Credit Agreement

CREDIT AGREEMENT

This Credit Agreement (the " Agreement" ) is entered into as of February 13, 2004, by and among ADAMS GOLF, INC. , a Delaware corporation; ADAMS GOLF HOLDING CORP , a Delaware corporation; ADAMS GOLF GP CORP , a Delaware corporation; ADAMS GOLF, LTD. , a Texas limited partnership; ADAMS GOLF IP, LP , a Delaware limited partnership; and ADAMS GOLF MANAGEMENT CORP , a Delaware corporation (the " Borrowers" ), whose address is 2801 E. Plano Parkway, Plano, Texas, 75074 and BANK OF TEXAS, N.A. (" Lender" ) whose address is 5956 Sherry Lane, Suite 1100, Dallas, Texas 75225. In consideration of Lender' s making the following described loans, the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each of the parties to this Agreement, Borrowers and Lender agree as follows:

ARTICLE 1. DEFINED TERMS.

" Affiliate" means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of such Person; or (c) five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question. The term " control" means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall the Lender be deemed an Affiliate of the Borrowers or any of its Subsidiaries or Affiliates.

" Applicable Rate" means a variable rate of interest per annum at all times equal to the Prime Rate minus one-half of one percent (1/2 of 1%), such Applicable Rate to change when and as the Prime Rate changes.

" Authorization Documents" means, as to any Person which is not an individual, all appropriate evidences of the authority of such Person to execute, deliver and perform the Loan Documents to which it is a party, including, without limitation, as to any such Person which is a corporation, resolutions of its Board of Directors certified by its secretary or an assistant secretary, and a Certificate of Incumbency certified by its secretary or an assistant secretary certifying the names of the officers of such Person authorized to sign the Loan Documents to which it is a party.

" Authorized Officer" means, (a) with respect to the Corporate Borrowers, the President, Vice President, or Chief Financial Officer of each such respective Corporate Borrower and (b) with respect to the Partnership Borrowers, the President, Vice President, or Chief Financial Officer of the general partner of the Partnership Borrowers, in each case as designated in writing to Lender.

" Borrowing Base" means, at the particular time in question, an amount equal to the sum of (a) seventy-five percent (75%) of Eligible Accounts, as shown on the latest Borrowing Base Report received by Lender and (b) for the determinations using the subject month of December, January, and February of each calendar year during the term of this Agreement, the lesser of (i) ten percent (10%) of Eligible Inventory, as shown on the latest Borrowing Base Report received by Lender, or (ii) $900,000.00.

" Borrowing Base Report" means a report in the form of report attached hereto as " Exhibit A" , appropriately completed, together with the following attachments: (i) detailed aged schedule of all Eligible Accounts, as of the date specified in the report, listing face amount and date of invoices of each Eligible Account and the name of each account debtor (and, upon request of Lender, the address of each

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account debtor and copies of invoices, credit reports, and any other matters and information relating to the Eligible Accounts), and (ii) a schedule of Eligible Inventory detailed by product and location.

" Business Day" means a day (other than Saturday, Sunday or a legal holiday) on which commercial banks are open for business in Dallas, Texas.

" Capital Lease Obligation" means the amount of Debt under a lease of Property by a Person that would be shown as a liability on a balance sheet of such Person prepared for financial reporting purposes in accordance with GAAP.

" Charter Documents" means, as to any Person which is not an individual, as applicable, its articles/certificate of incorporation, bylaws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement, operating agreement and all shareholder agreements, voting trusts and similar arrangements evidencing the existence, good standing, governance and authority of such Person together with appropriate certificates of the appropriate governmental officials of the state of incorporation or formation of such Person as to the existence and good standing of such Person.

" Closing Date" means, the date upon which all of the conditions precedent set forth in Article 7 hereof have been performed by Borrowers to Lender' s satisfaction.

" Closing Documents" means a collective reference to (i) the Charter Documents and Authorization Documents of Borrowers, certified as of a Current Date; (ii) the Loan Documents, dated as of the Closing Date and executed and delivered by the appropriate Person; (iii) the Initial Borrowing Base Report certified by the Borrowers, as of a Current Date, and (iv) the Request for Loan executed by Borrowers.

