Document:

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                                                                    EXHIBIT 10.2

                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.

                               SEVERANCE PAY PLAN

                            EFFECTIVE AUGUST 15, 2004

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                                TABLE OF CONTENTS
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               SEVERANCE PAY PLAN

<TABLE>
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                                                                              PAGE
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<S>                                                                           <C>
Section 1.  PURPOSE AND EFFECTIVE DATE......................................     1
            1.1  Purpose....................................................     1
            1.2  Effective Date.............................................     1
Section 2.  DEFINITIONS.....................................................     1
            2.1  Committee..................................................     1
            2.2  Company....................................................     1
            2.3  Disabled...................................................     1
            2.5  Eligible Employee..........................................     1
            2.5  Employee...................................................     1
            2.6  Participating Employer.....................................     2
            2.7  Plan.......................................................     2
            2.8  Weekly Pay.................................................     2
            2.9  Year of Service............................................     2
Section 3.  PLAN PARTICIPATION AND SEVERANCE PAY BENEFIT....................     3
            3.1  Circumstances in Which Benefits are Payable................     3
                 (a)  Position Elimination..................................     3
                 (b)  Other.................................................     3
                 (c)  Factors...............................................     3
                 (d)  Notice................................................     4
                 (e)  Failure to Timely Execute Release.....................     4
            3.2  Benefit Formula............................................     4
            3.3  Release/Noncompetition and Nondisclosure Form..............     4
            3.4  Benefit Payment Form.......................................     4
            3.5  Withholding................................................     5
            3.6  Forfeiture of Benefit......................................     5
            3.7  Effect on Certain Other Benefits...........................     5
                 (a)  Unemployment Benefits.................................     5
                 (b)  No Duplication of Benefits............................     5
Section 4.  ADMINISTRATION..................................................     5
Section 5.  MISCELLANEOUS...................................................     6
            5.1  Right to Terminate Employment..............................     6
            5.2  Death......................................................     6
            5.3  Incompetency...............................................     6
            5.4  Source of Benefits.........................................     6
            5.6  ERISA......................................................     7
            5.8  Amendment and Termination..................................     7
            5.9  Limitations................................................     7
            5.10 Severability...............................................     7
</TABLE>

<PAGE>

                                TABLE OF CONTENTS
                        SUMMARY PLAN DESCRIPTION FOR THE
                     GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                               SEVERANCE PAY PLAN

<TABLE>
                                                                              PAGE
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<S>                                                                           <C>
Section 1.  GENERAL INFORMATION.............................................     1
            1.1  Plan Administrator.........................................     1
            1.2  Plan Sponsor...............................................     1
            1.2  Participating Employers....................................     1
            1.3  Questions and Legal Matters................................     2
            1.4  Additional Information.....................................     2
Section 2.  CLAIMS REVIEW PROCEDURE.........................................     2
            2.1  Initial Claim..............................................     2
            2.2  Appeal of Initial Decision.................................     2
Section 3.  RIGHTS UNDER ERISA..............................................     3
            3.1  General....................................................     3
            3.2  Information about the Plan.................................     3
            3.3  Prudent Actions by Plan Fiduciaries........................     3
            3.4  Enforcement of Rights......................................     4
            3.5  Assistance with Questions..................................     4
</TABLE>

<PAGE>

                        THE GOLFSMITH SEVERANCE PAY PLAN

                                     Section 1.

                           PURPOSE AND EFFECTIVE DATE

      1.1 Purpose. The purpose of this Golfsmith Severance Pay Plan is to
provide a monetary cushion to help certain former employees deal with loss of
employment.

      1.2 Effective Date. The Plan is established effective as of August 15,
2004, with respect to Eligible Employees terminating employment on or after such
date.

                                   Section 2.

                                   DEFINITIONS

      For purposes of this Plan, the following terms shall have the meanings set
forth opposite such terms.

      2.1 Committee -- means the Golfsmith Severance Pay Plan Committee,
comprised of not less than one member, established by the Chief Executive
Officer of the Company or his or her delegate to administer this Plan, the
members of which shall be appointed by him or her in his or her discretion and
shall serve as such at his or her pleasure.

      2.2 Company -- means Golfsmith International Holdings, Inc., a Delaware
corporation.

      2.3 Disabled -- means a mental or physical condition, or more than one
such condition, which qualifies the Eligible Employee for Social Security
disability benefits.

      2.4 Eligible Employee -- means

            (a) an active, full-time Employee of a Participating Employer who
      has been continuously employed on a full-time basis by one or more
      Participating Employers for at minimum of one year and who works primarily
      within the United States and who is not a member of a unit of employees
      covered by a collective bargaining agreement between an employee
      representative and a Participating Employer, unless otherwise provided in
      the collective bargaining agreement, or

            (b) a person who was an Employee described in Section 2.4(a)
      immediately before the date his or her status as an active Employee ceased
      as a result of his or her becoming Disabled.

      2.5 Employee -- means an individual who for purposes of this Plan for any
period who (i) is actually classified during such period by a Participating
Employer on its payroll, personnel and benefits system as an employee, and (ii)
is paid for services rendered during such period through the payroll system, as
distinguished from the accounts payable department, of the Participating
Employer.

<PAGE>

      2.6 Participating Employer -- means Golfsmith International Holdings, Inc.
and any subsidiary or affiliate of Golfsmith International Holdings, Inc.
designated by the Committee in its sole discretion as a Participating Employer
under the Plan.

      2.7 Plan -- means this Golfsmith International Holdings, Inc. Severance
Pay Plan as set forth in this document and as hereafter amended from time to
time.

