INTELLECTUAL PROPERTY LICENSE AGREEMENT

Territory, and MacGregor desires to grant such a license in accordance with the terms of this Agreement, and

WHEREAS, Golfsmith is desirous of obtaining ownership in the MGC Trademarks following the completion of this Agreement, and also desirous to obtain all trademark rights owned by MacGregor to the MacGregor Trademarks and MGJ Trademarks, as well as MacGregor’s ownership interest in MacGregor Corporation, and MacGregor desires to enter into such an assignment of rights.

NOW, THEREFORE, in consideration of the mutual covenants, undertakings and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and with the intent to be bound, the Parties agree as follows:

1.                                       Definitions.   For purposes of this Agreement, in addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the meanings ascribed to them below:

(a)           “ MacGregor Properties ” shall mean any and all worldwide rights in, arising from or associated with the following, whether protected, created or arising under the laws of the United States or any other jurisdiction or under any international convention: (1) all trademarks, service marks, logos, and slogans in the Territory owned by MacGregor, including the trademark and registrations and applications set forth on Schedule A and all goodwill associated therewith, (collectively, “ MGC Trademarks ”); (2) all patents and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, substitutions, continuations and continuations-in-part therefor, and equivalent or similar rights anywhere in the world in inventions and discoveries including, without limitation, invention disclosures, including but not limited to the patent applications and registrations listed in Schedule D (“ Patents ”); (3) all trade secrets, know-how, customer lists and databases, designs and prototypes, products, materials, and components research, models, development samples, market research reports, marketing plans and forecasts, advertising and public relations plans, sales plans and forecasts, and other proprietary information which derives independent economic value from not being generally known to the public (collectively, “ Trade Secrets ”); (4) all copyrights, copyright registrations and applications therefor (“ Copyrights ”);  (5) all uniform resource locators, e-mail and other Internet

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addresses and domain names and applications and registrations therefor (“ URLs ”); and (6) any similar, corresponding or equivalent rights to any of the foregoing relating to the MacGregor Properties anywhere in the Territory.

(b)          “ Territory ” shall mean all countries in the world, and shall specifically exclude the ASEAN Territory.

(c)           “ ASEAN Territory ” shall mean the countries of China, Japan, South Korea, Taiwan, Hong Kong, India, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and Vietnam, and all political subdivisions thereof.

(d)          “ Licensed Products ” shall mean golf clubs, golf balls, golf bags, and related golf accessories and equipment.

(e)           “ Licensed Trademarks ” shall mean the MGC Trademarks, the MacGregor Trademarks and the MGJ Trademarks.

2.                                       License Grant.   In consideration of the faithful performance by Golfsmith of the covenants and conditions contained herein and subject to the termination provisions contained herein, MacGregor hereby grants to Golfsmith:

(a)           an exclusive, royalty-bearing license to use the MacGregor Properties solely in connection with the manufacture, marketing, distribution and sale of the Licensed Products in the Territory.  MacGregor expressly reserves, and continues to expressly reserve, its ownership rights in the MacGregor Properties and shall continue to hold all rights in the MacGregor Properties in accordance with the terms of this Agreement.  Golfsmith’s use of the MacGregor Properties shall inure to the benefit of MacGregor; and

(b)          an exclusive sub-license to use the MacGregor Trademarks solely in connection with the manufacture, marketing, distribution and sale of the Licensed Products in the Territory.

(c)           a non-exclusive sub-license to use the MGJ Trademarks solely to manufacture the Licensed Products in the ASEAN Territory.