" Collateral" means all property of any kind which is subject to a Lien in favor of Lender or which, under the terms of any Loan Documents, is or is purported to be encumbered by any Lien in favor of Lender or subject to any Lien in favor of Lender.

" Commitment" means the obligation of Lender to make the Loans to Borrowers pursuant to Section 2.1 up to an aggregate principal amount at any time outstanding of $2,000,000.00.

" Corporate Borrowers" means Adams Golf, Inc., Adams Golf Holding Corp, Adams Golf GP Corp, and Adams Golf Management Corp.

" Current Date" means a date which is within five (5) calendar days prior to the Closing Date.

" Debt" means as to any Person at any time (without duplication): (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable of such Person arising in the ordinary course of business that are not past due by more than ninety (90) days, (d) all Capital Lease Obligations of such Person, (e) all Debt or other obligations of others guaranteed by such Person, (f) all obligations secured by a Lien existing on property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person, (g) any other obligation for borrowed money or other financial accommodations which in accordance with GAAP would be shown as a liability on the balance sheet of such Person, (h) any repurchase obligation or liability of a Person with respect to accounts, chattel paper or notes receivable sold by such Person, (i) any liability under a sale and leaseback transaction that is not a Capital Lease Obligation, (j) any obligation under any so-called " synthetic leases" , (k) all reimbursement obligations of such Person (whether contingent or otherwise) in

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respect of letters of credit, bankers' acceptances, surety or other bonds and similar instruments, and (m) all liabilities of such Person in respect of unfunded vested benefits under any Plan.

" Default" means any of the events or conditions specified in Section 6.1 , whether or not any requirement for notice or lapse of time or any other condition has been satisfied.

" Default Interest Rate" means a rate equal to the lesser of (a) the Applicable Rate plus three percent (3%), with adjustments to be made on the same date of any change in the Prime Rate or (b) the Maximum Rate.

" Eligible Accounts" means, as of the date of determination (without duplication) the total of all accounts receivable of Borrowers created in the ordinary course of business that are acceptable to Lender in its sole and absolute discretion and that satisfy each of the following conditions:
(a) The account complies with all applicable laws, rules and regulations, including, without limitation, usury laws, the Federal Truth in Lending Act and Regulation Z of the Board of Governors of the Federal Reserve System;
(b) The account, if due 30 days from the original date of invoice, is not more than 60 days past due;
(c) The account, if due 60 days from the original date of invoice, is not more than 30 days past due;
(d) The account was created in connection with (i) the sale of inventory in the ordinary course of business and the sale has been fully consummated and the inventory has been shipped and delivered and received by the account debtor or (ii) the performance of services by a Borrower in the ordinary course of business and the services have been completed and accepted by the account debtor;
(e) The account represents a legal, valid and binding payment obligation of the account debtor enforceable in accordance with its terms and arises from an enforceable contract, the performance of which contract, insofar as it relates to the account, has been completed by a Borrower;
(f) The account does not arise from the sale of any inventory on a bill-and-hold, guaranteed sale, sale-or-return, sale on approval, consignment or any other conditional basis;
(g) A Borrower has good and indefeasible title to the account and the account is subject to a valid, perfected, first priority security interest in favor of Lender and is not subject to any Liens except Liens in favor of Lender;
(h) The account does not arise out of a contract or an order that, by its terms, prohibits or makes void or unenforceable the grant of a security interest to Lender in and to the account;
(i) The amount of the account included in Eligible Accounts is not subject to any setoff, counterclaim, defense, dispute, recoupment or adjustment other than normal discounts for prompt payment;