      2.8 Weekly Pay -- means

            (a) for each hourly Eligible Employee, his or her basic rate of
      hourly pay (as determined by the Committee) as in effect on the date the
      Committee determines that his or her active employment as an Eligible
      Employee terminated (whether as a result of becoming Disabled or
      otherwise) multiplied by the lesser of (i) 40 or (ii) the number of hours
      which the Committee determines that he or she ordinarily was expected to
      work each week immediately before the date his or her active employment
      terminated, or

            (b) for each salaried Eligible Employee, 1/52 of his or her annual
      basic salary (as determined by the Committee) as in effect on the date the
      Committee determines that his or her active employment as an Eligible
      Employee terminated (whether as a result of becoming Disabled or
      otherwise), or

            (c) for each Eligible Employee whose pay depended at least in part
      on commissions, his or her basic weekly pay rate (as determined by the
      Committee) as in effect on the date the Committee determines that his or
      her active employment terminated (whether as a result of becoming Disabled
      or otherwise) plus the weekly average of his or her commissions which the
      Committee determines that he or she earned during the calendar year which
      immediately preceded the calendar year in which his or her active
      employment as an Eligible Employee terminated (whether as a result of
      becoming Disabled or otherwise).

      2.9 Years of Service -- means for each Eligible Employee, his or her
continuous full years of employment with a Participating Employer since his or
her most recent date of employment by the Participating Employer; provided,
however, that such continuous full years of employment commences as of the date
such Participating Employer was actually an affiliate of the company.

                                      -2-
<PAGE>

                                   Section 3.

                  PLAN PARTICIPATION AND SEVERANCE PAY BENEFIT

      3.1 Circumstances in Which Benefits are Payable.

            (a) Involuntary Termination. An Eligible Employee shall qualify for
      a benefit under Section 3.2 of this Plan as a result of his or her
      involuntary termination of employment by a Participating Employer, if the
      Committee in its discretion determines that

                  (1) his or her employment was not terminated for cause or for
            a violation of any policy of the Participating Employer that was his
            or her employer, each as determined by the Committee in its
            discretion;

                  (2) his or her termination was unrelated to a sale or other
            disposition of all or any part of a division, subsidiary or other
            business segment (including, without limitation, a disposition by
            sale of shares of stock or of assets) in which he or she was
            employed, unless he or she had no reasonable opportunity to continue
            to work for the purchaser or acquirer of the division, subsidiary or
            business segment;

                  (3) he or she failed (as a result of such termination) to
            qualify for any severance pay (except under this Plan) or other plan
            or benefit that the Committee in its discretion deems to duplicate
            this Plan and that is sponsored or paid by the Company or any of its
            affiliates, including any Participating Employer; and

                  (4) he or she properly, timely and unconditionally executes
            the release and, if applicable, the agreement on confidentiality and
            competition required under Section 3.2(e).

            (b) Other. An Eligible Employee who fails to satisfy the
      requirements of Section 3.1(a) nevertheless may qualify for a benefit
      under Section 3.2 of this Plan or for a lesser benefit (whichever the
      Committee acting in its absolute discretion specifies for such Eligible
      Employee) if:

                  (1) the Committee acting in its absolute discretion determines
            that such qualification is in the best interests of the Company and

                  (2) he or she properly, timely and unconditionally executes
            the release and, if applicable, the agreement on confidentiality and
            competition required under Section 3.2(e).

            (c) Factors. In making the determinations required under this
      Section 3.1, the Committee shall have the right to take into account all
      factors which the Committee deems relevant under the circumstances.

                                      -3-
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            (d) Notice. Notice of qualification under Section 3.1(a) or Section
      3.1(b) shall be furnished to the Eligible Employee by the Committee, and
      such notice shall include a copy of the release and, if applicable, the
      agreement on confidentiality and competition which he or she shall be
      required to promptly, timely and unconditionally execute as part of the
      qualification process.

            (e) Failure to Timely Execute Release. If an Eligible Employee
      declines to properly, timely and unconditionally execute the release and,
      if applicable, the agreement on confidentiality and competition required
      by the Committee for the benefit described in Section 3.2, the Eligible
      Employee shall not qualify for a benefit under this Plan.

      3.2 Benefit Formula If an Eligible Employee qualifies under Section 3.1(a)
or Section 3.l(b) for a benefit under this Section 3.2, his or her benefit under
this Plan shall equal the amount set forth opposite his or her position (as
determined based on the Participating Employer's payroll records as of the date
his or her employment terminated).

            Vice President -- 52 times his or her Weekly Pay.

            Director/Manager -- 2 times his or her Weekly Pay multiplied by his
            or her Years of Service, with a minimum benefit of 4 times his or
            her Weekly Pay.

            Employee below the level of Director/Manager -- 2 times his or her
            Weekly Pay multiplied by his or her Years of Service, with a minimum
            benefit of 2 times his or her Weekly Pay.

      3.3 Release/Noncompetition and Nondisclosure Form. The Committee shall
develop form releases and a form agreement on confidentiality and competition
which Eligible Employees shall be required to properly, timely and
unconditionally execute as a condition to qualifying for a benefit under Section
3.1. The Committee shall revise such forms from time to time as the Committee
deems necessary or appropriate and, further, shall determine when each such
revision shall become effective. The Committee, as part of each determination
under Section 3.1, also shall determine whether the release for an Eligible
Employee shall (for reasons sufficient to the Committee) include requirements in
addition to the minimum requirements set forth in the form and shall revise the
form release for such Eligible Employee accordingly. The Committee in its sole
discretion shall (for reasons sufficient to the Committee) determine whether an
Eligible Employee is required to sign the agreement on confidentiality and
competition to qualify for a benefit under Section 3.2.

