBMU(#>`PDI+RV,"?E8S50
MI0O0.LRIO,J=P,K0^H8\0&9DU@*Z\ZENH3@0E"I?ALQD<`"%L"&T!+`-V[V@
M8#)\\!]_(`[5T0E0M5(F92%4Q4`VO:A-\W!:D#^`&+LM8#JLX*B9J$8FK$;0
MR@DWS0D_72NP0,__D9QUS6K5GC3+8!6[QNMRKY`+KH!$>?6&>3,+C[8"?/)#
MEY`EKDS1ATLJ3&@)SAH+$[TB%&U%7LW*RZ`>L;!J6X!7&[5AW=H$(6(AMB4%
MR\()$;,L0A0Q.@(G(L@)U*/`)"3/4#0IEQ!=U+,?P7R'/(<+=&-;BW<`!!+/
MT`RZVR!8B2H$X!&??,<;Y]R`@R3:KPUJSLIW*A).I]PN9Y#:B+HG\J78T"<C
M#HP)62+8S5$9@!`BW+2BW(04G9%".9`SM=8"K#N#_P)XA\J1B7`>Y_'+`-#=
MNZ`JE\3=L+`V:^#=Z8TT4_/;&F.(WDG:4<5`]=<'I84T*\(&3`/`6@(Q:YR#
M-."!*;I`1Y57/(/PVZEV'I2"#%1`,8DP/UZEWIZ!#%[E!=QD%S$`(7]@O+N`
M`$B#597PX0.$#$05#EFQ"A0N=3I#.,-`!=>P?"_>8+16NO8K:K/7!XQ%#ZP`
1$X((58`YLI*RVG(+D2$``#L_
`
end
</TEXT>
</DOCUMENT>
</SUBMISSION>