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(j) No Borrower has established a reserve for bad debt with respect to the account or considered collection of the account doubtful;
(k) The account debtor is not insolvent or the subject of any bankruptcy, insolvency or similar proceeding and has not made an assignment for the benefit of creditors, suspended normal business operations, dissolved, liquidated, terminated its existence, ceased to pay its debts as they become due or suffered a receiver or trustee to be appointed for any of its assets or affairs;
(l) The account is not evidenced by chattel paper or an instrument;
(m) No default exists under the account;
(n) The account debtor has not returned or refused to retain, or otherwise notified a Borrower of any dispute concerning, or claimed nonconformity of, any of the inventory or services relating to the account;
(o) The account is not owed by an Affiliate of any Borrower, a Subsidiary of any Borrower, or any stockholder, officer, director or employee of any Borrower or any Subsidiary;
(p) The account is payable by the account debtor in lawful money of the United States of America;
(q) The account does not constitute progress billings, retainages, or deferred payments under a contract or order not fully performed;
(r) The account debtor is not domiciled in any country other than the United States, unless the account is fully insured by the Export-Import Bank of the United States, the Foreign Credit Insurance Association or another insuring entity acceptable to Lender or is fully secured by a letter of credit issued or confirmed by a bank acceptable to Lender containing terms and conditions reasonably acceptable to Lender;
(s) The account is not owed by an account debtor as to which more than five percent (5%) of the aggregate balances then outstanding on accounts owed by the account debtor and/or its affiliates to Borrowers are more than 60 days past due from the dates of their original invoices;
(t) The account debtor is not the United States or any department, bureau, agency or instrumentality of the United States, unless, with respect to the security interest in the account in favor of Lender, the Federal Assignment of Claims Act of 1940, as amended, and any other applicable laws, shall have been complied with; and
(u) The account is not owed by an account debtor as to which the total of all accounts owing by the account debtor or an Affiliate of the account debtor exceeds ten percent (10%) of the total of all accounts at such date, provided , that , an amount of accounts owing by the account debtor that do not exceed ten percent (10%) of the total of all accounts at such date shall not be excluded pursuant to this clause.


The amount of the Eligible Accounts owed by an account debtor shall be net of, and shall be reduced by (if and to the extent not already so reduced by virtue of the preceding clauses of this

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definition), the amount of all contra accounts, reserves, credits, rebates and other indebtedness, liabilities and obligations owed by Borrowers to the account debtor.

" Eligible Inventory" means, as of the date of determination, the value of all inventory of raw materials and finished goods then owned by and in the possession of a Borrower and held for sale or disposition in the ordinary course of business, which Lender in its sole judgment deems Eligible Inventory, based upon such considerations as Lender may from time to time determine to be appropriate and in which Lender holds a valid, perfected, first priority security interest, valued at the lower of (a) actual cost or (b) fair market value. Without limiting the generality of the foregoing, Eligible Inventory shall not include (i) inventory in which a Person (other than Lender) has a Lien, (ii) inventory located outside of the continental United States, (iii) inventory that consists of, work in process and materials or supplies used or to be used, or consumed or to be consumed in the normal course of business; (iv) inventory that has been shipped or delivered to a customer on a bill-and-hold, guaranteed sale, sale-or-return, sale on approval, consignment or any other repurchase or return basis, (v) inventory that is not in good condition or does not comply with all applicable laws, rules and regulations with respect to its manufacture, use, or sale, (vi) inventory with respect to which a claim exists disputing the title of any Borrower to or right to possession of the inventory, (vii) inventory that is not located at the locations specified in the Security Instruments, (viii) inventory which is deemed defective, obsolete, unmerchantable, or unsuitable by Lender in its reasonable judgment, and (ix) inventory evidenced by a negotiable or non-negotiable document of title.

" ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto.

" Event of Default" means any of the events or conditions specified in Section 6.1 provided that any requirement for notice or lapse of time or any other condition has been satisfied.

" GAAP" means generally accepted accounting principles, applied on a consistent basis, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements and pronouncements of the Financial Accounting Standards Board and/or their successors which are applicable in the circumstances as of the date in question; provided, however, for purposes of determining compliance with any covenant set forth in Article 4 of this Agreement, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in the Initial Financial Statements. Accounting principles are applied on a " consistent basis" when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period.

" Inactive Subsidiaries" has the meaning assigned that term in Section 3.22 hereof.

" Indebtedness" means the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to Borrowers, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of Borrowers to Lender, whether direct or indirect, absolute or contingent, due or to because due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to Lender that are required to be paid by Borrowers pursuant hereto) or otherwise.