      3.4 Benefit Payment Form. If an Eligible Employee qualifies for a benefit
under this Plan, such benefit shall be paid or shall commence as soon as
practicable after his or her employment has terminated, and payment shall be
made at the discretion of the Committee either (i) in a lump sum or (ii) at a
rate of one times the Eligible Employee's Weekly Pay per week, to be paid in
equal installments (reflecting the Eligible Employee's pay period immediately
prior to his or her termination of employment) until the amount set forth
opposite his or her position in Section 3.2 has been fully paid to such Eligible
Employee; provided no installments shall be paid over

                                      -4-
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a period which exceeds two years from the date that the Eligible Employee's
employment terminated.

      3.5 Withholding. The Participating Employer shall have the right to take
such action as it deems necessary or appropriate in order to satisfy any
federal, state or local income or other tax requirement to withhold or make
deductions from any benefit otherwise payable under this Plan.

      3.6 Forfeiture of Benefit. If an Eligible Employee who is entitled to a
benefit under the Plan is reemployed by the Company or any Participating
Employer, his or her benefit under the Plan shall cease or be forfeited in
accordance with the following:

            (a) If the Eligible Employee is reemployed prior to receiving any
      benefit under the Plan, he or she shall forfeit the entire benefit
      otherwise payable under the Plan;

            (b) If he or she is reemployed after benefit payments have commenced
      in the form of installments, he or she shall forfeit any remaining
      installments otherwise payable on and after the date he or she is
      reemployed; and

            (c) If he or she is reemployed after receiving his or her entire
      benefit under the Plan in the form of a lump sum, he or she shall return
      to the Company or the Participating Employer, as applicable, that portion
      of the lump sum equal to the remaining amount of benefit that would have
      been payable to him or her, as of the date he or she is reemployed, if he
      or she had received his or her Plan benefit in the installment form set
      forth in Section 3.4.

      3.7 Effect on Certain Other Benefits.

            (a) Unemployment Benefits. Each Participating Employer reserves the
      right to contest an Eligible Employee's claim for unemployment benefits
      for any period for which payments are made to him under this Plan.

            (b) No Duplication of Benefits. If the Committee determines that the
      benefit payable under this Plan to an Eligible Employee duplicates
      (directly or indirectly) any other benefit otherwise payable to such
      Eligible Employee by the Company or any of its affiliates, including any
      Participating Employer, the Committee shall have the right to reduce the
      benefit otherwise payable under this Plan to the extent deemed necessary
      to eliminate such duplication.

                                   Section 4.

                                 ADMINISTRATION

      Except as otherwise described in this Section 4, the Plan shall be
administered by the Committee. The Committee shall have the exclusive
responsibility and complete discretionary authority to control the operation and
administration of this Plan, with all powers necessary to enable it to properly
carry out such responsibility, including, but not limited to, the power to
construe the terms of this Plan, to determine status, coverage and eligibility
for benefits, and to

                                      -5-
<PAGE>

resolve all interpretive, equitable, and other questions that shall arise in the
operation and administration of this Plan. All actions or determinations of the
Committee shall be final, conclusive and binding on all persons. Solely for
purposes of satisfying the reporting and disclosure obligations under the
Employee Retirement Income Security Act of 1974, as amended, the plan
administrator under Section 3(16) of such act shall be Golfsmith International,
L.P.

                                   Section 5.

                                  MISCELLANEOUS

      5.1 Right to Terminate Employment. Each Participating Employer,
unconditionally reserve the right to terminate an Eligible Employee's employment
at any time, and the Eligible Employee's qualification or failure to qualify for
a benefit under this Plan shall not establish any right of any kind or
description whatsoever (a) to a continuation or reinstatement of employment with
the Company or its affiliates, including any Participating Employer, or (b) for
those who fail to qualify for a benefit, receipt of any payment from the Company
or its affiliates, including any Participating Employer, in lieu of such
benefit.

      5.2 Death. If an Eligible Employee dies after qualifying for a benefit
under this Plan but before receiving all payments scheduled under the Plan, any
unpaid amounts shall be paid to the Eligible Employee's estate in a lump sum.

      5.3 Incompetency. If any Eligible Employee is, in the opinion of the
Committee, legally incapable of giving a valid receipt and discharge of any
payment, the Committee may, in its discretion, direct that such payment or any
part thereof be made to such person or persons who, in the opinion of the
Committee, are caring for and supporting such Eligible Employee, unless it has
received due notice of the appointment of a guardian or conservator of the
estate of the Eligible Employee. A payment so made will be a complete discharge
of the obligations of the Plan to the extent thereof, and neither the Committee
nor any Participating Employer, shall have any obligation regarding the
application of such payment.

      5.4 Source of Benefits. All benefits under this Plan shall be paid from
the general assets of the Company or a Participating Employer, and the status of
the claim of an Eligible Employee or his or her estate to any benefit shall be
the same as the status of a claim against the Company or a Participating
Employer by any general and unsecured creditor. No person whosoever shall look
to, or have any claim whatsoever against, any officer, director, employee or
agent of the Company or any Participating Employer in his or her individual
capacity for the payment of any benefits whatsoever under this Plan.

      5.5 No Assignment; Binding Effect. No Eligible Employee or his or her
estate shall have the right to alienate, assign, commute or otherwise encumber
any benefit under this Plan for any purpose whatsoever and, except to the extent
prohibited by applicable law, any attempt to do so shall be disregarded
completely as null and void. The provisions of this Plan shall be binding on
each employee, former employee, their respective estates and the Company and its
affiliates, including each Participating Employer.

                                      -6-
<PAGE>

      5.6 ERISA. The Company intends that this Plan constitute a "welfare plan"
under the Employee Retirement Income Security Act of 1974, as amended, and any
ambiguities in this Plan shall be construed to effect that intent.