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3.                                       Term.   This Agreement and the licenses granted hereunder shall commence on the Effective Date and shall continue for a period ending on the earlier of (i) three (3) years from the Effective Date or (ii) the date this Agreement  is terminated by MacGregor in accordance with the provisions hereof (the period ending on such earlier date, the “Term”).  All rights and obligations under this Agreement (including any obligation to provide indemnification under Section 7 hereof) shall terminate in their entirety and be of no further force and effect after the end of the Term; provided , however , that if this Agreement is terminated by MacGregor in accordance with its terms prior to the third anniversary of the Effective Date, MacGregor’s indemnification obligations under clause (i) of the first sentence of Section 7(a) (together with the terms set forth in the proviso to such sentence), solely as they relate to actions that occurred during the Term and that would have been subject to indemnification by MacGregor if a claim had been made by Golfsmith during the Term, shall survive such termination for a period ending on the earlier of (A) six (6) months from the date of such termination or (B) three (3) years from the Effective Date (after which time such obligations shall terminate in their entirety and be of no further force and effect).

4.                                       Intellectual Property.

(a)           Ownership.   Licensor represents and warrants that it owns or has the right to license the MacGregor Properties, the MacGregor Trademarks and the MGJ Trademarks and has the right to grant the licenses in accordance with the terms of this Agreement.  Golfsmith hereby acknowledges MacGregor’s right, title and interest in and to the MGC Trademarks and agrees not to claim any title to the MGC Trademarks or any right to use the MGC Trademarks except as expressly permitted by this Agreement.  Similarly, Golfsmith hereby acknowledges MacGregor Corporation’s right, title and interest in and to the MacGregor Trademarks and agrees not to claim any title to the MacGregor Trademarks or any right to use the MacGregor Trademarks except as expressly permitted by this Agreement.

(b)           Quality Standards.   Golfsmith shall use the Licensed Trademarks solely in connection with goods that are of at least the level of quality as the goods provided by MacGregor immediately prior to the date hereof.  Golfsmith shall not use the Licensed Trademarks in connection with any defamatory, disparaging, scandalous or obscene products or

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materials.  Golfsmith shall prominently display the Licensed Trademarks on all Licensed Products and shall include such trademark notices indicating MacGregor’s ownership rights in the Licensed Trademarks as may be required by applicable federal, state and/or international laws, or such notice as may be reasonably requested by MacGregor.  Upon MacGregor’s  reasonable request, Golfsmith shall promptly furnish to MacGregor, representative copies of advertising, promotional, marketing or other written, audio or electronic materials that use the Licensed Trademarks and samples of Licensed Products bearing the Licensed Trademarks, in order to enable MacGregor to confirm that Golfsmith’s use of the Licensed Trademarks is in accordance with the quality standards set forth herein.

(c)   Registration and Enforcement.   MacGregor shall, with respect to the MacGregor Trademarks, ensure that MacGregor Corporation maintains all current registrations and applications for registration up-to-date and shall timely pay all fees associated with such current applications and registrations.  MacGregor shall, with respect to the Patents and MGC Trademarks, maintain all current registrations and applications for registration up-to-date and shall timely pay all fees associated with such current applications and registrations, except as expressly provided herein.  Within 90 days of the Effective Date of this Agreement, Golfsmith and MacGregor shall mutually agree upon the trademarks or patents for which MacGregor no longer needs to maintain the registration.  Registrations and any other protection for the MGC and MacGregor Trademarks shall be obtained only by MacGregor and MacGregor Corporation, respectively, in its name.  Golfsmith shall not directly or indirectly apply for or attempt to register for itself or others any of the Licensed Trademarks, nor claim any common law or similar rights in the Licensed Trademarks, anywhere in the world.

(d)           Authorization .  Licensor authorizes and requests any official throughout the Territory, whose duty is to register and record rights in trademark registrations, applications for registration of trademarks, and patent registrations, to record Licensee as the licensee of rights in the Licensed Trademarks and the Patents.