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" Law" means any law, regulation, rule, order, decree, license or permit, domestic or foreign.

" Lien" means any lien, mortgage, security interest, pledge, deposit, rights of vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, or any charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise.

" Loan Documents" means this Agreement, the Note, the Security Instruments, and all other certificates, documents and agreements executed in connection with this Agreement.

" Loans" means the loans made by Lender to Borrowers pursuant to Section 2.1 .

" Material Adverse Effect" means any set of circumstances or events which (a) is or could reasonably be expected to be material and adverse to the business, condition (financial or otherwise), operations, Property, assets, operations, prospects or profits of Borrowers, (b) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any of the Loan Documents or any of the transactions contemplated by the Loan Documents, (c) materially impairs or could reasonably be expected to materially impair the ability of Borrowers to pay the Indebtedness or to perform their respective obligations under any of the Loan Documents, (d) impairs or could reasonably be expected to impair the ability of Lender to enforce its legal rights and remedies under any of the Loan Documents, or (e) impairs or could reasonably be expected to impair the priority of the Liens under any Loan Document or the value of the Collateral.

" Maximum Rate" means the maximum lawful rate of interest permitted by applicable usury laws now or hereafter enacted which interest rate shall change when and as said laws change, to the extent permitted by said laws, effective on the day such change in said laws becomes effective, provided, however, that the term " Maximum Rate" means a rate equal to five (5) percentage points above the Prime Rate as it varies if there is no Maximum Rate.

" Note" has the meaning assigned that term in Section 2.1 .

" Partnership Borrowers" means Adams Golf, Ltd. and Adams Golf IP, LP.

" Permitted Liens" means (a) Liens in favor of Lender, (b) Liens for taxes, assessments and other governmental charges arising by law in the ordinary course of business for sums which are not yet due and payable, (c) Liens of mechanics, materialmen, warehousemen and other like Persons arising by law in the ordinary course of business for sums which are not yet due and payable, (d) Liens, not delinquent, created by statute in connection with worker' s compensation, unemployment insurance and social security obligations, (e) encumbrances consisting of minor easements, zoning restrictions or other restrictions on the use of real property that do not (individually or in the aggregate) materially affect the value of the assets encumbered or materially impair the ability of any Borrower to use the assets in its business, and (f) liens held by Tom Watson on the liquidated net assets including the inventory, accounts and account receivables of Adams Golf, Inc., and Adams Golf, Ltd., which liens have been subordinated to the liens held by Lender.

" Person" means an individual, corporation, partnership, association, joint stock company, trust, estate, unincorporated organization or joint venture, or a court or governmental unit or any agency or subdivision thereof, or any other legally recognizable entity.

" Plan" means any employee benefit or other plan established or maintained by Borrowers and which is covered by Title IV of ERISA.

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" Prime Rate" means the " prime rate" published in the " Money Rates" table in The Wall Street Journal from time to time, and if multiple rates are published, the highest such prime rate; provided , however , that in the event The Wall Street Journal is no longer published or no longer publishes the " Money Rates" table, Lender shall choose a substitute rate that is based or comparable information. Such rate is only one of the reference rates or indexes used by Lender from time to time. Lender may lend to others at rates greater or less than such rate.

" Property" means any interest in any kind of property or assets, whether real, personal or mixed, or tangible or intangible.

" Security Instruments" has the meaning assigned to that term in Section 7.1 .

" Stock" means all shares, options, interests, participations or other equivalents (howsoever designated) of or in a corporation, whether voting or non-voting, including, without limitation, common stock, warrants, preferred stock, convertible debentures, and all agreements, instruments, and documents convertible, in whole or in part, into any one or more of all of the foregoing.

" Subsidiary" means any corporation of which more than fifty percent (50%) of the issued and outstanding securities having ordinary voting power for the election of directors is owned or controlled, directly or indirectly, by a Borrower and/or one or more of its Subsidiaries.

" Termination Date" means February __, 2005, unless sooner terminated pursuant to Section 6.2 .

" UCC" means the Uniform Commercial Code, as enacted and in effect in the State of Texas.