      5.7 Construction, Controlling Law. This Plan shall be construed in
accordance with the law of the State of Texas except to the extent such law has
been preempted by the Employee Retirement Income Security Act of 1974, as
amended. In the construction of this Plan, the masculine shall include the
feminine and the feminine the masculine, and the singular shall include the
plural and the plural the singular, in all cases where such meanings would be
appropriate. Headings and subheadings have been added only for convenience of
reference and shall have no substantive effect whatsoever. All references to
sections shall be to sections of this Plan.

      5.8 Amendment and Termination. The Plan may be terminated at any time by
adoption of a resolution of the Committee. The Committee also may amend this
Plan at any time and from time to time, in any manner which the Committee deems
desirable, to take effect retroactively or otherwise, by adoption of a written
amendment.

      5.9 Limitations. In the event an Eligible Employee discloses to any
unauthorized person information relating to the business of the Company or its
affiliates, including any Participating Employer, which is confidential or
breaches any contract (including the agreements described in Section 3.3) with
or violates any legal obligation to the Company or its affiliates, including any
Participating Employer, or if the Company or any affiliate, including any
Participating Employer, acting in good faith determines that it has a claim
against an Eligible Employee that relates back directly or indirectly to his or
her employment with the Company or the affiliate, including any Participating
Employer, the Committee shall have the right to suspend or discontinue
permanently any further payments to or for the benefit of the Eligible Employee
under the Plan and/or to offset the benefit otherwise payable to the Eligible
Employee under the Plan to the extent deemed necessary to satisfy any debt or
other amount that the Committee, acting in good faith, determines is owed by the
Eligible Employee to the Company, affiliate or Participating Employer.

      5.10 Severability. If any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan, but this Plan shall be construed and enforced
as if said illegal and invalid provision had never been included herein.

                                      -7-
<PAGE>

      IN WITNESS WHEREOF, Golfsmith International Holdings, Inc. has caused this
Plan to be executed by its duly authorized officer this 15th day of August,
2004, effective as of August 15, 2004.

                            GOLFSMITH INTERNATIONAL HOLDINGS, INC.
                            SEVERANCE PAY PLAN COMMITTEE

                            By: /s/ JAMES D. THOMPSON
                               ------------------------------------
                               Title:  Chief Executive Officer
                                     ------------------------------
                            Date: August 15, 2004
                                 ----------------------------------

                                      -8-
<PAGE>

                            SUMMARY PLAN DESCRIPTION
                      FOR THE GOLFSMITH SEVERANCE PAY PLAN

                                   Section 1.

                              GENERAL INFORMATION.

      Attached to this summary plan description is a copy of the Golfsmith
Severance Pay Plan, or the "Plan", in effect as of August 15, 2004, and together
with this summary plan description, the attached copy of the Plan describes the
severance benefits to which you may be entitled as of such date. The Plan may be
amended at any time, and from time to time, in any manner the Golfsmith
Severance Pay Plan Committee deems desirable, and such amendment may take effect
retroactively or otherwise. In addition, the Golfsmith Severance Pay Plan
Committee may terminate the Plan at any time. You will be notified of any such
amendment or termination, as applicable, within the time periods prescribed by
law.

      1.1 Plan Administrator. The plan administrator of the Plan is:

                   Golfsmith International, L.P.
                   11000 North- IH 35
                   Austin, Texas 78753-3195
                   Telephone: (512) 837-8810
                   Attention: Ginger Bunte

      1.2 Plan Sponsor. The sponsor of the Plan is

                   Golfsmith International Holdings, Inc.
                   11000 North- IH 35
                   Austin, Texas 78753-3195
                   Telephone: (512) 837-8810
                   Attention: Ginger Bunte

      1.3 Participating Employers. In order to be an Eligible Employee for
purposes of participating in the Plan, you must meet the requirements that are
set forth in the Plan, and you must be employed by one of the following
Participating Employers:

                   Golfsmith International Holdings, Inc.
                   Golfsmith International, L.P.
                   Golfsmith NU, LLC
                   Golfsmith USA, LLC
                   Don Sherwood Golf Shop

The Golfsmith Severance Pay Plan Committee has the right to designate new
participating employers or to remove employers from the list of participating
employers at any time. If you have any questions regarding whether you are
employed by a Participating Employer, please contact your Human Resources
Department.

<PAGE>

      1.4 Questions and Legal Matters. For routine questions about benefits,
Eligible Employees should check with the Human Resources Department. Matters of
a legal nature relating to the plan should be addressed to the Human Resources
Department. Legal process may also be served on the plan administrator.

      1.5 Additional Information. The plan year for this Plan shall be the
calendar year. For government reporting purposes, the Employer Identification
Number (EIN) for Golfsmith International, L.P. is 22-1957337. In addition, the
Plan is identified by the following official plan name and plan number:

      - Plan Name: Golfsmith Severance Pay Plan

      - Plan Number: [503]

      This information should be used to identify the Plan in any correspondence
relating to it.

                                   Section 2.

                            CLAIMS REVIEW PROCEDURE.

      2.1 Initial Claims. An Eligible Employee (or his or her estate) who does
not receive a severance benefit following his or her termination of employment
or who disagrees with the amount of benefit received, may send a claim in
writing to the Committee through the Human Resources Department. A response to
the claim will be provided to the Eligible Employee or his or her estate within
90 days (180 days if the Eligible Employee or his or her estate is notified of
an extension).

In the event the Committee denies or modifies the claim for benefits under the
Plan, the Eligible Employee or estate will be notified in writing of the
following:

            (a) the specific reason for the denial or modification;

            (b) the Plan provisions upon which the denial or modification is
      based;

            (c) any additional material or information necessary to perfect the
      claim and the reasons why such material or information is necessary;

            (d) a description of the Plan's claim review procedures and the time
      limits applicable to such procedures; and

            (e) a statement of the claimant's right to bring a civil action
      under Section 502(a) of ERISA if his or her claim is denied after the
      Committee undertakes additional review.

      2.2 Appeal of Initial Decision. In the event the claim is denied or
modified, the claimant or his or her authorized representative must, within 60
days following receipt of the denial or modification, submit a written request
to the Committee for review of its initial decision. Upon request and free of
charge, the claimant or his or her authorized representative will be provided
reasonable access to and copies of all relevant documents, including all
documents relied upon

                                      -2-
<PAGE>

by the Committee in reaching its initial determination. Within 60 days following
the request for review, the Committee must, after providing the claimant with a
full and fair review, render its final decision in writing to the claimant
stating specific reasons for its decision. If special circumstances require an
extension of such 60-day period, the Committee's decision will be rendered as
soon as possible, but not later than 120 days after receipt of the claimant's
request for review. If an extension of time for review is required, the claimant
will receive written notice of the extension prior to the commencement of the
extension period.

If the Committee again denies or modifies the claim for benefits under the Plan,
the claimant or his or her estate will be notified in writing of the following:

            (a) the specific reason for the denial or modification;

            (b) the Plan provisions upon which the denial or modification is
      based;

            (c) any additional material or information necessary to perfect the
      claim and the reasons why such material or information is necessary;

            (d) a statement of the claimant's right to bring a civil action
      under Section 502(a) of ERISA; and

            (e) a statement that the Plan has no voluntary review procedures.

                                   Section 3.

                               RIGHTS UNDER ERISA.

      3.1 General. Each Eligible Employee is entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA provides that all Eligible Employees shall be entitled to:

      3.2 Information about the Plan and Benefits. ERISA provides that all
Eligible Employees shall be entitled to:

      - receive information about the Plan and benefits,

      - examine, without charge, at the plan administrator's office and at other
        specified locations, all documents governing the Plan, and a copy of the
        latest annual report (Form 5500 Series), if any, filed by the Plan with
        the U.S. Department of Labor and available at the Public Disclosure Room
        of the Employee Benefits Security Administration, and

      - obtain, upon written request to the plan administrator, copies of
        documents governing the operation of the Plan, including an updated
        summary plan description. The plan administrator may make a reasonable
        charge for the copies.

      3.3 Prudent Actions by Plan Fiduciaries. ERISA provides that all Eligible
Employees shall be entitled to prudent actions by Plan fiduciaries. In addition
to creating rights for Eligible

                                      -3-
<PAGE>

Employees, ERISA imposes duties upon the people who are responsible for the
operation of the Plan. The people who operate the Plan, called "fiduciaries" of
the Plan, have a duty to do so prudently and in the interest of Eligible
Employees and their beneficiaries. No one, including the employer, a union, or
any other person, may fire or otherwise discriminate against an Eligible
Employee in any way to prevent an Eligible Employee from obtaining a benefit or
exercising his or her rights under ERISA.

      3.4 Enforcement of Rights. ERISA provides that all Eligible Employees
shall be entitled to enforce their rights. If a claim for a benefit is denied or
ignored in whole or in part, an Eligible Employee has a right to know why this
was done, to obtain copies of documents relating to the decision without charge,
and to appeal any denial, all within certain time schedules.

      Under ERISA, there are steps that may be taken to enforce the above
rights. For instance, if an Eligible Employee requests a copy of Plan documents
or the latest annual report from the Plan and does not receive them within 30
days, a suit may be filed in a Federal court. In such a case, the court may
require the plan administrator to provide the materials and pay an Eligible
Employee up to $110 a day until the materials are received, unless the materials
were not sent because of reasons beyond the control of the plan administrator.
If a claim for benefits is denied or ignored, in whole or in part, a suit may be
filed in a state or Federal court. If it should happen that Plan fiduciaries
misuse the Plan's money, or if an Eligible Employee is discriminated against for
asserting rights, assistance may be sought from the U.S. Department of Labor, or
a suit may be filed in a Federal court. The court will decide who should pay
court costs and legal fees. If successful, the court may order the person that
is sued to pay these costs and fees. If the Eligible Employee loses, the court
may order the Eligible Employee to pay these costs and fees, for example, if it
finds the claim is frivolous.

      3.5 Assistance with Questions. ERISA provides that all Eligible Employees
shall be entitled to assistance with questions.

      Eligible Employees should contact the Plan Administrator with questions
about the Plan. For questions about this statement or about rights under ERISA,
or assistance in obtaining documents from the Plan Administrator, an Eligible
Employee should contact the nearest office of the Employee Benefits Security
Administration, U.S. Department of Labor, listed in the telephone directory or
the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210. Certain publications about rights and responsibilities
under ERISA may be obtained by calling the publications hotline of the Employee
Benefits Security Administration.

                                      -4-<PAGE>

                      INVESTMENT MANAGEMENT TRUST AGREEMENT

          This Agreement is made as of ___________, 2004 by and between Rand
Acquisition Corporation (the "Company") and Continental Stock Transfer & Trust
Company ("Trustee").

          WHEREAS, the Company's Registration Statement on Form S-1, No.
333-117051 ("Registration Statement"), for its initial public offering of
securities ("IPO") has been declared effective as of the date hereof by the
Securities and Exchange Commission ("Effective Date"); and

          WHEREAS, EarlyBirdCapital, Inc. ("EBC") is acting as the
representative of the underwriters in the IPO; and

          WHEREAS, as described in the Company's Registration Statement, and in
accordance with the Company's Certificate of Incorporation, $17,850,000 of the
gross proceeds of the IPO ($20,527,500 if the underwriters over-allotment option
is exercised in full) will be delivered to the Trustee to be deposited and held
in a trust account for the benefit of the Company and the holders of the
Company's common stock, par value $.0001 per share, issued in the IPO as
hereinafter provided and in the event the Units are registered in Colorado,
pursuant to Section 11-51-302(6) of the Colorado Revised Statutes. A copy of the
Colorado Statute is attached hereto and made a part hereof (the amount to be
delivered to the Trustee will be referred to herein as the "Property"; the
stockholders for whose benefit the Trustee shall hold the Property will be
referred to as the "Public Stockholders," and the Public Stockholders and the
Company will be referred to together as the "Beneficiaries"); and

          WHEREAS, the Company and the Trustee desire to enter into this
Agreement to set forth the terms and conditions pursuant to which the Trustee
shall hold the Property;

          IT IS AGREED:

1. Agreements and Covenants of Trustee. The Trustee hereby agrees and covenants
to:

          (a) Hold the Property in trust for the Beneficiaries in accordance
with the terms of this Agreement, including the terms of Section 11-51-302(6) of
the Colorado Statute, in a segregated trust account ("Trust Account")
established by the Trustee at a branch of JPMorgan Chase NY Bank selected by the
Trustee;

          (b) Manage, supervise and administer the Trust Account subject to the
terms and conditions set forth herein;

          (c) In a timely manner, upon the instruction of the Company, to invest
and reinvest the Property in any "Government Security." As used herein,
Government Security means any Treasury Bill issued by the United States, having
a maturity of one hundred and eighty days or less;

          (d) Collect and receive, when due, all principal and income arising
from the Property, which shall become part of the "Property," as such term is
used herein;

          (e) Notify the Company of all communications received by it with
respect to

<PAGE>

any Property requiring action by the Company;

          (f) Supply any necessary information or documents as may be requested
by the Company in connection with the Company's preparation of the tax returns
for the Trust Account;

          (g) Participate in any plan or proceeding for protecting or enforcing
any right or interest arising from the Property if, as and when instructed by
the Company to do so;

          (h) Render to the Company and to EBC, and to such other person as the
Company may instruct, monthly written statements of the activities of and
amounts in the Trust Account reflecting all receipts and disbursements of the
Trust Account; and

          (i) Commence liquidation of the Trust Account only after receipt of
and only in accordance with the terms of a letter ("Termination Letter"), in a
form substantially similar to that attached hereto as either Exhibit A or
Exhibit B, signed on behalf of the Company by its President or Chairman of the
Board and Secretary, and complete the liquidation of the Trust Account and
distribute the Property in the Trust Account only as directed in the Termination
Letter and the other documents referred to therein.

2. Agreements and Covenants of the Company. The Company hereby agrees and
covenants to:

          (a) Give all instructions to the Trustee hereunder in writing, signed
by the Company's President or Chairman of the Board. In addition, except with
respect to its duties under paragraph 1(i) above, the Trustee shall be entitled
to rely on, and shall be protected in relying on, any verbal or telephonic
advice or instruction which it in good faith believes to be given by any one of
the persons authorized above to give written instructions, provided that the
Company shall promptly confirm such instructions in writing;

          (b) Hold the Trustee harmless and indemnify the Trustee from and
against, any and all expenses, including reasonable counsel fees and
disbursements, or loss suffered by the Trustee in connection with any action,
suit or other proceeding brought against the Trustee involving any claim, or in
connection with any claim or demand which in any way arises out of or relates to
this Agreement, the services of the Trustee hereunder, or the Property or any
income earned from investment of the Property, except for expenses and losses
resulting from the Trustee's gross negligence or willful misconduct. Promptly
after the receipt by the Trustee of notice of demand or claim or the
commencement of any action, suit or proceeding, pursuant to which the Trustee
intends to seek indemnification under this paragraph, it shall notify the
Company in writing of such claim (hereinafter referred to as the "Indemnified
Claim"). The Trustee shall have the right to conduct and manage the defense
against such Indemnified Claim, provided, that the Trustee shall obtain the
consent of the Company with respect to the selection of counsel, which consent
shall not be unreasonably withheld. The Company may participate in such action
with its own counsel; and

          (c) Pay the Trustee an initial acceptance fee of $1,000 and an annual
fee of

                                        2
<PAGE>

$3,000 (it being expressly understood that the Property shall not be used to pay
such fee). The Company shall pay the Trustee the initial acceptance fee and
first year's fee at the consummation of the IPO and thereafter on the
anniversary of the Effective Date. The Trustee shall refund to the Company the
fee (on a pro rata basis) with respect to any period after the liquidation of
the Trust Fund. The Company shall not be responsible for any other fees or
charges of the Trustee except as may be provided in paragraph 2(b) hereof (it
being expressly understood that the Property shall not be used to make any
payments to the Trustee under such paragraph).

3. Limitations of Liability. The Trustee shall have no responsibility or
liability to:

          (a) Take any action with respect to the Property, other than as
directed in paragraph 1 hereof and the Trustee shall have no liability to any
party except for liability arising out of its own gross negligence or willful
misconduct;

          (b) Institute any proceeding for the collection of any principal and
income arising from, or institute, appear in or defend any proceeding of any
kind with respect to, any of the Property unless and until it shall have
received instructions from the Company given as provided herein to do so and the
Company shall have advanced or guaranteed to it funds sufficient to pay any
expenses incident thereto;

          (c) Change the investment of any Property, other than in compliance
with paragraph 1(c);

          (d) Refund any depreciation in principal of any Property;

          (e) Assume that the authority of any person designated by the Company
to give instructions hereunder shall not be continuing unless provided otherwise
in such designation, or unless the Company shall have delivered a written
revocation of such authority to the Trustee;

          (f) The other parties hereto or to anyone else for any action taken or
omitted by it, or any action suffered by it to be taken or omitted, in good
faith and in the exercise of its own best judgment, except for its gross
negligence or willful misconduct. The Trustee may rely conclusively and shall be
protected in acting upon any order, notice, demand, certificate, opinion or
advice of counsel (including counsel chosen by the Trustee), statement,
instrument, report or other paper or document (not only as to its due execution
and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information therein contained) which is believed by the
Trustee, in good faith, to be genuine and to be signed or presented by the
proper person or persons. The Trustee shall not be bound by any notice or
demand, or any waiver, modification, termination or rescission of this agreement
or any of the terms hereof, unless evidenced by a written instrument delivered
to the Trustee signed by the proper party or parties and, if the duties or
rights of the Trustee are affected, unless it shall give its prior written
consent thereto;

          (g) Verify the correctness of the information set forth in the
Registration Statement or to confirm or assure that any acquisition made by the
Company or any other action taken by it is as contemplated by the Registration
Statement; and

                                        3
<PAGE>

          (h) Pay any taxes on behalf of the Trust Account (it being expressly
understood that the Property shall not be used to pay any such taxes and that
such taxes, if any, shall be paid by the Company from funds not held in the
Trust Account).

4. Termination. This Agreement shall terminate as follows:

          (a) If the Trustee gives written notice to the Company that it desires
to resign under this Agreement, the Company shall use its reasonable efforts to
locate a successor trustee. At such time that the Company notifies the Trustee
that a successor trustee has been appointed by the Company and has agreed to
become subject to the terms of this Agreement, the Trustee shall transfer the
management of the Trust Account to the successor trustee, including but not
limited to the transfer of copies of the reports and statements relating to the
Trust Account, whereupon this Agreement shall terminate; provided, however,
that, in the event that the Company does not locate a successor trustee within
ninety days of receipt of the resignation notice from the Trustee, the Trustee
may submit an application to have the Property deposited with the United States
District Court for the Southern District of New York and upon such deposit, the
Trustee shall be immune from any liability whatsoever;

          (b) At such time that the Trustee has completed the liquidation of the
Trust Account in accordance with the provisions of paragraph 1(i) hereof, and
distributed the Property in accordance with the provisions of the Termination
Letter, this Agreement shall terminate except with respect to Paragraph 2(b); or

          (c) On such date after ____________, 2006 when the Trustee deposits
the Property with the United States District Court for the Southern District of
New York in the event that, prior to such date, the Trustee has not received a
Termination Letter from the Company pursuant to paragraph 1(i).

5. Miscellaneous.

          (a) The Company and the Trustee each acknowledge that the Trustee will
follow the security procedures set forth below with respect to funds transferred
from the Trust Account. Upon receipt of written instructions, the Trustee will
confirm such instructions with an Authorized Individual at an Authorized
Telephone Number listed on the attached Exhibit C. The Company and the Trustee
will each restrict access to confidential information relating to such security
procedures to authorized persons. Each party must notify the other party
immediately if it has reason to believe unauthorized persons may have obtained
access to such information, or of any change in its authorized personnel. In
executing funds transfers, the Trustee will rely upon account numbers or other
identifying numbers of a beneficiary, beneficiary's bank or intermediary bank,
rather than names. The Trustee shall not be liable for any loss, liability or
expense resulting from any error in an account number or other identifying
number, provided it has accurately transmitted the numbers provided.

          (b) This Agreement shall be governed by and construed and enforced in

                                       4

<PAGE>

accordance with the laws of the State of New York, without giving effect to
conflict of laws. It may be executed in several counterparts, each one of which
shall constitute an original, and together shall constitute but one instrument.

          (c) This Agreement contains the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof. This Agreement or
any provision hereof may only be changed, amended or modified by a writing
signed by each of the parties hereto; provided, however, that no such change,
amendment or modification may be made without the prior written consent of EBC.
As to any claim, cross-claim or counterclaim in any way relating to this
Agreement, each party waives the right to trial by jury.

          (d) The parties hereto consent to the jurisdiction and venue of any
state or federal court located in the City of New York for purposes of resolving
any disputes hereunder.

          (e) Any notice, consent or request to be given in connection with any
of the terms or provisions of this Agreement shall be in writing and shall be
sent by express mail or similar private courier service, by certified mail
(return receipt requested), by hand delivery or by facsimile transmission:

          if to the Trustee, to:

                    Continental Stock Transfer
                    & Trust Company
                    17 Battery Place
                    New York, New York 10004
                    Attn:     Steven G. Nelson
                    Fax No.:  (212) 509-5150

          if to the Company, to:

                    Rand Acquisition Corporation
                    450 Park Avenue, 10th Floor
                    New York, New York 10022
                    Attn:    Laurence S. Levy, Chairman
                    Fax No.:

          in either case with a copy to:

                    EarlyBirdCapital, Inc.
                    600 Third Avenue, 33rd Floor
                    New York, New York 10016
                    Attn:    David M. Nussbaum, Chairman
                    Fax No.:  (212) 269-3796

          (f) This Agreement may not be assigned by the Trustee without the
prior

                                        5
<PAGE>

consent of the Company.

          (g) Each of the Trustee and the Company hereby represents that it has
the full right and power and has been duly authorized to enter into this
Agreement and to perform its respective obligations as contemplated hereunder.
The Trustee acknowledges and agrees that it shall not make any claims or proceed
against the Trust Account, including by way of set-off, and shall not be
entitled to any funds in the Trust Account under any circumstance.

                                        6
<PAGE>

          IN WITNESS WHEREOF, the parties have duly executed this Investment
Management Trust Agreement as of the date first written above.

                                              CONTINENTAL STOCK TRANSFER & TRUST
                                              COMPANY, as Trustee

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                            RAND ACQUISITION CORPORATION

                                            By:
                                               ---------------------------------
                                               Name:   Laurence S. Levy
                                               Title:  Chairman

                                        7
<PAGE>

                                                                       EXHIBIT A

                             [LETTERHEAD OF COMPANY]

                                       [INSERT DATE]

Continental Stock Transfer
  & Trust Company
17 Battery Place
New York, New York 10004
Attn:  Steven Nelson

           Re:   Trust Account No. ----------- Termination Letter

Gentlemen:

          Pursuant to paragraph 1(i) of the Investment Management Trust
Agreement between Rand Acquisition Corporation ("Company") and Continental Stock
Transfer & Trust Company ("Trustee"), dated as of ___________, 2004 ("Trust
Agreement"), this is to advise you that the Company has entered into an
agreement ("Business Agreement") with __________________ ("Target Business") to
consummate a business combination with Target Business ("Business Combination")
on or about [INSERT DATE]. The Company shall notify you at least 48 hours in
advance of the actual date of the consummation of the Business Combination
("Consummation Date").

          In accordance with the terms of the Trust Agreement, we hereby
authorize you to commence liquidation of the Trust Account to the effect that,
on the Consummation Date, all of funds held in the Trust Account will be
immediately available for transfer to the account or accounts that the Company
shall direct on the Consummation Date.

          On the Consummation Date (i) counsel for the Company shall deliver to
you written notification that (a) the Business Combination has been consummated
and (b) the provisions of Section 11-51-302(6) and Rule 51-3.4 of the Colorado
Statutes have been met, and (ii) the Company shall deliver to you written
instructions with respect to the transfer of the funds held in the Trust Account
("Instruction Letter"). You are hereby directed and authorized to transfer the
funds held in the Trust Account immediately upon your receipt of the counsel's
letter and the Instruction Letter, in accordance with the terms of the
Instruction Letter. In the event that certain deposits held in the Trust Account
may not be liquidated by the Consummation Date without penalty, you will notify
the Company of the same and the Company shall direct you as to whether such
funds should remain in the Trust Account and distributed after the Consummation
Date to the Company. Upon the distribution of all the funds in the Trust Account
pursuant to the terms hereof, the Trust Agreement shall be terminated.

          In the event that the Business Combination is not consummated on the
Consummation Date described in the notice thereof and we have not notified you
on or before the original Consummation Date of a new Consummation Date, then the
funds held in the Trust Account shall be reinvested as provided in the Trust
Agreement on the business day immediately following the Consummation Date as set
forth in the notice.

                                          Very truly yours,

                                          RAND ACQUISITION CORPORATION

                                        8
<PAGE>

                                            By:
                                               ---------------------------------
                                                Laurence S. Levy, Chairman

                                            By:
                                               ---------------------------------
                                                Carol Zelinski, Secretary

                                        9
<PAGE>

                                                                       EXHIBIT B

                             [LETTERHEAD OF COMPANY]

                                       [INSERT DATE]

Continental Stock Transfer
  & Trust Company
17 Battery Place
New York, New York 10004
Attn:

            Re:   Trust Account No. -------------- Termination Letter

Gentlemen:

          Pursuant to paragraph 1(i) of the Investment Management Trust
Agreement between Rand Acquisition Corporation ("Company") and Continental Stock
Transfer & Trust Company ("Trustee"), dated as of ___________, 2004 ("Trust
Agreement"), this is to advise you that the Board of Directors of the Company
has voted to dissolve and liquidate the Company. Attached hereto is a copy of
the minutes of the meeting of the Board of Directors of the Company relating
thereto, certified by the Secretary of the Company as true and correct and in
full force and effect.

          In accordance with the terms of the Trust Agreement, we hereby (a)
certify to you that the provisions of Section 11-51-302(6) and Rule 51-3.4 of
the Colorado Statutes have been met and (b) authorize you, to commence
liquidation of the Trust Account. You will notify the Company and JPMorgan Chase
NY Bank ("Designated Paying Agent") in writing as to when all of the funds in
the Trust Account will be available for immediate transfer ("Transfer Date").
The Designated Paying Agent shall thereafter notify you as to the account or
accounts of the Designated Paying Agent that the funds in the Trust Account
should be transferred to on the Transfer Date so that the Designated Paying
Agent may commence distribution of such funds in accordance with the Company's
instructions. You shall have no obligation to oversee the Designated Paying
Agent's distribution of the funds. Upon the payment to the Designated Paying
Agent of all the funds in the Trust Account, the Trust Agreement shall be
terminated.

                                        Very truly yours,

                                        RAND ACQUISITION CORPORATION

                                        By:
                                           -------------------------------------
                                            Laurence S. Levy, Chairman

                                        By:
                                           -------------------------------------
                                            Carol Zelinski, Secretary

                                       10
<PAGE>

                                    EXHIBIT C

AUTHORIZED INDIVIDUAL(S)                    AUTHORIZED
FOR TELEPHONE CALL BACK                     TELEPHONE NUMBER(S)
-----------------------                     -------------------

COMPANY:

Rand Acquisition Corporation
450 Park Avenue, 10th Floor
35th Floor
New York, New York 10019
Attn:  Laurence S. Levy, Chairman                    (212) 644-3450

TRUSTEE:

Continental Stock Transfer
  & Trust Company
17 Battery Place
New York, New York 10004
Attn:  Steven G. Nelson, Chairman                    (212) 845-3200

                                       11

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