(e)           Infringement.   Golfsmith shall promptly notify MacGregor in writing of any threatened or suspected infringement of the MacGregor Properties or MacGregor Trademarks in the Territory of which Golfsmith becomes aware and Golfsmith will reasonably assist

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MacGregor to resist any such infringement.  MacGregor reserves the right to determine in its absolute discretion whether or not to conduct litigation or take other action to protect the MacGregor Properties and MacGregor Trademarks from infringement.  MacGregor shall be entitled to all damages, profits arising from accounts of profit, or other recovery as a result of any action taken in respect of any infringement of the MacGregor Properties and MacGregor Trademarks in the Territory.  In the event MacGregor desires to conduct legal action involving the MacGregor Properties or MacGregor Trademarks, MacGregor will have absolute control over any such action, except that MacGregor may not agree to any settlement or compromise which involves any continuance of the infringing use without the consent of Golfsmith, such consent not to be unreasonably withheld.  If MacGregor declines or fails to initiate such action in respect of any infringement of the MacGregor Properties or MacGregor Trademarks in the Territory within ninety (90) days after it learns of such infringement, then Golfsmith shall have the right and discretion (but not the obligation) to enforce its rights in the MacGregor Properties Trademarks by the institution of appropriate legal proceedings against such infringers and shall be entitled to retain any recovery from such suit.

5.                                       Royalties.   As compensation for the rights and licenses granted hereunder, Golfsmith shall pay to MacGregor a $1.75 million dollar (USD) royalty (the “MacGregor Royalty”), payable in eight (8) quarterly installments of $218,750 dollars with the first quarterly installment due commencing one (1) year from the Effective Date of this Agreement and the eighth quarterly installment due ninety (90) days prior to the third anniversary of the Effective Date.  All payments to MacGregor under this Agreement will be made in the manner indicated on Exhibit 1 and will be further made without any deduction or withholding for or on account of any taxes, unless otherwise required by law.

6.                                       Transfer of Ownership.  If and to the extent that Golfsmith has timely made all MacGregor Royalty payments, upon receipt of the final quarterly payment, MacGregor shall promptly and effectively: (i) transfer and assign to Golfsmith all rights, title and interest in and to the MacGregor Properties in the Territory; (ii) assign to Golfsmith all exclusive license rights to the MacGregor Trademarks pursuant to the license agreement with MacGregor Corporation; and (iii) assign to Golfsmith the limited non-exclusive license rights to the MGJ Trademark rights pursuant to the license agreement with MacGregor Golf (Japan) Ltd.  Golfsmith and MacGregor

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shall also mutually agree on terms for transferring MacGregor’s ownership interest in MacGregor Corporation to Golfsmith.  MacGregor shall reasonably assist Golfsmith in perfecting all rights, title and interest to be transferred under this Agreement.

7.                                       Indemnification.

(a)                                   Licensor Indemnification.   Licensor will indemnify, defend and hold Licensee and its related entities harmless from any third party claim, demand, cause of action (including actions for trademark and patent infringement), debt or liability (including reasonable attorney fees and expenses)  (collectively, “ Losses ”) solely caused by or solely arising from (i) Licensee’s proper use of the Licensed Trademarks in accordance with the terms of this Agreement and (ii) Licensee’s practice of inventions covered by the Patents in the exact form in which such inventions are incorporated into products which are manufactured and sold by the Licensor on the Effective Date, without any variations thereto ; provided , however , that (A) Licensor’s aggregate liability in respect of all claims for indemnification pursuant to this Section 7(a) shall not exceed the amount of the MacGregor Royalty, (B) Licensor shall at no time be required to make out-of-pocket payments for indemnification under this Section 7(a) in excess of that portion of the MacGregor Royalty that has actually been paid to Licensor at the time of an indemnity claim, and (C) subject to the provisions of Section 7(b), Licensee shall have the right to set-off against and deduct from installments of the MacGregor Royalty not yet paid to Licensor the amount of any indemnifiable Losses of Licensee under this Section 7(a).  The foregoing indemnity obligation is conditioned on Licensee promptly notifying Licensor of any indemnified claims, giving Licensor control of the defense (including through the counsel of its choice) and settlement of the action, and providing Licensor with reasonable assistance in the defense and settlement of the action.  Notwithstanding the foregoing, no claim, demand, cause of action or otherwise shall be settled by Licensor without consent from Licensee, which consent shall not be unreasonably withheld or delayed.

(b)                                  Licensor hereby acknowledges and consents to Licensee’s right to set-off against and/or receive by way of deduction from any payments of the MacGregor Royalty as provided in Section 7(a).  The amount of such set-off shall be limited to Losses suffered by Licensee that are subject to indemnification as provided in Section 7(a), subject to the other limitations set forth

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therein.  In the event Licensee elects to exercise its set-off rights as set forth in this Section 7(b) (a “ Set-Off Event” ), Licensee shall (i) not less than ten (10) business days prior to exercising any rights of set-off, notify Licensor with reasonable specificity of the claims that it reasonably believes give rise to such right of set-off (including the nature and amount of any such indemnifiable Losses), such notification to be made to the Licensor in writing  (a “ Set-Off Notice” ), (ii) promptly enter into a commercially reasonable escrow agreement with Licensor and an escrow agent reasonably acceptable to Licensor (an “ Escrow Agent” ), which escrow agreement shall provide for customary terms and conditions upon which amounts deposited with the Escrow Agent by Licensee are released from escrow following resolution of any dispute involving indemnifiable Losses that are the subject of such exercise of set-off and (iii) deposit with the Escrow Agent any and all amounts to be paid to Licensor which are the subject of such exercise of set-off.  Upon the occurrence of a Set-Off Event and the delivery of a Set-Off Notice to Licensor in accordance with this Agreement, the Licensor and Licensee shall attempt in good faith to resolve any dispute which is the subject of such exercise of set-off promptly by negotiations between the representatives of the affected parties who have the authority to settle such dispute.  If such dispute has not been resolved within thirty (30) days of delivery of the Set-Off Notice, any of the affected parties may bring suit to resolve such dispute in a court of law in accordance with Section 13 hereof.

(c)                                   Licensee Indemnification.   Licensee agrees that it is wholly responsible for all Licensed Goods manufactured and sold by Licensee.  Licensee will indemnify, defend and hold Licensor and its related entities harmless from any Losses caused solely by or arising solely from Licensee’s sale of Licensed Goods, including claims for products liability, patent and copyright infringement or Licensee’s failure to use the Licensed Trademarks or MacGregor Properties in accordance with the terms of this Agreement.  The foregoing indemnity obligation is conditioned on Licensor promptly notifying Licensee of any indemnified claims, giving Licensee control the defense (including through the counsel of its choice) and settlement of the action, and providing Licensee with reasonable assistance in the defense and settlement of the action.  Notwithstanding the foregoing, no claim, demand, cause of action or otherwise shall be settled by Licensee without consent from Licensor, which consent shall not be unreasonably withheld or delayed.

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8.                                       Termination.   In the event Golfsmith fails to timely make any quarterly royalty payment or otherwise commits a material breach of this Agreement which breach is not cured within thirty (30) days of receipt of notice from Licensor, this Agreement and the licenses granted hereunder shall automatically terminate.  Notwithstanding the foregoing, upon termination of this Agreement, Licensee shall not operate its business in any manner which would falsely suggest to the public that this Agreement is still in force or that any relationship exists between Licensee and Licensor.  Licensee shall have the right, after termination of this Agreement, to sell those Licensed Goods which were manufactured and in Licensee’s inventory prior to termination, provided that no such products shall be sold more than six (6) months after the date of termination; provided, however, that in the event that Licensee has failed to make at least four (4) quarterly royalty payments as of the date of termination, Licensee shall pay to Licensor a royalty equal to twenty five percent (25%) of Licensee’s standard list price for the Licensed Product on each unit of the Licensed Products sold within the first three (3) months after the termination date and a royalty equal to fifty percent (50%) of Licensee’s standard list price for the Licensed Product on each unit sold more than three (3) months after the termination date.

9.                                       Assignment.   This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties.  MacGregor shall have the right to assign all of its rights and obligations under this Agreement at any time.  Golfsmith may not assign this Agreement without the prior, written consent of MacGregor, such consent not to be unreasonably withheld.  Notwithstanding the foregoing, Golfsmith may, provided that it is compliant with the payments terms herein, without the consent of MacGregor:  (i) assign or otherwise transfer this Agreement to any affiliate of Golfsmith, and  (ii) assign or otherwise transfer this Agreement to an entity succeeding to that portion of Golfsmith’s business to which the Agreement relates, whether through merger or consolidation, sale of all or substantially all of its assets, sale of equity interests or otherwise.  For the avoidance of doubt, any successor to Golfsmith’s rights and obligations under this Agreement shall remain fully compliant with the payments terms herein or this Agreement and the licenses granted hereunder shall automatically terminate.

10.                                Further Assurances . The parties agree to execute and deliver at a future date any additional documents that are reasonably required to perfect or record the rights to the Licensed Trademarks under this Agreement.

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11.                                Bankruptcy.  All licenses granted under this Agreement (including, but not limited to, the licenses granted under Sections 2(a), 2(b), and 2(c)) are deemed to be, for purposes of Section 365(n) of the US Bankruptcy Code, licenses of right to “intellectual property” as defined in Section 101 of the Bankruptcy Code.  The Party not filing for protection under the Bankruptcy Code may fully exercise all of its rights and elections as a licensee under the Bankruptcy Code.

12.                                Severability.   The provisions of this Agreement shall be severable, and if any provision of this Agreement shall be held or declared to be illegal, invalid or unenforceable, such provision shall, if possible and without waiving rights of appeal, be limited or construed so as to make it valid and enforceable or, if such limitation or construction is not possible or would be contrary to the parties’ manifest intentions, such provision shall be stricken from the Agreement.  In any event, the remainder of the Agreement shall continue in full force and effect.

13.                                Governing Law; Venue.   This Agreement shall be deemed to be made in and entered into pursuant to the laws of the State of New York.  The terms of this Agreement (e.g., their interpretation) and all disputes arising from or related to this Agreement, or any activities under it, shall be governed by, remedied and resolved in accordance with the laws of New York, without reference to its conflict of laws principles.  Each of the parties to this Agreement, by its execution hereof, (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court located in the Southern District of New York, or if such action may not be brought in federal court, the state courts of the State of New York  located in the Borough of Manhattan  for the purpose of any action among any of the parties relating to or arising in whole or in part under or in connection with this Agreement or the transactions contemplated hereby and (ii) hereby agrees not to commence any such action other than before one of the above-named courts.    Notwithstanding the previous sentence a party may commence any action in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.

14.                                Waiver.   The terms of this Agreement may be waived, and this Agreement may be amended, only in a writing signed by the party to be bound thereby.  A waiver of one term shall not be construed as a waiver of any other term, nor shall a waiver of, or failure to enforce, a term in one instance be deemed a continuing waiver or a waiver of the provision itself.

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15.                                Integration.   This Agreement constitutes the parties’ entire agreement and understanding with respect to the subject matter hereof, and supersedes all prior oral and written agreements and understandings.  No interpretation, change, termination, waiver, or amendment shall be binding upon either party unless in writing and signed by the party or its duly authorized officer or agent.

16.                                Warranties, Covenants and Representations.

(a)                                   Each Party warrants that it (i) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder and (ii) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

(b)                                  Golfsmith warrants, covenants, and represents that it shall use the MacGregor Properties solely in connection with the Licensed Products.

17.                                Counterparts.  This Agreement may be executed in counterparts via facsimile and together shall constitute the entire agreement.

(signature page follows)

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

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