ARTICLE 2. AMOUNT AND TERMS OF CREDIT.
2.1 The Commitment . Subject to, and upon the terms, conditions, covenants and agreements contained in this Agreement, Lender agrees to make Loans to Borrowers from time to time for a period from and after the date of this Agreement up to but not including the Termination Date in such amounts as Borrowers may request up to but not exceeding an aggregate principal sum at any time outstanding equal to the lesser of (a) the Borrowing Base, as determined by Lender from time to time pursuant to Section 2.5 , and (b) the Commitment. Within such limits and during such period, Borrowers may borrow, repay, and re-borrow under this Agreement. To evidence the Loans, Borrowers will issue, execute and deliver a promissory note (such note together with any and all renewals, extensions and/or rearrangements thereof is called the " Note" ) dated as of the date of this Agreement in the principal amount of the Commitment and payable to the order of Lender on the Termination Date, and otherwise being in form and substance satisfactory to Lender. Unpaid principal of, and accrued interest on, the Loans shall be in accordance with the terms of the Note. Interest on the Loans shall accrue at the rates provided in Section 2.2 .
2.2 Interest Rate . The unpaid principal of the Loans shall accrue interest from the date of advancement until the earlier of (a) an Event of Default or (b) maturity at the lower of (i) the Applicable Rate, with adjustments to the Applicable Rate to be made on the same date as any change in the Prime Rate or (ii) the Maximum Rate. All past due principal and interest, whether due as a result of acceleration or otherwise, shall accrue interest at the Default Interest Rate from the date payment of the principal and interest shall have become due until the same shall have been fully discharged by payment.
2.3 Request for Loans . Each Loan shall be made on the same Business Day as written notice in the form of the " Request for Loan" attached to this Agreement as Exhibit " B" duly


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completed and executed by an Authorized Officer of each Borrower is received by Lender if received by 12:00 p.m. (Dallas, Texas time) and on the next Business Day if received by Lender after 12:00 p.m. (Dallas, Texas time). If all conditions precedent to the Loan have been met, Lender will, on the date requested, make the Loan available to Borrowers by depositing the proceeds thereof into an account maintained at Lender as directed by Borrowers.
2.4 Initial Borrowing Base . During the period from the date of this Agreement until the first redetermination of the Borrowing Base by Lender, the Borrowing Base shall be $_________________ as provided by Borrowers in that certain Borrowing Base Report of even date with this Agreement.
2.5 Subsequent Determination of Borrowing Base . Promptly after receiving (a) each Borrowing Base Report, (b) the results of any audit or inspection performed by or on behalf of Lender with respect to Borrowers or the Collateral, or (c) any other information which Lender, in good faith, reasonably believes affects the Borrowing Base or any component thereof, Lender shall, based upon the Borrowing Base Report, audit, inspection or information, redetermine the Borrowing Base to remain in effect until the next redetermination. In the event Lender has not received an appropriately completed Borrowing Base Report (with all attachments) within the time period specified in this Agreement, Lender shall have no obligation to redetermine the Borrowing Base or make any additional Loans until such time as Lender shall have received the information.
2.6 Mandatory Prepayments . If the unpaid principal balance of the Loans exceeds the lesser of (a) the Borrowing Base or (b) the Commitment, Borrowers shall immediately prepay the principal of the Loans in an amount at least equal to the excess. Each prepayment of principal under this Section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid under this Section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of the payment.
2.7 Computation of Interest . All payments of interest shall be computed on the per annum basis of a year of 360 days, but to the extent such computations of interest might cause the rate of interest to exceed the Maximum Rate, the interest shall be computed on the basis of a year of 365 or 366 days, as applicable.
2.8 Voluntary Prepayments . Borrowers may prepay the unpaid principal of the Note at any time in whole or from time to time in part, without premium or penalty, but with accrued interest to the date of prepayment on the amount so prepaid. Each prepayment of principal of the Note shall be applied to reduce the outstanding principal balance of the Note.
2.9 Joint and Several Liability of Borrowers .
(a) Each of the Borrowers are accepting joint and several liability under this Agreement, the Note, and the other Loan Documents in consideration of the financial accommodations to be provided by the Lender under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Indebtedness.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally ...